Regulatory Risks for Pharma in Brexit Uncertainty

The Regulatory Impact of No-Deal Brexit on the Pharmaceutical Sector

In the first of a new series of industry insight articles, Intersys Risk Ltd Director Catherine Geyman, examines the various legal risks to the pharma sector posed by a no-deal Brexit.

Importers, distributors, pharmacists and others face a fast-changing legal environment in the event of no-deal

With Boris Johnson taking the keys to number 10, the prospect of a no-deal Brexit looms large. It is “do or die” when it comes to departing in October, he says, and the risk is probably at its highest since March, before Theresa May first confirmed she would ask for an extension to our departure date.

With that realisation, many of the now well-worn discussions about the risks of disruption to the pharma supply chain are resurfacing. But, as the chances of leaving the EU without a deal grow, new risks are also coming into focus – not least the legal framework in which drug companies operate.

Looming liability for pharma distribution

Of course, it’s long been recognised that the regulatory framework for the UK industry is heavily reliant on more than four decade’s worth of acquis communautaire. As we’ve looked at before, that change will manifest itself physically, with the European Medicines Agency in London relocating to Amsterdam, as the UK ceases to be a member.

More recently, however, we’ve also had some indications of what that may mean in practice – and the changes are far from being simply symbolic.

As this piece by a product liability expert makes clear, for example, it threatens serious consequences for those importing drugs. Distributors importing products (including pharmaceuticals) from the EU and selling them to retailers currently benefit from a level of protection against liability for personal injury due to a product defect: Provided they have conducted due diligence on the supplier and its product, they won’t be held at fault. Rather, it’s likely to be the manufacturer that bears the cost; and within the EU consumers can seek compensation from the manufacturer even where they’re in another country.

That changes if we leave the EU without a deal, however, as the expert explains: “As an importer into the UK, the distributor will be liable to the injured person as if he were the manufacturer.”

Moreover, for injured parties, making a claim against the EU-based manufacturer is likely to become much more complex, and much less likely to succeed after Brexit. This will make the UK importer the more viable and likely target for any consumer seeking compensation.

That’s a significant change, and one for which there’s been little discussion or debate, and for which there is likely to be widespread ignorance in the sector. The advice for importers is relatively simple: “[They] should review their product liability insurance,” writes the expert.

It is, though, just another overhead already hard-pressed businesses will not relish having to take on board.

Serious Shortage Protocols

It’s far from the only change the pharma supply chain faces, either.

This month, for instance, Amendments to the National Health Service (Pharmaceutical and Local Pharmaceutical Services) Regulations 2013 made in June came into effect. These introduce Serious Shortage Protocols (SSPs) into the terms of service for NHS community pharmacies. As the Pharmaceutical Services Negotiating Committee explains, if an SSP is put in place for a product, a retail pharmacy business or a dispensing appliance contractor must consider supplying in accordance with the SSP rather than fulfilling an NHS prescription for that product.

In practice, this means that, to protect supplies of a drug where shortages are an issue, the pharmacy can use the relevant SSP when fulfilling a prescription to dispense less of the drug, give a different strength, or provide an alternative product. Use or otherwise of SSPs could therefore have significant impacts for the supply chain of not only the product for which the SSP applies but also, depending on the terms of the protocol, likely alternatives that the pharmacists may choose.

On the one hand, this provides additional flexibility in the supply chain and should help minimise disruption. On the other, though, the impact is going to be difficult to predict – not least because pharmacists still have discretion as to whether to use the SSP. They only have an obligation to consider it, and if they consider supplying a different product or quantity is unreasonable or inappropriate, they can choose to fulfil the prescription as written.

Preparing for anything

In fact, every part of the supply chain is likely to be affected by the legal changes Brexit will bring. In June the government published guidance on the “written confirmation” that will be required for each shipment of Active Substances manufactured in the UK exported to the European Economic Area in the event of a no-deal exit; and that followed guidance on how to apply for a certificate of pharmaceutical product.

Regulatory resources

All this preparation is encouraging – even if it means there’s a lot to take in and there are resources that can help pharma businesses keep abreast. TOPRA’s site for professionals in healthcare is one useful site, while, in April, the House of Commons library published an overview of the current state of regulations relating to medicines, and how that might change. But one line from the introduction to the that briefing jumps out:

“It is still not known how medicines will be regulated when the UK leaves the EU.”

