Can drugs that have been stockpiled in case of a no-deal Brexit legally be sold to other countries? Yes, at the moment they can, and because the pound is so weak compared with the Euro, there is a very real risk that this may happen.
There is a lot of uncertainty surrounding what will happen in the event of a no-deal Brexit, in particular in relation to trade. There are concerns that we may be left with gaps on shelves in the short to medium term, as has been seen in the government’s recently partially released Project Yellowhammer report, which has attracted widespread controversy, with the prospect of patient safety being prominent. While the supermarkets are busy stockpiling mince pies, GPs and hospitals are more concerned that their patients may not able to have their prescriptions dispensed from pharmacies, where gaps on shelves will have a much greater impact.
Earlier in the summer, the Department of Health and Social Care (DHSC) asked healthcare companies to build a six week supply of stock ready for no-deal Brexit, to mitigate any shortfalls in products and ingredients crossing the borders from the EU into the UK. Stockpiling is a key component of the DHSC’s ‘multi-layered’ approach to no-deal Brexit planning along with re-routing, emergency freight options, trader readiness, etc. A high proportion of the pharmaceutical and medical devices industry players have built a stockpile wherever circumstances allow (many products have too short a shelf-life to be stockpiled), having had to manage their previous stockpile through the supply chain after the UK’s exit date from the EU was extended in March and April.
However, the Association of British Pharmaceutical Industry (ABPI) has warned of concerns that medicines that have been stockpiled for the UK market in the event of a no-deal Brexit could be sold off outside the UK before Brexit. This would widen the gap in supply in the UK post-Brexit, leaving patients unable to get the prescriptions that they need after the UK leaves the EU.
The concern is fuelled by the devaluation of the pound in the run-up to Brexit: if the pound continues to drop against the Euro, the rest of Europe becomes an increasingly attractive market in which to sell drugs, meaning that medicines that had been intended for the UK market are sold off elsewhere in the EU by wholesalers.
The stockpiling programme is for medicines and medical products that would require a prescription or that you would usually get under supervision from a pharmacist, and that are either made in the EU or contain ingredients or components that are made in the EU.
The stockpiled drugs fall into two buckets: 1. Those that purchased by an entity in the EEA. Whether that entity bought them in the UK or elsewhere in the EEA, these drugs have already been put on the market in the EEA with the rightsholder’s consent. The trade mark rights in these drugs have been exhausted, meaning that the drugs can legitimately be sold on anywhere in the EEA (before or after Brexit). This is known as parallel trade. 2. Those that have not yet been put on the market in the EEA, because they have been transported and stored in the EEA but not yet sold in the EEA. The trade mark rights in these drugs are not exhausted. These drugs can currently be put on the market either in the UK or elsewhere in the EEA with the rightsholder’s consent. As we currently have EEA-wide exhaustion they can then be re-sold anywhere in the EEA. However if on Brexit, the UK were to enter into a national exhaustion regime, drugs first put on the market with the rightsholder’s consent in the UK, could not be sold outside the UK without infringing trade mark rights.
The likelihood of a national exhaustion regime is very low, and the Government has said that in the short term at least in the event of a no-deal Brexit, the UK will continue to recognise the EEA regional exhaustion regime. However, there may be restrictions on the parallel export of goods from the UK to the EEA. At the moment, parallel imports tend to flow into the UK, where goods can be bought inexpensively in other EU member states and resold at a higher price in the UK. If the pound continues to weaken, and such restrictions are not imposed, stockpiled drugs could continue to be sold outside the UK after Brexit.
In an attempt to stem the flow of drugs out of the UK, the ABPI has called for ministers to introduce temporary restrictions on parallel exports. The aim of the restriction would be to prevent the stockpiles being run down and to keep the drugs in the UK until Brexit.
Post a no-deal Brexit, the introduction of duties on goods shipped from the UK to the EU may well stem the flow, but for any temporary restrictions to have the full intended effect they will need to last beyond Brexit, possibly until the pound recovers against the Euro.
For further information please contact Iona Silverman or Julia Gillert of our London office.