Editor’s Note: This article was published in Pharmaceutical Technology Europe’s November 2020 print issue.
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Bio/pharma continues preparations for a no-deal scenario as time for the UK and EU to agree upon a new deal runs out.
On 1 January 2021, the Brexit transition period will officially end, and the United Kingdom and European Union will enter a new relationship. Essentially, there are two potential pathways that the new relationship can take: either both sides enter 2021 with a new deal in place (both agreed and ratified), or the UK exits the EU without any deal in place under the rules of the World Trade Organization (WTO).
At the time of writing, the negotiations on a potential deal have stalled, with the UK’s Prime Minister, Boris Johnson, specifying that the UK should be prepared to trade in 2021 without an agreement in place (1). In response to Johnson’s comments, Richard Torbett, chief executive of the Association of the British Pharmaceutical Industry (ABPI) said, “No deal is not in the interest of the patient, the pharmaceutical industry, or the economies of the UK and the EU. As long as a window of opportunity remains, negotiators must keep talking and agree a comprehensive deal. [The negotiators] must ensure medicines supplies are uninterrupted and that a way forward for patients in Northern Ireland is urgently found” (2).
However, deals with non-EU countries are also in the process of being negotiated by the UK’s government as a way of securing future investment. So far, one trade deal has been agreed in principle between the UK and Japan (3). Any deals between the UK and non-EU countries can only start from 1 January 2021, as that is the date that the UK will have left the EU customs union.
Editor’s Note: This article was published in Pharmaceutical Technology Europe’s November 2020 print issue.
To learn more about the impact of a no-deal Brexit, the fast-approaching end of the transition period, the Northern Ireland protocol, and other trade deals on the pharma industry, Pharmaceutical Technology Europe spoke with Charley Maxwell, director QMC/senior consultant at PharmaLex.
PTE: Could you highlight some of the key aspects of a no-deal scenario that drug developers should be focusing on, in terms of preparations, to ensure continued business and supply of medicines?
Maxwell (PharmaLex): No-deal, or the most likely deal scenarios at the end of this post-Brexit transition period, would mean the end of the free movement of goods and services between the EU/EEA [European Economic Area] and Great Britain. Drug developers should be preparing for the following: customs and tariff arrangements, potential delays due to customs checks, and revised regulatory considerations.
In the event of a no-deal and the UK operating under WTO terms, the Tariff Elimination Agreement would mean no cost implications for finished medicines. However, tariffs would apply to UK export of APIs and excipients, which are currently charged at approximately 4–6% across the EU. Similarly, for a UK manufacturer wishing to import API or excipients, these would be subject to the new UK Global Tariff list currently charged at 6%.
Delays at ports are now looking possible for the foreseeable future, as EU customs officials would be obliged to inspect consignments coming from the UK in the same way as any other non-EU country. Drug companies should expect the flow of goods to be impacted particularly at the Dover/Folkestone (UK ports) pinch point.
Perhaps the biggest hurdle would be the regulatory considerations; however, both UK and EU pharmaceutical manufacturers and distributors have been preparing for this hurdle for some time. Separate UK and EU marketing authorizations (MAs) have been developed with different packaging, serialization, testing, and release arrangements to comply with EU directives and regulations. UK manufacturers required new stock keeping units (SKUs) and MAs and have had to prepare for the day that the medicines they produce are treated as third country imports. This has meant setting up remote access to the National Medicines Verification Systems (NMVS) for the country of import/release and making sure batch control testing and QP [qualified person] release arrangements have been put place in an EU/EEA country.
PTE: What are the major challenges facing drug makers trying to build up stockpiles again (as advised by regulatory and governmental bodies) that have perhaps been depleted as a result of the current pandemic?
Maxwell (PharmaLex): Stockpiling has been put forward as a short-term solution by both the Medicines and Healthcare products Regulatory Agency (MHRA) and the Health Products Regulatory Authority (HPRA) to avoid any initial disruption to supply chains when or if additional border checks come into force from 1 January 2021.
In Ireland, HPRA issued a letter to marketing authorization holders (MAHs) on 3 July 2020 to promote addressing regulatory gaps should there be a no-deal scenario (4). Their advice is that up to 10 weeks supply of medicines should be made available at primary wholesalers in Ireland on 31 December 2020 to ensure adequate supplies are available post-transition.
The UK Department of Health and Social Care advised medicine and medical product suppliers in a letter on 3 August 2020, that there will likely be disruption at the UK-EU border for six months following the transition period (5). There is some practical support proposed such as express freight arrangements using specialist logistic companies; however, the advice is for six weeks supply to be stockpiled on UK soil and to be prepared for possible future supply chain delays.
This sort of stockpiling will provide a short-term solution and contingency planning for replenishing of stock in the event of longer-term disruption is advised to enable continuity of supply.
