The duty of continuous supply by healthcare manufacturers will continue to apply in the UK following a departure of the UK from the EU without a withdrawal agreement. However, with the risk of interruptions to trade with the EU, the UK government has implemented some additional instructions to ensure that healthcare manufacturers can continue to comply with this duty.

This post will set out why the duty of continuous supply will continue to apply in the UK. It will also examine the additional instructions from the government, namely the mandatory requirements of notification and the multi-layered approach. And finally, it will consider why it is so important that healthcare manufacturers comply with these instructions.

Duty of continuous supply

In the UK, the holder of the marketing authorisation, and the distributor, for a medicinal product that has been placed on the UK market has a duty to continue the supply of that medicinal product so that the needs of patients in the UK are covered. This duty of continuous supply comes from EU Directive 2001/83/EC, Article 81.

This duty will continue to apply in the UK following the UK’s departure from the EU, even in the event of a no-deal exit, due to the European Union (Withdrawal) Act 2018 (“EUWA”). The EUWA states that EU law will be incorporated into UK domestic law as of the day the UK leaves the EU. Moreover, the EUWA empowers Ministers of the Crown to enact regulations into order to correct any deficiencies (a term broadly defined under the EUWA) in the retained EU law. To date, the Secretary of State of Health & Social Care has enacted four Regulations under the EUWA to ensure the continued sale of, and access to, medicines, medical devices and clinical trials.

The latest of these Regulations, the Human Medicines (Amendment etc.) (EU Exit) Regulations 2019 (the “2019 Regulation”), updates and amends the Health Service Products (Provision and Disclosure of Information) Regulations 2018. These updates and amendments will come into force on the day that the UK leaves the EU (currently 23:00 on 31 October 2019).

Mandatory requirements added to the duty of continuous supply

The Health Service Products (Provision and Disclosure of Information) Regulations 2018, mentioned above, imposes mandatory requirements onto manufacturers, distributors and suppliers[1] of medicines and medical devices, and the amendments by the 2019 Regulation confirm that these mandatory requirements will continue to apply following the UK’s departure from the EU.

Most notably, the manufacturers of medicines will continue to be required to notify the Secretary of State of Health & Social Care that they intend to discontinue the manufacturing or supply of a medicine, or that they consider that a supply shortage of a medicine is likely to occur (Regulations 29(1) and (2)). The notification must be provided “at least six months before the day on which the manufacturing or supply will cease” (or as soon as practicable after the decision is made), or “at least six months before any anticipated impact on any patient who takes the presentation is realised” (or as soon as practicable after the manufacturer becomes aware that there may be a shortage) (Regulation 29(3)).

If the Secretary of State considers that a manufacturer has not complied with Regulation 29, then, by written notice, it may require that the manufacturer provide specific information to the Secretary of State. If the manufacturer fails to comply with this notice from the Secretary of State, then the Secretary of State may impose a daily penalty of up to £5,000 for the first 13 days of non-compliance, and £10,000 for the subsequent days, until the manufacturer starts to comply.

This mandatory requirement to notify the Secretary of State reinforces the duty of continuous supply: even in cases where the manufacturer is not responsible for a shortage in the supply of the medicine, the manufacturer is still required to notify the government of the shortage as soon as practicable after it becomes aware of it, and it must show the steps taken by the manufacturer to address the shortage (Regulation 29(2)(f)). By adding this mandatory requirement, the government ensures that manufacturers continue to assess the potential shortage of supply of their own product. This way, the onus is on the manufacturer to ensure that there is no shortage of their products after the UK leaves the EU.

Other requirements: the multi-layered approach

The Department of Health & Social Care has published numerous communications to members of the healthcare and medical industry in order to provide guidance in the lead-up to the UK’s departure from the EU. In particular, the Secretary of State of Health & Social Care has recently updated the Department’s multi-layered approach to “help ensure the continuation of medicines and medical supplies across the UK” in the event of a no-deal exit (Written Statement by the Secretary of State of Health & Social Care (Matt Hancock) on 8 October 2019 in the House of Lords).

Some of these components of the multi-layered approach will be taken on by the Department, such as securing freight capacity, changing or clarifying regulatory requirements, and growing the support unit, in particular with regard to the National Supply and Disruption Response unit. Healthcare manufacturers will apply the remaining recommendations: improving trader readiness for new border arrangements, building up buffer stocks of six weeks above the business-as-usual inventory, and securing extra warehousing space for stockpiled medicines.

As with the mandatory requirements discussed above, the multi-layered approach puts a lot of responsibility on healthcare companies to help the government ensure that medicines and medical supplies are distributed across the UK following a no-deal exit of the EU.

Inability to blame Brexit for shortage of supply

By involving the private entities of the healthcare industry in its safeguard against medicine shortages in the UK after a no-deal exit from the EU, the government has essentially put the onus on manufacturers and distributors to ensure that shortages do not occur. Moreover, as the duty to continuously supply medicinal products will continue after a no-deal Brexit, these private entities have been given the means to mitigate any shortage of supply.

However, this means that it will be difficult for healthcare companies to blame Brexit for any interruption of the supply of their products. Accordingly, if a healthcare company fails to ensure appropriate and continued supplies pursuant to Article 81 of Directive 2001/83/EC, then it will not be able to claim that the interruption of the supply was out of its control.

It is clear from the mandatory requirements discussed above that the government can impose penalties on companies that are not complying with their duty to notify the Department of Health & Social Care that they intend to discontinue a medicine, or that they foresee a supply shortage for a particular medicine.  However, whether the government would take legal action against a company for not having taken adequate preventative measures (such as stockpiling) in the event of the interruption of supply of a medicine is uncertain.

Instead, it is more likely that the government will take legal action based on a breach of the duty of continuous supply, as this breach is easier to determine. As mentioned above, in such a case, the healthcare company may not succeed in blaming Brexit for the interruption of the supply if it had a hand in ensuring that there would be no shortage of supply post-Brexit. In such a situation, its only defence might be its compliance with the mandatory requirement to notify the government of the impending shortage of supplies at the earliest practicable time, along with a description of the steps taken by the company to address the impending shortage. In other words, the best protection healthcare companies can secure at this time is to comply with the government’s mandatory requirements and multi-layered approach. Not only might this mitigate the consequences of a no-deal Brexit, but it will likely be the companies’ best legal safeguard against accusations of a breach of their duty of continuous supply in the event that Brexit interrupts the supply of medicines in the UK.

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Joanna Ludlam is a partner in the Dispute Resolution team in the Firm's London office, where she leads the market-leading Regulatory, Public & Media law team in the London office and also co-leads the office's Compliance & Investigations practice group. At an international level, she chairs the Firm's EMEA Compliance & Investigations Group, and is a member of the steering committee of the Global Compliance & Investigations Group.

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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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