The Cost of Brexit

Editor’s Note: This article was published in Pharmaceutical Technology Europe’s November 2019 print issue.

At the time of writing this article, it is still unknown as to whether or not the United Kingdom, pursuant to Article 50 of the Treaty on European Union, will reach an agreement establishing the arrangements for its withdrawal from the EU. If Brexit leads to the UK leaving the EU without a withdrawal agreement in place, there will be a so-called ‘hard Brexit’, which will make citizens, companies, and public authorities, on both sides of the English Channel face a critical time as the UK, from 1 November 2019 onwards, will cease to be bound by the rules on free movement of goods, workers, and services. Alternatively, should a further extension to reach an agreement be granted, as most people currently predict will be the outcome, pending the negotiations on the new set of rules for governance, a transitional period, with no major changes to the current relationship, will commence, and likely run until 31 December 2020, leading to a so-called ‘soft Brexit’.

In either scenario, the bio/pharma industry has been preparing to mitigate the impact of Brexit by undertaking a Brexit impact assessment and addressing the major implications that the UK’s withdrawal from the EU will have on their internal organization and marketing strategies. Regulatory authorities (inter alia, the European Medicines Agency [EMA] and the UK Medicines and Healthcare products Regulatory Agency [MHRA]) and governmental institutions (mainly the European Commission [EC] and the UK’s government) have issued and constantly updated several publications that identify the major challenges and provide all the relevant stakeholders with valuable guidance on how to best prepare for change in their respective fields, especially in the case of a no-deal Brexit.

Major issues for consideration

Among the major issues the bio/pharma industry will have to consider is the relocation of European headquarters or, at least, a relevant portion of staff, as EU legislation applicable to both the pharmaceutical and medical device industries requires companies to be established in the EU (rectius, in the European Economic Area [EEA], including Norway, Iceland, and Liechtenstein) to keep on benefiting from the EU internal market. According to Article 2 of Regulation (EC) No. 726/2004, the marketing authorization holder must be established in the EU (1). Through the EEA agreement, this is extended to include also Norway, Iceland, and Liechtenstein (2). Conversely, with specific regard to the marketing of medicinal products in the UK, the marketing authorization holder and the qualified person for pharmacovigilance (QPPV) should be established in the UK by 31 July 2021 at the latest (3). 

Additional implications to be duly taken into account relate to the need for compliance with new customs formalities (e.g., import and export licences issued in the UK will be no longer be valid in the EU) and tax procedures (e.g., EU member states will charge VAT [Value Added Tax] at importation of goods entering the EU from the UK). Import and export burdens in trading with the UK are likely to generate delay or, in the worst-case scenario, a shortage of products on the UK market. According to the Serious Shortage Protocols (SSPs) (4), which may be issued when it is deemed to be absolutely necessary, pursuant to the Human Medicines (Amendment etc.) (EU exit) Regulations 2019, which amends the Human Medicines Regulations 2012, UK pharmacists may be given unprecedented powers to substitute drugs they are unable to get hold of, for other drugs, which may not necessarily have the same active ingredients as those prescribed (4). 

As far as medical devices are concerned, in the case of a ‘no-deal’ Brexit, UK-based notified bodies will no longer be recognized by the EU after Brexit, meaning that the devices they have certified will no longer be in conformity with the applicable EU rules and, as such, they will not be able to be placed on the EU market. That’s the reason why the British Standards Institution (BSI) group, the UK national standard body, chose Amsterdam for its second location and migrated most of its clients and certificates to the Netherlands to reduce the risk of a ‘no-deal’ Brexit.

In addition, bio/pharma companies have to bear in mind that the UK will be progressively losing its clinical trial attractiveness as many research and development activities have already moved outside the UK to remain eligible and approvable for the EU market. This will also be the consequence of unsecure access to the Horizon Europe, the next EU research and innovation framework programme 2021–2027 that will replace Horizon 2020, and on uncertainty related to the future mobility of researchers, scientists, and other employees of the pharmaceutical and medical device sectors (5). Access to the EU research and development funding could only be retained through the UK gaining the ‘associate member’ status for Horizon Europe, that still has to be negotiated.

Increased costs: Financially and socially

All the above-mentioned changes imply an increase in activity-related costs for the bio/pharma industry, irrespective of the final Brexit outcome scenario. Nonetheless, the magnitude of market disruptions and financial implications will greatly depend on the actual exit scenario. 

According to the Queen’s speech addressed to both Houses of Parliament on 14 October 2019 (6), the UK government intends to work towards a new partnership with the EU, based on free trade and friendly cooperation. This approach seems to entail an option where UK remains part of the European Economic Area (EEA), retains access to the EU market, and is allowed to take part in clinical trials EEA (or Norwegian model). Should the latter not be the case and omitting all the possible intermediate variations of the aforesaid option, the worst-case scenario would imply a complete separation of the UK market from the EU where World Trade Organization rules apply. That would probably lead to the negotiation of mutual recognition agreements to give effect to authorizations and certificates issued by the UK, EU, and EU member states’ competent authorities, respectively. The same may be true with regard to technical standards that medical devices will have to comply with to be placed on the market.

Looking at individuals it has been highlighted that patients, researchers and scientists, medical practitioners, and public health groups are also expected to greatly suffer from the UK divorce from the EU. Industry will have to take this element in due consideration as this will constitute an obstacle to health-related mobility that may seriously undermine not only the patients interests but also training and condition of work of healthcare professionals. This will definitely have a serious impact on future research activities and on the supply-demand ratio for both medicinal products and medical devices. 

Avoiding major disruptions

Eventually, it has to be noted that at this point in time the UK government is committed to ensure that EU rules are converted (‘grandfathered’) into UK law at the moment of exit through the EU (Withdrawal) Act, with changes where necessary to make sure the rules work in the UK. In addition, whatever the final exit scenario will be, adequate time will be given for businesses to smoothly implement any new requirements. Furthermore, information that is already available will also be used to complete administrative tasks for continuity of work and authorizations.

Last but not least, the bio/pharma industry is expected to cooperate with governmental authorities in promoting information and awareness campaigns to avoid consumer panic and major disruption on the availability of medicinal products and medical devices on both the UK and the EU internal market.

References

1. EC, Regulation (EC) No. 726/2004 of the European Parliament and of the Council (Brussels, 31 March 2004).
2. EUR-Lex, “Agreement on the European Economic Area,” Official Journal of the European Communities (3 January 1994).
3. MHRA, “Further Guidance Note on the Regulation of Medicines, Medical Devices and Clinical Trials if There’s No Brexit Deal,” gov.uk, 3 September 2019.
4. UK Statutory Instruments, “The Human Medicines (Amendment) Regulations 2019,” legislation.gov.uk, 14 January 2019.
5. EC, “Horizon Europe-the next research and innovation framework programme,” ec.europa.eu [accessed 25 October 2019].
6. UK Government, “Queen’s Speech 2019,” gov.uk, 14 October 2019. 

Article Details

Pharmaceutical Technology Europe
Vol. 31, No. 11
November 2019
Pages: 45–46

Citation 

When referring to this article, please cite it as V. Salvatore, “The Cost of Brexit,” Pharmaceutical Technology Europe 31 (11) 2019.