Unfortunately, three years on from the vote to leave the EU and – possibly just three months before we actually do – that remains true. All pharma businesses across the supply chain can do is, first, keep a watchful eye out for regulatory developments as they become clear; and, second, keep their supply chain risks under constant review as the legal landscape continues to change around them.

Catherine Geyman, Director, Intersys Risk Ltd

Is Brexit Bad for your Health?

3 Health Conditions That Could be Affected by Brexit

With the Bank of England warning of an eight per cent contraction in the economy (a “scenario”, not a prediction, it emphasised), it’s all too easy to dismiss dire warnings about Brexit as part of “project fear”.

But the uncertainty around the UK’s exit from the EU is real, and so, too, are the vulnerabilities of many pharmaceutical and medical supply chains. As the Parliamentary select committee report on the impact of Brexit on the pharmaceutical sector noted, the industry is ‘heavily integrated with European Economic Area (EEA) states for supply chains and the regulation of production and distribution’.

Some – and perhaps much of the potential impact – should be mitigated if firms follow the UK government advice issued in August to stockpile an extra six weeks’ supplies to prepare for any disruption. Yet, as we looked at before, in a ‘no-deal’ scenario, some worry it won’t be enough, particularly since many pharmaceutical firms don’t have massive resources: The majority are SMEs, with 90 per cent of manufacturers having fewer than 250 employees.

So where could problems arise? Here’s a quick look at the top three conditions where Brexit could mean breaks in the supply chain and problems for patients…

1. Diabetes: could Brexit cause widespread disruption?

The impact of Brexit on diabetes or, more accurately, insulin supply has probably received the most comment. In part that’s because it makes a good story when the prime minister herself has a direct interest since she has type one diabetes. More significantly, it is because of the numbers who could be affected, and potentially ‘seriously disadvantaged’ if supplies of insulin are affected by a no-deal Brexit, as Sir Michael Rawlins, the chair of the UK’s Medicines and Healthcare Products Regulatory Authority (MHRA), put it.

As charity Diabetes UK notes, insulin in the UK comes from three main pharmaceutical manufacturers, which produce in Denmark, US, Puerto Rico, France, Italy, Brazil, Russia, Algeria, Japan, and a range of other countries – but not Britain. In fact, all analogue and synthetic human insulin in the UK, the most common forms of insulin used here, is imported. As Rawlins put it: “We make no insulin in the UK. We import every drop of it.” He also pointed out that it needs to be temperature controlled, making disruption and delays to transport a more pressing issue.

However, while the impact of insulin shortages would be high, the probability of these occurring is, hopefully, low. The early attention and high profile given to the risks has seen the main manufacturers make significant contingency plans to avoid disruption. Consequently, the big producers supplying the UK have said they don’t expect supply problems, even in the event of a no-deal Brexit.

2. Asthma: Are recent shortages a taste of things to come?

Asthma’s another condition affecting large numbers of people – with 5.4 million sufferers in the UK. Again, they rely on a continuous supply from the pharma industry to manage the condition, this time of inhalers. The last month has shown that it doesn’t need the threat from Brexit to cause problems in the supply chain: Asthma UK warned in November that stocks of AstraZeneca’s Bricanyl Turbohalers, used by about half a million people in the UK, were running very low.

Again, the consequences of a supply disruption would be widely felt and could be serious: the UK already has among the worst asthma death rates in Europe, partly because the condition is not taken seriously enough.

Fortunately, though, it is a risk that is being taken seriously by manufacturers, with those like Vectura making plans to mitigate any disruption, as it revealed earlier this year. ‘The group remains of the view that Brexit could result in an increased cost of operations for the group and potential disruption to partner supply chains. Accordingly, the group is continuing to review stock levels with its partners for both finished product and key components and planning appropriately,’ read a section in its half-year results.

That should mean that plans are in place to deal with most likely outcomes next March when we leave.