One of the major challenges with stockpiling for a lot of companies is of course capacity constraints and the added costs incurred in holding stock for prolonged periods of time. Additionally, another challenge is that the delays right now are unknown, therefore it is difficult for distributors to gauge how far in advance they need to place orders to still receive the medicines they require on time.
PTE: Could you elaborate on how the Northern Ireland protocol may affect both UK businesses and EU businesses in pharma? Are there any preparations that companies should be putting in place to avoid difficulties relating to this protocol?
Maxwell (PharmaLex): In August 2020, the UK government issued guidance based on the Protocol on moving goods to and from Northern Ireland (6). In this guidance, it is stated that there will be no change in how goods will flow between Northern Ireland and EU Member States, including the Republic of Ireland. It is specified that this would mean no new paperwork, tariffs, quotas, checks on rules of origin, or barriers to movement within the EU Single Market for goods in free circulation in Northern Ireland. Therefore, Northern Ireland would operate as if they were a member of the free trade area, with the added benefit of also having unrestricted access to Great Britain.
This unchanged flow of goods is also reflected in the European Medicines Agency’s (EMA’s) notice to stakeholders published in March 2020 where they specified, ‘The IE/NI Protocol provides that insofar as EU rules apply to and in the United Kingdom in respect of Northern Ireland, it is assimilated to a Member State’ (7).
However, when moving goods from Great Britain (England, Scotland, and Wales) to Northern Ireland, it is not as straightforward. The Northern Ireland protocol will require HM [Her Majesty’s] Customs to apply EU customs rules and regulatory standards to all goods entering Northern Ireland, ensuring that tariffs are not paid on trade within the UK and that goods going onward to the Republic of Ireland pay tariffs and meet regulations when required.
For compliance with regulatory standards, UK companies that manufacture and distribute products for their domestic market and who also supply EU markets, this should not be an issue as they can divert the EU compliant goods to Northern Ireland. However, for those who only import or manufacture for their domestic market, as many generic medicine suppliers do, this would require manufacture/import for Great Britain (GB) and then also the setup of separate EU compliant arrangements for supply to Northern Ireland.
Products previously imported to GB from the EU and destined for Northern Ireland would have to be managed via different supply routes as product entering Northern Ireland will need to have an active unique identifier as per EU regulations. Those manufactured in GB destined for Northern Ireland would need to be serialized in accordance with EU requirement and then have the unique identifiers activated at the point of entering Northern Ireland.
Northern Ireland will be regulated by MHRA but will need to remain compliant with EU/EEA regulations to have unrestricted access to the EU/EEA markets as promised in the Northern Ireland protocol. Therefore, Northern Ireland manufacturers would need to arrange for future EU competent authority inspections to obtain the required good manufacturing practice (GMP) certificates and Northern Ireland importers and distributors would need retain remote access to another EU27 National Medicines Verification System (NMVS) to be able to carry out verification checks when moving from non-designated wholesalers and when decommissioning serialized prescription medicines.
These potential requirements are all assuming that a mutual recognition agreement is not put in place; if one can be agreed in a reasonable timeframe, it would make a lot of these arrangements much simpler.
PTE: Are there specific guidance documents that companies should be following to effectively prepare for 1 January 2021?
Maxwell (PharmaLex): Both EMA and MHRA have recently issued guidance. On 1 September 2020, MHRA published guidance explaining how medicinal products, medical devices, clinical trials, and pharmacovigilance will be regulated after the Brexit transition period expires on 1 January 2021 (8). In March 2020, EMA issued a notice to stakeholders (7) and updated EMA/478309/2017 (9). Both sets of guidance contain practical steps that pharma companies need to take for whatever outcome on 1 January 2021.
PTE: What are the major pros and cons of trade deals, such as the one agreed in principle between Japan and the UK?
Maxwell (PharmaLex): The UK–Japan comprehensive economic partnership agreement is agreed in principle and awaits publishing and ratification. Assuming that this deal will be agreed and ratified it would be a step in the right direction, and in principle will replicate the favourable arrangements already in place between the EU and Japan.
The downside is that total trade with all non-EU trading partners does not equal that of the EU, and many have argued that the most important deal to secure for the UK is the one with their closest neighbours.
Total trade between Britain and Japan was worth around £29.5 billion (€32.5 billion) in 2018, eclipsed by nearly £700 billion (€770.6 billion) of exports and imports between Britain and the EU.
Therefore, current negotiations and the establishment of a mutual recognition arrangement and frictionless trading arrangement between the UK and EU should be the priority in the coming months.
Felicity Thomas is the European editor for Pharmaceutical Technology Group.
Pharmaceutical Technology Europe
Vol. 32, No. 11
When referring to this article, please cite it as F. Thomas, “Dealing with No Deal,” Pharmaceutical Technology Europe 32 (11) 2020.