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20.Jul.2018

Surviving Brexit – How will Brexit Impact the Pharmaceutical Industry?

By Rachael Crook, QA Associate, inglasia pharma solutions

With Brexit looming in March 2019, it has been inevitable from the start that changes would be made to how the pharmaceutical sector functions. The House of Commons released a report in May on these impacts, which are summarised in this article.

Regulatory system

After Brexit, all active substances manufactured in the UK will be treated as imported product to EEA states, and the MHRA will need to certify their GMP manufacture. For products manufactured and for release in the UK, batch testing and release will also need to be carried out in the UK, whether it has been tested and released in the EEA or not.

There is still uncertainty in whether the UK will form an agreement to remain part of the European Medicines Agency (EMA), although the government are pushing for this. If the UK departs from the EMA, batch testing, release and approval of medicines will need to take place separately in the UK and EU. This involves having Qualified Persons (QPs) and Qualified Persons for Pharmacovigilance (QPPVs) present in both locations. For separate UK release, the MHRA would require increased funding, otherwise fewer marketing authorisations would be granted in the UK. Existing marketing authorisations would also need to be transferred to the EU.

As the UK market is smaller than the EU market, manufacturers are more likely to prioritise the EU market if we depart from the EMA. There will be increased costs in obtaining marketing authorisations for the UK’s small market, so companies are already investing in moving manufacturing and batch release sites to the EU. An alternative to owning QC testing and release sites in the UK is using UK contract laboratories, however these have high competition and restricted capacity. Due to a relocation in batch release sites, there could be a shifting of QPs and QPPVs to EEA member states, and there is no evidence more people are becoming qualified in the UK, so it may become more challenging to recruit QPs and QPPVs in the UK.

On the plus side, leaving the EMA could result in quicker approvals for new products. However, this is unlikely to make up for the additional costs and requirement for separate UK and EU release.

There is potential for a special agreement to be made between the UK and EMA, alike the agreements between the EMA and Australia, USA, Canada, New Zealand, Switzerland, Japan and Israel. Separate batch testing for these counties is not required, they share information, cooperate on pharmacovigilance and mutually recognise GMP standards. If the UK and EMA can form an agreement, batch testing and release may not have to occur separately in the UK and EU.

Future of EMA

It has been confirmed that the EMA Headquarters will move from the UK to Amsterdam in 2019. Many staff could leave the organisation if the UK departs from the EMA, losing knowledge, slowing public health initiatives and slowing approval of new medicines. However, if an arrangement is made to continue partnership, its staff may remain in the UK, at least until the current headquarters building lease expires in 2039, to support the continued relationship.

Trade Tariffs

If no deal is made on trade between the UK and EU, World Trade Organisation (WTO) tariffs will be implemented. As the EU is signatory to the WTO, the UK would still be able to trade with the EU at a 0% tariff for most products after Brexit. However, approximately 1000 products hold a tariff of 5-6.5% under the WTO, which would double charges for both the import and export, and increase costs for products crossing the border multiple times during manufacture. The government are pushing for a special zero tariff deal between the UK and EU for all medicinal products.

Customs

It is uncertain what the customs arrangements will be after Brexit – however the government has laid out two proposals. The first is like the current arrangement, with the addition of undefined technology-based modernisations to the process, and the second involves a partnership with the EU, removing the need for a customs border.

Delays at the border may impact temperature sensitive products those with a short shelf life, and incentivises movement of manufacturing to the EU, so a frictionless border is crucial.

European Court of Justice (ECJ)

The prime minister would like the UK to resolve challenges in UK courts instead of in the ECJ, but this is unconfirmed. However, continued partnership with the EMA may require use the of the ECJ. There have been very few challenges to decisions made in the ECJ resulting from political disagreement, so this is unlikely to affect the UK.

Intellectual Property (IP)

If the UK departs from the current IP rules set by the WTO, product patents may be extended. It would then take longer to approve generic medicines, causing increased costs to the healthcare industry, decreased access to wider medicines to patients, and it would make the UK less attractive for development of new medicines. It is currently unclear whether the UK will depart from WTO IP rules.

Skills 

Approximately 10% of the UK pharmaceutical sector workforce are recruited from non-UK EEA states, and have often been recruited for skills shortages. Although existing non-UK Europeans currently living in the UK will be protected from any changes, it may take longer to fill future positions, or move staff between countries to add diversity and transfer skills and knowledge. If companies are unable to fill positions using UK candidates due to a shortage of skilled candidates, businesses may relocate from the UK. It would be beneficial to improve the skills gap in the UK to make UK candidates more employable in the future.

Research and Development (R&D)

The UK has benefited from the EU’s Horizon 2020 funding, receiving 13% of the grants. The government has committed to maintaining this funding and continuing the collaboration, as the UK and EU both benefit from it.

Clinical trials

The UK has contributed to developing the EU Clinical Trials Regulation (536/2014) which will replace the Clinical Trials Directive (2001/20/EC) in 2019, effective after Brexit. It is not yet known whether the UK will continue to use or align itself with the new regulation, but in order to continue partnership on safe and effective clinical trials, it would be beneficial to.

Conclusion

If no deals are made, Brexit is likely to bring greater costs to pharmaceutical companies, whether that be in approvals, tariffs, border delays for pharmaceutical products or relocation of the business to meet skills shortages and for product approval. Skilled workers may relocate to the EU, including QPs and QPPVs, making recruiting harder in the UK.

A transitional phase will last until 31st December 2020 to allow businesses time to relocate or expand to the EU and implement any new processes. UK and EU bodies have recommended that manufacturers plan for all eventualities and prepare for batch release sites in the UK and EU, and transfer marketing authorisations to the EU ahead of Brexit as this can be time-consuming.

As it can take up to two years to relocate, some companies have already begun this process in anticipation of no deal being made with the EMA. Whilst the UK disproportionately contributes to R&D and regulation of the pharmaceutical industry, the EU market is larger than the UK market, so it is likely investment in the UK will drop due to additional costs if no deal is made. Pharmaceutical companies have, however, continued to invest in the UK after Brexit was announced.

The future for UK manufacturing, regulation and development of pharmaceuticals would be benefitted most by remaining closely partnered with the EU. Only time will tell exactly how closely partnered we will be.

References

The House of Commons. 2018. The impact of Brexit on the Pharmaceutical sector [Online] Available at: https://publications.parliament.uk/pa/cm201719/cmselect/cmbeis/382/382.pdf [Accessed 01 July 2018].