The potential threat from a no-deal Brexit and the ongoing general Brexit chaos continues to have a negative impact upon the pharmaceutical industry.  The UK was legally due to leave the EU on 12 April 2019 but of course the date for departure was delayed once again to 31 October 2019. As a result, there is tremendous uncertainty and concern amongst the pharmaceutical industry, which was made clear during a recent Brexit Select Committee Hearing on 19 June 2019. 

Key points to take away from the hearing are as follows:

·        Government preparations to prepare for such a scenario have been inconsistent in nature, especially in relation to the pharmaceutical industry. However, industry representatives note that the Department of Health and the NHS have done the best they can by way of setting up a shortages team within the NHS. However, their productivity has been limited as a direct result of the uncertainty and inconsistent information surrounding Brexit at present

·        Businesses, including pharmaceutical companies, will face (i) continuous price rises; (ii) costs; and (iii) supply chain inefficiencies. For example, under a no-deal Brexit there will be an impact on getting the necessary products for pharmaceutical medicines in and out of the UK. This will have a corresponding impact regarding timing on the supply of these products

·        There is not only a substantial and real risk of medicine shortages (which builds on our previous article), but there will be significant price rises for the NHS as well as shortages of in-demand and necessary medicines in the majority of constituencies within the UK

·        Wholesale distributors are only capable of stockpiling two weeks’ worth of stock before they need to be delivered to pharmacies and hospitals. Over-stockpiling in such a scenario would be a waste of not only resources and money, but also would cause costly inefficiencies within their distribution network. Further, some products are not capable of being stockpiled (for instance, due to the lifecycle of the relevant product) and must be delivered direct to pharmacies and/or hospitals to be sold. As such, if there was a refrigerated lorry carrying such medicines and it got held at a port (e.g. Dover), then those medicines could become unusable for the end customer (i.e. patients)

·        Stockpiling is a cost that is borne by the manufacturers. Their principal aim is to keep the flow of products in their supply chain as fluid as possible to maximize efficiencies, whilst minimizing the costs that are associated with the need to stockpile additional resources. The complications caused by Brexit so far have presented issues (and cost) around sourcing additional space to hold these products within the UK, which could become increasingly problematic. There is also the risk of the creation of an anti-competitive advantage to manufacturers that are already based within and operating throughout the UK

·        Martin Sawer, Executive Director of the UK’s Healthcare Distribution Association, pointed out that there is a potential risk of a rise in the amount of counterfeit medicine entering the UK following Brexit. The Delegated Regulation to the Falsified Medicines Directive (“FMD”) 2011/62/EU which came into force in February 2019, aims to protect and enhance the security and distribution of medicinal products within a distributors supply chain. However, at present, this regulation will cease to apply in the UK after 31 October 2019. As a result, counterfeit products could more easily be disseminated throughout a distributor’s supply chain, and such products could be dispensed through UK pharmacies and/or hospitals. At present, every legitimate pharmaceutical product for wholesale distribution must be scanned before being dispensed as proof of its authenticity. This would not currently be the case after Brexit. Through following Governmental discussions with the European Commission to date, it is our understanding that the UK would be treated as a “third country”, with the resulting effect that there would be no mutual exchange of this vital authenticity data, which could potentially increase the risk of harm to patients in the UK

Based on the above, it is clear that there is a very real and present threat to the stability of the UK pharmaceutical sector, as well as a risk to UK patients. At present, the uncertainty is clearly causing great concern. Once the UK Government provides more clarity and consistency in its handling of the Brexit situation, it will enable the pharmaceutical industry to better prepare and adjust for business outside of the bloc than is presently the case.

Author

Julia Gillert is a Senior Associate in the Corporate Department of Baker & McKenzie's London office and is a key member of the Healthcare industry group within the London office and European and Global networks. Julia advises both domestic and international companies in the med-tech, pharma and healthcare sectors on a wide range of regulatory and general compliance matters. Julia has contributed to a variety of regulatory healthcare related publications and practice handbooks and co-edits the firm's European Healthcare Newsletter. Julia sits on the ABHI's Legal Issues Committee.

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