House of Commons publishes report on the impact of Brexit on the pharmaceutical sector

On 17 May 2018 the House of Commons Business, Energy and Industrial Strategy Committee (the Committee) published its report on “The impact of Brexit on the pharmaceutical sector”.  The report evaluates the consequences of the different outcomes of the Brexit negotiations, including a “no deal” scenario, as well as their views on the most beneficial type of withdrawal agreement for the industry.   

The Committee’s key message is that leaving the EU without a deal for pharmaceuticals would be hugely damaging for the sector in the UK, with the greatest risk being to UK patients as access to markets may diminish.   

Nonetheless, the report recognises the positive engagement demonstrated by the UK government to date and their support for continued cooperation between the UK and the EU with regard to the pharmaceutical industry. The Committee urges the government to provide clarity and ensure that the UK maintains is status as a world leader in pharmaceuticals.

Recommendations

The Committee’s inquiry focused on the following seven key areas, based on evidence from trade bodies, businesses and other stakeholders. The following recommendations are made with a view to informing public and parliamentary debate and to influence the UK government’s objectives as part of its ongoing negotiations on leaving the EU.

1. Tariff barriers

• To pursue a trade agreement with the EU and other trading partners that includes all finished and component pharmaceutical products and is not limited to those listed under World Trade Organisation (WTO) rules.  
• Outside the Brexit negotiations, work to ensure that the WTO updates the list of pharmaceuticals and components covered by the Pharmaceutical Tariff Elimination Agreement, which facilitates zero-tariff trade between WTO members. 

2. Non-tariff barriers

• To seek as frictionless a border as possible, prioritising the absolute minimum additional costs and eradicating bureaucracy for the sector. 
• Put arrangements in place to ensure the cross-border transfer of short-life pharmaceutical products for emergency treatments and public health cases.

3. Regulatory alignment

• The Committee supports the UK government’s recognition of the benefits of the UK’s continued membership of the European Medicines Agency (EMA) and invites the European Commission to explain its approach going forward. 
• Prioritise regulatory alignment with the EU market as well as a form of membership with the EMA, particularly given the integral role played by the Medicines and Healthcare products Regulatory Agency in the EU-wide regulation of manufacturing, testing and release of medicines.
• Retain a presence for EMA jobs and facilities in the UK, supporting UK businesses to continue to access the European market and European businesses to access the UK market.
• Take a pragmatic approach post Brexit in relation to the role of the European Court of Justice in dispute resolution.

4. Transitional arrangements

• Ensure that a decision is made quickly on the new relationship for the UK and EMA, to reduce uncertainty and minimise the need for unnecessary contingency planning costs currently being borne by the pharmaceutical sector.

5. Trade opportunities post-Brexit

• Prioritise friction free access to the EU market and the roll-over of existing free trade agreements to ensure the UK remains a major global hub for pharmaceutical innovation.
• Ensure that any trade deals do not cause divergence from current intellectual property rules, as unilateral change could risk the UK’s attractiveness as a base of research or the ability of the NHS to access a full range of medicines.

6. Skills

• Work with the sector to meet the skills gap (which could increase post Brexit) and ensure the effective circulation of staff from around the world.

7. Research and development:

• Provide certainty to the industry by clarifying the approach to research and development collaboration, including whether it will be seeking an association agreement with the successor to the current EU research programme, Horizon 2020.
• Ensure that UK pharmaceutical companies can continue to conduct effective clinical trials, through cooperation with European institutions and a mutual recognition of results.

Comment

The Committee’s concerns echo those articulated by the life sciences industry, reiterating the risk of the UK being treated as a ‘third country’ outside of the EU if a ‘no deal’ scenario materialises, thereby losing access to key markets as well as vital funding for research and design.  

It is however clear that the Committee’s most pressing concern is the potential for regulatory divergence, notwithstanding the Prime Minister recently indicating a willingness for close cooperation with the EU on regulation.  This is evidenced by the strong statements made by the Committee as to the importance of prioritising a form of membership with the EMA and achieving regulatory alignment post Brexit.

As part of its inquiry, the Committee sought out potential benefits to the UK pharmaceutical sector from Brexit, but found that any small gains would be hugely outweighed by additional costs or the loss of access to existing, successful markets.   It is particularly telling that the Committee found no-one involved at a senior level in the sector who was prepared to make a positive case for Brexit for pharmaceuticals.

With no clear Brexit deal in sight, most pharmaceutical manufacturers and suppliers will already be preparing for a ‘no deal’ scenario, undoubtedly at significant cost.  Given that the UK’s departure from the EU is merely a matter of months away, it is absolutely imperative that the government provides clarity to the sector as soon as possible so that those within the industry can prepare accordingly.

Read other items in the London Market Brief - July 2018

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