Brexit Means Brexit

“Brexit means Brexit.” The three little words that launched Theresa May’s leadership campaign in the aftermath of the EU referendum were originally described as firm and unambiguous. But almost two years after the UK voted to leave the European Union, their meaning remains as unclear today as it was in July 2016. In the intervening months, Brexit has dominated both news and business agendas - and become a topic to be avoided at family barbeques. Yet in the sphere of healthcare, Brexit is much more than a political ideology or a three-word soundbite; it affects patients and it affects lives. Brexit may indeed mean Brexit - but for the European pharmaceutical industry, knowing what it really means is hugely important. The final outcome will lead pharma - and the patients it serves - to one of two extremely different destinations. With less than 12 months to go before the UK’s withdrawal becomes official, the industry must prepare for both.

Common sense and commonality

So where are we now? For a subject that polarises opinion and sparks heated debate, Brexit has found a rare consensus in pharma. In the UK, the ABPI has outlined five priorities. These include securing a single-step transition period, regulatory alignment between the EU and UK and ‘frictionless’ movement of medicines across borders. In addition, it wants an immigration system that allows pharma to attract talent from around the world as well as ‘predictable access’ to funding and collaboration for scientific research. These common-sense ambitions are broadly aligned with those of EFPIA and pharmaceutical companies across Europe. Thankfully, they reflect the position of the UK Government too.

In her Mansion House speech at the beginning of March 2018, Theresa May called for a comprehensive system of mutual recognition (strong overtones of working together) where products only need to undergo one series of approvals, in one country, to show that they meet the required regulatory standards. The Prime Minister specifically cited the importance of regulatory alignment for the pharmaceutical industry, indicating a determination to explore how the UK can remain a member of the EMA. Maintaining membership would, she said, assure a continuation of investment in innovative medicines in the UK. Moreover, with pharma companies prioritising larger markets when they begin the protracted process of seeking product authorisations, regulatory alignment would enable new medicines to reach patients (on both sides of the Channel) as quickly as possible.

May’s Mansion House statement was welcomed by the ABPI. Its Chief Executive, Mike Thompson, said: “Every month, 45 million packs of medicines move from the UK to the EU - and 37 million come the other way. That is why the Prime Minister’s commitment to seek cooperation on medicines regulation would be the best outcome for patients, not just in the UK but across Europe.” However, close cooperation on regulation is, he said, only one part of the challenge. “Making sure the supply of medicines is uninterrupted is essential to ensure patients in the UK and EU can get the medicines they need from day one of Brexit.”

With the Mansion House speech advocating ‘frictionless’ borders and integrated supply chains, the consensus across government and industry is reassuring. What’s more, recent confirmation of a transition period that, at the very least, maintains regulatory alignment until December 2020 provides further stability for pharma (teetering on the edge) businesses. However, despite the encouraging signs, the real challenge will be in ensuring the pre-deal rhetoric is reflected in the post-transition reality. The shape of pharma’s future is, very much like this article, a hostage to negotiations that may ultimately puncture the balloon of optimism.

So what can pharma do now? The answer fundamentally breaks down into two components: high-level engagement with the negotiation process to lobby for the deal the industry needs, and constructive scenario planning to prepare for the possibility that the final deal falls short. Ultimately, despite the consensus, horizontal issues beyond pharma’s gift may make the latter a more likely scenario.

Maintaining pharma’s voice

Pharma’s voice in the negotiations to date has been both impressive and effective. “The industry, both as a whole and as individual companies, has worked out detailed, constructive and practical solutions as to how pharma can flourish after Brexit and ensure any disruption is minimised,” says Paul McGrade, Senior Counsel on Brexit at Lexington Communications. “We see this in the trade body positions and we also see it internally within pharma organisations. There’s a coherence across the industry and a thread of rationality running right through the approach. The working assumptions are that people on all sides of the negotiation want a positive win/win outcome. However, although there’s a visible solution out there for the industry, the politics cutting across it may mean we do not get there. The outcome pharma wants is unlikely to be achievable without a comprehensive customs union partnership or agreement. This takes us to the heart of the tensions in Westminster, and also to the caution that characterises the EU27, that doesn’t want to create a new structure for the benefit of a country that’s leaving - even though they will obviously feel the impact as much as the UK. Pharma knows its ambitions are a hostage to fortune. The question is: what does it now do to close the gap between the solution it has mapped out in detail and where we are currently in the negotiations? The answer is simple: more engagement.”

To date, the industry’s engagement has largely focused on pushing its pragmatic solutions. It now needs to ratchet things up a notch and bring the implications for patients into the dialogue. As the ABPI says: “It is now critical that both sides prioritise patient safety in phase two of the negotiations.”

