Is Brexit Really Top of European Pharma's New Year To-Do List?

Jan 02, 2018

The year ended, for European pharma, as it had begun – with deep anxieties that the industry's operations would be seriously jeopardized by the widening fissure of the English Channel. Things are still not much clearer, even now, about the likely consequences of ripping one of the largest and most profitable drug markets out of the finely-tuned structures of the European Union.  Barring a miracle (or a popular revolution), the United Kingdom will cease to be a member state at midnight on March 30, 2019, and stands to lose all the rights and privileges that go with that status—including free movement of medicines and ingredients into and out of the other 27 EU members.

Nine business associations representing the European and British life science industry have just launched a joint cry of alarm about the potential impact on their businesses—and expressed the pious, if delusory, hope that medicines will be made a special case in the talks that are due to start in the new year on the future relationship between the EU and the UK. John Brennan, secretary general of the European Association for Bioindustries candidly admitted that "no matter how fast the biotech industry and European drug approval authorities work together, we cannot succeed in adapting all drug approvals and all drug supply lines in time and by the 29th March."

Transitional arrangements after March 2019 will be critical, industry bodies argued, to allow companies to change their marketing authorizations and supply chains. This would require "close cooperation in the regulation of medicines, including mutual recognition of regulatory activities and quality testing", and ensuring "that medicines are able to continue to move between both regions." They also put in a bid for alignment of intellectual property frameworks "in order to avoid uncertainties for industry."

A report from OHE Consulting on the implications of the UK exiting the EU's single market warns that if the UK fails to negotiate continued participation in public health activities or a free trade agreement, medicines safety and crisis response to public health threats and the medicines supply chain will be hit in Europe and the UK. The sharing of drug safety and adverse events information could face a five-month delay, and management of crises such as the Zika virus could be at risk. And with 82 million patient packs travelling between the UK and EU each month, medicines shortages could arise from the extra administrative burden, customs delays and tariff measures, says the industry. Vaccines and advanced therapies that use human blood/plasma would face particular obstacles, as these are disproportionately manufactured or imported via the UK.

Senior figures lined up to deliver their special pleading. Hubertus Cranz, director general of the Association of the European Self-Medication Industry urged "an open minded, pragmatic approach", Mike Thompson, CEO of the Association of the British Pharmaceutical Industry, called for "a cooperation agreement between the UK and the EU on medicines". Warwick Smith, director general of the British associations of generic and biosimilars manufacturers, wanted "clarity" for the pharmaceutical sector. Steve Bates, CEO of the UK BioIndustry Association demanded that "the complex issues surrounding medicines regulation and supply chain need to be front and center in the second phase of talks". For Nathalie Moll, director general of the European Federation of Pharmaceutical Industries and Associations, discussions must move on "as soon as possible to agreeing cooperation between the UK and the EU on the regulation, trade and supply of medicines." Adrian van den Hoven, director general of the generic industry association, Medicines for Europe, focused on "workable trade and customs mechanisms to ensure continued circulation of medicines between the UK and future EU27." John Smith, chief executive of the Proprietary Association of Great Britain, insisted on the need for mutual recognition agreements "to allow over-the-counter and self-care products manufactured in the UK to continue to be exported to the EU and vice versa.”

The drug industry call echoed a message to EU health ministers in early December from an alliance that industry formed with patient groups and healthcare professionals. These "European health community" priorities included "close cooperation between the EU and UK on the regulation of medicines", and "a common framework for collaboration in research and information sharing".

But if the UK is to leave the single market and the joint EU customs arrangements of membership, the best the drug industry can realistically hope for, it seems, is a free trade agreement – such as the one just reached with Canada, the EU’s deepest free trade agreement yet. This would offer none of the mutual recognition that would meet the drug industry's needs, but the EU27 have already made clear that for the UK, "there can be no cherry picking”. Michel Barnier, the Commission’s negotiator, told a recent Brussels meeting that “the UK needs to decide if it is leaving the European regulatory model. The answer to this question is the key to the future relationship."

UK prime minister Theresa May continues to claim that the UK "can do so much better" than a free trade agreement, and her government is still hovering on the brink of seeking a tailored arrangement that offers more, but without remaining in the single market.  But there is little evidence that the EU is ready to offer anything other than a standard free trade agreement. Many of Europe's political sages believe that in the end the EU will get as much as it can out of this regrettable UK decision to leave, and that the UK will have to settle for whatever it is allowed, both in terms of any agreement's content, and of any transitional arrangements. Charles Grant, director of the London-based Centre for European Reform, predicts that the EU will continue to insist that the single market is a package: "You are either in all or none of it", and any special deal for special sectors is out of the question.

Bad enough. But for the pharma sector across Europe, there are many other tough issues in the environment. The EU's annual cycle of economic and fiscal policy coordination, the European Semester, has been increasingly urging national governments to tighten up their controls on national drug spending, with an emphasis on generic prescribing and more efficient procurement. There is the alarming news from the marketplace—with major companies in the generic sector such as Teva having to cut back drastically on their activities and laying off tens of thousands of staff, and innovators challenged on every front—from patent suits in China, such as against Gilead's hepatitis C treatments, from increased cooperation among national pricing and reimbursement agencies in Europe that seek to counter the power of drug firms (the EU has just announced new money to support this work), or from tougher conditions for orphan drug designation and rewards. European drugmakers complained in mid-December that an EU study on innovative payment models for high-cost innovative medicines was "a missed opportunity", because of "concerns over the quality of the data used in the draft opinion, its lack of focus and failure to examine forward thinking solutions such as outcome-based approaches or the potential of real world evidence." Industry said it is "unable to support the conclusions". And while internet-based giants may become new disruptors to the stability of the distribution sector, that is nothing compared to the threat that they pose to the drug research sector, with the potential impact of firms like Google or Apple, already shifting towards the health sector both through wearables and through data acquisition and processing.

For the European pharma sector as a whole, Brexit may in the end prove to be nothing more than a transient irritant.


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