3. Cancer – Delays for life saving drugs?

As the most common cause of death in Britain, accounting for around a quarter of all mortality, cancer treatment remains a hugely evocative issue. The disease affects one in three of us at some point in our lives, and drug development and availability is often the key to determining whether a cancer is treatable or terminal.

It’s not surprising, then, that the potential for Brexit to disrupt supplies of cancer drugs is seen as ‘uniquely damaging’ by Jeremy Hunt, the Health Secretary. Any disruption as a result of Brexit would not just be a problem for the UK, as he said: ‘It’s not just that we want to continue to get cancer drugs that are manufactured in Europe. It’s Europeans who will not want any interruption to their supply chain for drugs that are manufactured in this country,’ he said earlier this year.

In a fast moving medical field, drug supply is not the only issue around cancer treatment that might be affected by Brexit. There have been significant concerns about the impact on research from potential skills gaps, for example. A review by Queen's University in Belfast noted that overseas staff contributed to nearly 80 per cent of papers on the topic published in the UK.

There could also be consequences for new drug development. In last month’s blog, we looked at how uncertainty over the regulatory framework is already putting back clinical trials here and could mean delays in new drugs coming to the UK market. That would affect not just new cancer drugs, but a wide range of drugs approved abroad. Much depends on whether the European Medicines Agency (EMA) ends up considering the UK as a ‘third country’ under its regulatory regime. If so, a House of Commons Select Committee has warned it could mean approval times lengthening from a few months to a year.

The outcome here remains significantly unclear.

Looking up – opportunities in Brexit for pharma

Finally, it is worth noting that not everyone is so downbeat about the prospects of Brexit. This week, a report by The Institute of Cancer Research (ICR), noted that the EMA itself does not have a spotless record when it comes to approvals. It could do more to speed the path of new cancer drugs to market, in part by learning from other regulators such as the US Food and Drugs Administration, the ICR argued.

With this in mind, Brexit could potentially offer opportunities to actually speed up approvals, according to ICR’s chief executive Prof Paul Workman. “If we don’t align with the EMA after Brexit then the MHRA could be an alternative mechanism for approvals,” he said.

How likely that is remains to be seen, but it is a useful reminder: In the short term, for pharmaceuticals Brexit is necessarily about minimizing disruption to supplies and making sure people have access to the drugs on which they depend. In the long-term, though, it should be about looking for new opportunities, too.

Brexit and the pharmaceutical supply chain

There’s work to be done on all sides – not just by the negotiators – to prepare supply chains for a future outside the EU.

For anyone already sick of Brexit, Michael Barnier’s recent announcement won’t have been encouraging: “The hard work starts now,” the EU’s chief negotiator Michel Barnier told reporters – more than a year after the UK voted to leave.

It’s a big issue – and a particular challenges for some.

One is the pharmaceuticals industry, and a couple of days before Michel Barnier was urging the UK to knuckle down, leaders in the UK and EU pharmaceutical industry were issuing a warning to both Barnier and Britain’s Brexit Secretary David Davis of the risk to supplies of life-saving medicines.

“In the case of an unorderly withdrawal, there is a risk that all goods due to be moved between the UK and EU could be held either at border checks, in warehouses or manufacturing, and/or subject to extensive retesting requirements,” the letter warned.

And it’s not just the industry that’s worried. The week before, the UK’s health secretary and its business secretary called for continued co-operation with the European Medicines Agency after the UK left the EU – “in the interests of public health and safety”.

Preparing your supply chain

Hopefully, these warnings will have their desired effect, and arrangements – transitional or otherwise – will be in place when the negotiations finish. In that case, this will all be put down as a crisis averted or just another “scare story”, according to taste.

As we’ve noted before , though, whatever happens Brexit will be a game changer not just for pharma but for all businesses. The currency volatility we’ve already seen could well return as the deadline for negotiations gets nearer; the regulatory framework remains uncertain; and supply chains are going to have to get more complex – perhaps in the short-term, as contingencies are put in place, or in the long-term to deal with new realities.

Many companies have already made changes to their supply chains to make them more resilient to whatever results from the negotiations; many other are still looking but have at least gained an understanding of the risks they face and the vulnerabilities in their supplies. For any that haven’t made much progress, though, or those that haven’t even begun, the hard work truly does need to start now. Time is not on our side.