A Brexit pill for Romania

When you mention EU states competing to win a prestigious and powerful European regulatory agency from Britain after Brexit, most people would probably think of the European Banking Authority. But the European Medicines Agency (EMA) is also up for grabs, and the most intriguing bidder is Bucharest.

Romanian politicians and officials seem relatively sanguine about Brexit. They are confident that they now have assurances from Brussels about the protection of the rights of Romania’s citizens in the UK and about a tough deal on liabilities that will ensure that the net beneficiaries are not squeezed as the UK drops from the EU budget. They believe that Romania’s unique position on the Black Sea and its tough stance on Russia would guarantee a continued security relationship with the UK and wider NATO support.

The race for the EMA is a more idiosyncratic test for Bucharest, but an important one. As usual, it will be a mix of the practical and the political. Bucharest argues that Romania remains the largest EU member state without a European Union agency based in its territory. This would distinguish its bid from those of France, Italy or other CEE countries. It will probably resonate with Brussels policymakers already anxious that the Brexit process become neither a policy stitch-up at the hands of Berlin and Paris, nor a carve up of EU assets in the UK between ‘older’ members.

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Romania has invested a lot of political capital in post-accession efforts on anti-corruption and being a good European. For many policymakers, securing the EMA would top up the anticipated completion of the EU’s Cooperation and Verification Mechanism on judicial and anti-corruption reform in the next two years. It would be an important domestic trophy for Bucharest’s first EU Presidency in the first half of 2019, when it will oversee the final stages of the Brexit negotiation process.

The main opposition is likely to specifically be directed at Romania’s claim to host the EU’s most important pharmaceutical agency. Though there is no formal requirement for a local science or pharmaceuticals industry base attached to the bid, the UK experience shows a clear link and a mutual benefit from the synergy between the R&D and the regulatory drug approval process. Many pharmaceutical firms have come to see the colocation of the regulatory agency and a deep pool of research expertise as the natural order of things.

Here, perhaps counterintuitively, Romania’s Communist heritage may actually be a strength. The Romanian pharmaceutical industry was one of the most advanced in the Eastern bloc and supplied the USSR and other neighbours with medicines before big international pharma from Europe and Asia entered the market. This local industry may have encountered challenges in the past three decades but it has managed to successfully turn its legacy into an investment opportunity with good geographical positions, low cost of labour and a high quality of medical education and research.

The EU would be interested in a swift and smooth transition for the EMA in order to not lose the competitive advantage of shorter and more efficient approval process compared to other jurisdictions. Some international pharma businesses have already indicated a preference to relocate together with the EMA. It will be interesting to see how they come down on the Bucharest bid.