Brexit & Pharma Industry: Preparing for a No DealBy
Of the 12,300 medicines used in the UK, around 7,000 come from or via the European Union (EU), so what happens if the UK is not able to negotiate a deal as it faces an October 31 deadline to withdraw from the EU? How are the UK and the pharmaceutical industry preparing?
Brexit: where it stands
As of press time (Wednesday October 2, 2019), UK Prime Minister Boris Johnson had presented a revised exit plan in a speech in Manchester, the UK at a Conservative Party conference. He said that the plan would represent the UK’s final plan to reach an agreement with the EU and that if an agreement cannot be reached, the UK would withdraw from the EU on October 31 without a deal. Johnson and EU Commission President Jean-Claude Juncker were reportedly set to speak on the revised proposal while submitting the plan to the EU negotiations team.
A key upcoming meeting is on October 17–18, when the European Council, which is composed of the heads of state or government of the 28 EU member states, the European Council President, and the President of the European Commission, will meet. Although not one of the EU’s legislating institutions, it sets the EU’s policy agenda. The British Parliament passed a law last month designed to force another Brexit delay if the UK government has not agreed to a deal with the EU by October 19, just following the meeting of the European Council. If a deal is not agreed to between the UK and EU by October 19, and the UK Parliament does not vote in favor of leaving with no deal, then the UK prime minister will be legally obliged to ask the EU for a Brexit delay although there would be no guarantee that such a request would be granted.
Pharmaceutical industry response
Throughout the Brexit process, the UK pharmaceutical industry has maintained a position of the importance of the UK securing a deal to exit the EU. “Securing a deal remains the best way to protect patients,” said Dr Richard Torbett, Executive Director of Commercial Policy at the Association of the British Pharmaceutical Industry (ABPI), the UK trade association representing innovator and research-based pharmaceutical companies, in a September 27, 2019 release.
In late September (2019), The National Audit Office (NAO), an independent Parliamentary body in the UK, which is responsible for auditing central government departments, government agencies and non-departmental public bodies, released a report that outlined the efforts that the UK government and private sector have made to ensure the continuity of supply of pharmaceuticals in the event of a “no-deal” in the Brexit process. In December 2018, the UK Department of Health & Social Care (DHSC) brought all its preparations for maintaining supplies in the event of a ‘no-deal’ EU exit under a single Continuity of Supply Program.
In its recently released report, the NAO reviewed the DHSC preparations to make sure the UK has a steady flow of supplies for the health and social care sector when it leaves the EU. Of the 12,300 medicines used in the UK, DHSC estimates that around 7,000 come from or via the EU and the vast majority use the short Channel crossings (i.e., crossings between the English Channel and Continental Europe). More than half the clinical consumables the UK uses come from or via the EU, and the vast majority use the short Channel crossings. Also, half of all supplies for clinical trials come from or via the EU, and half of those (25% of the total) come through the short Channel crossings.
To maintain continuity of supply, the NAO said it “recognizes that this is a significant challenge and it is not possible for anyone to know exactly what will happen at the border if the UK leaves without a deal,” said the NAO in a September 27, 2019 statement in releasing the report. It said that the UK government’s own “reasonable worst case” assumption is that the flow of goods between the UK and EU could be reduced to 40–60% of current levels on Day One of withdrawal with the flow of goods improving to 50%–70% of current flow after three months and returning to close to current levels within 12 months.
This assumption underpins DHSC’s preparations to try to avoid disruption, for which it has identified high risk areas and for which it has taken a multi-layered approach to mitigate supply disruption by focusing on three areas: (1) building up stockpiles and obtaining space in warehouses; (2) re-routing supplies to avoid busy crossings, procuring additional freight capacity, and preparing suppliers; and (3) increasing DHSC’s ability to monitor the situation and respond.
For its part, the ABPI says pharmaceutical companies have been working to ensure continuity of supply. “Pharmaceutical companies have been doing everything in their power to prepare for Brexit, including increasing stocks and planning alternative supply routes where possible,” said ABPI’s Torbett in the association’s September 27, 2019 statement. “But as the NAO sets out, some things are outside of their control. We have been working closely with Government on the contingency plans outlined in this report. Prioritizing medicines on Government-secured freight capacity is an important part of these plans. We reiterate the need for companies to get the detail of how to access this capacity as soon as possible.”
UK’s progress in preparing for a no-deal
In its report, the NAO outlined the actions taken thus far by the UK’s DHSC to ensure continuity of pharmaceutical supply in the UK. The DHSC has encouraged suppliers, including pharmaceutical companies, to build up stockpiles of medicines and other supplies, but it has incomplete information about the level of stockpiles in place. Ahead of the EU exit, the DHSC has relied on suppliers building up their own stocks at their own expense. It can advise suppliers to build up stocks but cannot instruct them to do so. For October 31, the DHSC asked pharmaceutical suppliers of medicines from, or via, the EU to ensure they can continue to supply medicines through a combination of stockpiling and securing alternative routes into the UK. It has suggested a default stockpile of six weeks’ supplies. The DHSC is surveying its suppliers to determine their progress in building stockpiles and re-routing supplies. As of September 20, suppliers reported that 72% of medicine product lines had at least six weeks’ worth of supplies stockpiled, and for 25% of medicine product lines, suppliers had secured freight capacity away from the short Channel crossings.
The DHSC has also secured additional warehouses for companies to use. Suppliers of medicines and other priority clinical supplies will be able to use freight capacity bought for government-wide use. DHSC expects to use 91% of government’s total freight capacity.
As a contingency measure, the DHSC has secured additional warehouse space to enable manufacturers to stockpile their medicines and material for clinical trials. In December 2018 and January 2019, it signed 12-month contracts with three specialist providers of storage space to provide additional storage capacity for 58,850 pallets, of which 5,000 could be used for refrigeration and 850 for temperature-controlled drugs. The contracts were originally put in place for a possible no-deal exit on March 29, 2019. The DHSC latest assessment for October 31 is for a lower requirement: a maximum of 48,000 pallet spaces. As a result, the DHSC terminated one of the contracts although it is keeping the overall situation under review in case of additional need. It pays the cost of preparing the warehouses for use, and the space is then let out to suppliers at normal commercial rates.
The NAO report says that although the Department for Transport (DfT)-led procurement of freight capacity is underway, the time available to put capacity in place for October 31 is extremely limited and it might not now be possible to have all the freight capacity available on that date. DfT’s aim is to have as much of the freight capacity for priority goods as possible in place by October 31 and all of it by November 30 at the latest. The DHSC has started procurement of its own dedicated courier service that can pick up urgent medicines and supplies direct from manufacturers in Europe and deliver them to where they are needed in the UK. This will provide capacity for 50 pallets and an additional 35 cubic meters of urgent or specialist goods to be transported each day.
The NAO report, however, says that despite recent efforts across government, there is a risk that traders, including medicine suppliers, will not be ready for new border processes by October 31. In June 2019, the government estimated that 50%–85% of heavy goods vehicles (HGVs) using the short Channel crossings might not be ready by October for new French customs arrangements. Trade bodies operating in the pharmaceutical sector told the NAO in September about continuing concerns among their members about the quality of practical information from government on the precise border processes that will operate after October 31 as well as the need for clarity about how the government-secured freight capacity will operate. On September 1, 2019, the government launched a communications campaign to support individuals and businesses to prepare.