Brexit: What Happens Next for Pharma?

Editor’s Note: This article was published in Pharmaceutical Technology Europe’s February 2020 print issue.

The United Kingdom and the European Union were scheduled to start negotiations in February 2020 on a permanent trading relationship in pharmaceuticals and other products after the UK finally departed the EU on 31 January 2020. Since the UK’s referendum vote in June 2016, Brexit has eventually led the way to a year’s transition period for the talks on an EU–UK Free Trade Agreement (FTA).

Brexit also ended-at least for a while-three and half years of painful uncertainty during which there was a big threat of a ‘no-deal’ scenario on immediate issues, such as financial compensation and the position of around three million EU citizens who reside in Britain. No-deal would have triggered the immediate imposition of customs barriers leading to shortages of medicines both in the UK and the EU.

Industry priorities

For the pharma industry, the FTA aims to be a bold attempt to supply the basis for a collaborative regulatory framework to prevent large regulatory gaps opening up between the UK and European medicines sectors. But few experts believe that a year is long enough to thrash out such a complex arrangement, particularly in a such an intricately regulated sector such as pharmaceuticals. In the summer of 2020, the UK government has the choice of extending the transition by at least another year (1), but it has vowed not to take this opportunity. 

For the industry, the priority will be that by 1 January 2021, when the transition will have ended and Brexit at last fully completed, there will be sufficient agreement on basic trade rules to ensure a smooth flow of medicines between the UK and the 27 EU member states. The worse-case scenario would be a breakdown in negotiations or a transition that ends without a deal of any sort. The EU–UK trade in pharmaceuticals and other products would then be governed by the rules of the World Trade Organization (WTO), which would seriously disrupt medicines supplies.

The UK is a major centre of pharmaceuticals production in Europe, representing both a leading exporter and importer of medicines within the region (2). The EU accounts for around half of the country’s pharmaceutical exports and close to three quarters of pharmaceutical imports (3).

Currently, 45 million patient medicine packs are supplied each month from the UK to EU member states and three European Economic Area (EEA) countries of Norway, Iceland, and Liechtenstein  (4). The EU/EEA in turn exports 37 million packs per month to the UK, according to figures from the European Federation of Pharmaceutical Industries and Associations (EFPIA) in Brussels (4).

As long as EU regulations continue to apply to the UK during the transition, the stream of medicines, active ingredients, intermediates, and other raw materials between the EU and the UK will continue. Quality testing certificates will be recognized by the EU and vice versa, as will manufacturing and distribution licences. Marketing authorization holders (MAHs) will be able to remain based in the UK to have access to EU markets. In the context of international agreements, including mutual recognition agreements (MRAs) such as those covering good manufacturing practice (GMP) inspections, the UK will be treated as an EU member state.

The big difference will be that the country will be a taker of EU regulations without any involvement in decisions in the drawing up or approval of new regulations or their amendments. UK regulators are no longer allowed to be rapporteurs or reference states for the co-ordination of approvals and mutual recognitions under the decentralized licensing procedure. In most cases, they will not be able to act as observers at meetings assessing marketing authorization applications. 

“Decisions taken on marketing authorizations will be applicable in the UK,” a spokesperson for the UK Medicines and Healthcare products Regulatory Agency (MHRA) told Pharmaceutical Technology Europe. “The UK is not permitted to lead work, such as marketing authorization assessments, and is only allowed to attend decision-making committees ‘exceptionally’,” they added.

Transitional preparations

UK-based pharma companies have been urged by the UK government or their trade association to use the transition to reorganize their distribution and supply operations in preparation for the full implementation of Brexit at the beginning of next year. EU pharma companies are being advised to take similar steps with regard to their exports into the UK. For many companies, particularly multinationals, decisions on these changes will have been taken last year because of the threat of a no-deal Brexit.

One key aspect after the transition end is the location of batch testing and the base of a company’s qualified person responsible for quality control, both of which will have to be in an EU member state. Also, the locations of MAHs have to be moved to the EU (5). Preparations will have to be made for the approval, after the implementation period, of variations to centralized and decentralized authorizations if there have been changes to manufacturing and supply operations and to the labelling of products.