Paul McGrade agrees: “Pharma should continue to emphasise its constructive solution to both the UK government and the EU27,” he says. “But it should also begin, privately at least, to stress the potential consumer impacts an alternative position might bring; the unpredictable delays and inherent risks to patient safety, access to medicines and patient care. Pharma must redouble its efforts to highlight the implications if negotiations cannot close the gap between the ready-made solution it’s advocating and the low ambition deal that appears to be on the cards.”

Yet despite the enormity of what is at stake, pharma must remain pragmatic and flexible. It’s important to acknowledge that the trade deal will not be finalised in 2018. “This year is all about securing a broad political agreement that will set the parameters for the future trade deal,” says Paul. “Negotiations will continue well beyond March 2019. Much of what pharma has set out in its detailed proposals won’t be negotiated until after the UK has left the EU. In the short term, therefore, the industry should focus on what it needs to see in that broad political agreement to ensure its ambitious vision isn’t closed off from the start. Pharma has already made huge progress in defining an outcome upon which both sides broadly agree. Now it’s about how we get there. This requires focused engagement, both collectively and at the individual company level, to make sure the rule-making doesn’t negate those shared ambitions.”

Be prepared

But beyond engagement, what can pharma do now to ensure the smoothest possible transition to a new way of working, whatever that looks like? In an uncertain and ever-evolving environment, the challenge is to prepare for all eventualities. At the headline level it seems the EMA is encouraging pharma to prepare for a so-called ‘hard Brexit’ where Britain operates as a third country outside a customs union and the MHRA stands alone as a regulator for the UK market only. The recently agreed transition deal provides a calming short-term reassurance for pharma, but the world on New Year’s Day 2021 may ultimately look very different. So how do you prepare for the unknown?

“Some of the larger multinationals are already preparing for the worst-case scenario and relocating key roles such as QPs and QPPVs into EU27 markets,” says Jonathan Trethowan, VP, Regulatory and Scientific Policy, PharmaLex. “It’s an understandable response from organisations that have the resource to make these things happen quickly. However, mid-sized and smaller companies are typically adopting a more risk-based approach and waiting to see what emerges from the next phase of negotiations before making significant changes to their resourcing models. There’s a mature market for outsourced regulatory affairs in Europe so companies can make resourcing decisions closer to March 2019 and the start of the transitional (implementation) phase. But they cannot leave everything so late. Preparations for a potential ‘hard’ Brexit must start now - and in many cases they already have.”

As highlighted by the ABPI, one of the biggest risks of a failure to achieve the industry’s preferred outcome is in the crucial arena of supply chains. “As we know, any changes in regulation that affect the movement of goods across Europe will have significant implications - not just for businesses, but also for healthcare consumers,” says Jonathan. “The considerations are wide-ranging; what’s it going to cost to move your product? Is that a finished product or an active ingredient? How are you going to move raw supplies from outside the EU? Factors such as these can - and indeed must - be considered proactively. If they haven’t already started, companies should begin a comprehensive review of their supply chains to understand both how they work now and how they might need to work should circumstances change. Where are your supplies coming from? Where is the manufacturing being conducted? And to where, from that site, is product being shipped to; is it simply within the EU and UK, or is it going further afield? There are implications in non-EU markets too.”

There are also potential issues around CPPs (Certificate of a Pharmaceutical Product). CPPs, which establish the status of a pharmaceutical in the exporting country, are required by importing countries to ensure the product being registered or renewed aligns with the scope of commercialisation or distribution permitted in that country. Their importance may be exposed by Brexit. “For example, a company may currently be manufacturing a product in Britain where it’s registered for use in four indications,” says Jonathan. “However, as part of Brexit, that company may decide it no longer wants the risk of manufacturing it in Britain and opt to move production to Spain. This brings new challenges. In Spain that product may only be authorised in two indications. There’s a clear risk that international registrations will only recognise the indications in the market where a product is manufactured. This will have significant downstream implications.”

Clearly, pharmaceutical regulation has always been a dynamic and complex landscape - but the advent of Brexit brings additional layers of complexity and uncertainty that are challenging pharma’s preparedness for change. Arguably, now more than ever, an independent eye could prove crucial. “It’s always helpful to get professional advice from regulatory professionals that are well-versed in the dynamics of global regulation and can provide the holistic view,” says Jonathan. “This is certainly the case with something as complicated and impactful as Brexit. The best advice is to start preparations now so you can push the button when the final agreement, whenever it comes and whatever it looks like, arrives.”

Three little words

In an uncertain environment where “Brexit means Brexit” but no-one truly knows what the final deal will mean, the industry’s future may still depend on three little words. Primarily, the differential destinations of ‘deal/no deal’ will have far-reaching repercussions. But, at present, an alternative three words should dominate the industry’s thinking: do not wait. Engage now and prepare now. Because in the final analysis, beyond the business implications and the impact on profitability, there are patients sitting at the end of this process. For their sakes more than any other, we cannot afford to get this wrong.