The medicines industry in Europe, led by EFPIA, wants, with the support of the UK pharma sector, to keep pharmaceuticals regulations in the region as closely aligned as possible (4). This may not be achievable because, for the UK government’s ruling Tory party, a fundamental objective of Brexit is the introduction of regulations which diverge from those of the EU.

The government’s aim with the UK pharma industry is to strengthen its leadership in basic research and product development with the help, if necessary, of the country’s newly acquired legislative freedom. This could be used to boost its biopharma clusters in areas with close links to universities like Oxford, Cambridge, and London, as well as hospital-based centres of excellence with their own manufacturing capacity.

In EFPIA’s latest study of the performance of the European medicines sector, the UK pharma industry accounted for around 15% of the European industry’s R&D expenditure. It was the second biggest spender behind Germany in the EU (2). The UK is among the top five locations in Europe for clinical trials. Its two main pharmaceutical companies-GlaxoSmithKline and AstraZeneca-have been among the leaders in all European sectors for R&D collaborations between industry and academia.

To encourage breakthroughs in technologies like gene therapy, the UK government could give hospitals more regulatory opportunities to develop decentralized systems for the manufacture of bedside treatments. This would contrast with the European Commission’s seeking of ways to tighten up controls on hospital-based drugs production (6).

With the development of new production processes, the MHRA may make use of licensing agreements which after approval would be conditional on improvements in the quality, safety, and efficacy of new manufacturing technologies.

The UK government, which in December 2019 won a general election by a substantial majority, has promised to replace EU research funds for UK projects with its own money (7).

UK is not alone

In the European pharma sector, the UK is not alone in being a large player able to pursue, if necessary, its own regulatory strategies. Switzerland, which is among the biggest R&D spenders on medicines as well as being a major pharmaceuticals producer and exporter in the region, is not a EU member.

Between them, the UK and Swiss medicines industries account for around a third of the European pharma industry’s R&D expenditure and around a quarter of total output (2). Some analysts have predicted that the UK will follow the Swiss model of having close ties with the EU in some areas while in others taking advantage of its regulatory flexibility. 

There has already been one big Anglo-Swiss collaborative initiative in product development. Novartis, which, with Roche, is the big Swiss multinational player in the global market, announced in January 2020 a planned collaboration with NHS England, the English arm of the UK’s state-run National Health Service, for the development of the company’s anti-cholesterol drug inclisiran (8). 

The UK’s strategy with Brexit is to be less reliant on Europe’s pharma market by becoming a bigger global player. In parallel with the negotiations on the EU–UK FTA, the country is negotiating an FTA with the US to be followed by planned talks on trade deals with other non-EU countries such as China. But it faces a dilemma in reconciling its desire for regulatory divergence with the EU with the growing trends for regulatory convergence in the world’s medicines sector.

References

1.  UK Government, “Political Declaration setting out the framework for the future relationship between the European Union and the United Kingdom,” gov.uk, Political Declaration, 19 Oct. 2019.
2.  EFPIA, “The Pharmaceutical Industry in Figures 2019,” efpia.eu (Brussels, 2019)
3.  Business, Energy, and Industry Strategy Committee, House of Commons, “The Impact of Brexit on the Pharmaceutical Sector,” parliament.uk (8 May 2018).
4.  EFPIA, “Brexit Briefing,” efpia.eu (Brussels, 2017).
5. UK Government, “Technical Information on What the Implementation Period Means for the Life Science Sector,” gov.uk (6 Aug. 2018).
6.  EC, “European Commission: DG Health and Food Safety and European Medicines Agency Action Plan on ATMPs” (Brussels, November 2018).
7. UK Conservative and Unionist Party, “Get Brexit Done-Unleash Britain’s Potential,” Conservative and Unionist Party Manifesto (London, December 2019).
8.  Novartis, “Novartis Announces Intent to Collaborate with NHS England to Tackle Burden of Cardiovascular Disease in the UK,” Press Release, 13 Jan. 2020. 

Article Details

Pharmaceutical Technology Europe
Vol. 32, No. 2
February 2020
Pages: 6–8

Citation 

When referring to this article, please cite it as S. Milmo, “Brexit: What Happens Next for Pharma?” Pharmaceutical Technology Europe 32 (2) 2020.