The United Kingdom (UK) voted in a referendum on June 23rd, 2016 to leave the European Union (EU), by 52% to 48%, leaving the Single Market and the Customs Union. While the referendum was not legally binding, the UK government at the time promised to honour the result. The UK has population of over 66 million. The makeup is, England (84.25%), Scotland (8.2%), Wales (4.7%), and Northern Ireland (2.8%). Interestingly, both Northern Ireland and Scotland voted in the referendum to remain in the EU.
This ‘Brexit’ (exit of the UK from the EU) was due to happen on 29 March 2019. That was two years after then Prime Minister Theresa May triggered Article 50, the formal EU process to leave. However, the Brexit date has been delayed twice. The UK (led by Theresa May) and the EU agreed a deal in November 2018, but Members of Parliament (MPs) voted to rejected it three times. Since then there has been an extension to the Brexit deadline out to the 31st October 2019.
The single market refers to the EU as one territory without any internal borders or other regulatory obstacles to the free movement of goods, services and people between all 28 EU member states (as well as Iceland, Norway, Liechtenstein and Switzerland, who are members of the European Economic Area). Countries in the single market apply many common rules and standards. The EU Single Market currently accounts for 500 million consumers and 21 million small and medium-sized enterprises. The single market is at the heart of the EU project. Its aim is to stimulate competition and trade, improve efficiency, raise quality, and helps to cut prices.
The customs union ensures that all EU countries charge the same taxes on goods coming in from outside. They do not charge taxes on each other’s goods, but members cannot strike their own trade deals. This is a crucial point and part of the reason parliament voted not to accept the agreed deal.
The EU is the world’s largest trading block. Its GDP was estimated to be $18.8 trillion in 2018, representing about 22% of the global economy. Together with the United States and China, the EU is one of the 3 largest global players in international trade. It has significant trade deals with other economies around the world having recently done trade deals with Japan and Canada. These trade deals can sometimes take years to negotiate.
The deal that was agreed between the UK and EU (the withdrawal agreement) but not approved by the UK parliament, covers the following critical areas (and many more):
- Citizens’ rights, both of UK citizens in EU countries and vice-versa,
- Border arrangements and customs, particularly along the border between the UK and the Republic of Ireland
- The law, and the mechanisms for resolving disputes, currently vested with the European Court of Justice
The agreement also sets up a transitional period, which lasts until 31 December 2020 and can be extended once by mutual consent. During the transitional period, the UK would remain a member of the European Economic Area, the single market, and the customs union, EU laws would continue to apply to the UK, and the UK would continue to pay into the EU budget. However, the UK would not be represented in the decision-making bodies of the EU. The transition period would give businesses time to adjust to the new situation and time for the British and EU governments to negotiate a new trade deal between the EU and UK.
Without a parliamentary approved agreement or a further extension there would be a hard Brexit on 31st October 2019, i.e. a no-deal scenario and the UK would immediately leave the EU. Overnight, the UK would leave the single market and customs union. No deal also means immediately leaving EU institutions such as the European Court of Justice and Europol, its law enforcement body. Membership of dozens of EU bodies that govern rules on everything from medicines to trademarks would end. There would be no transition period and the UK would effectively become like a third country to the EU without any trade deal in place and it would mean that the UK service industry would lose its guaranteed access to the EU single market.
Continuity of supply of medicines to patients in both the UK and the rest of the EU has long been one of the major areas of concern in the context of Brexit. The European Medicines Agency (EMA), which has relocated from London to Amsterdam, has called on all biopharmaceutical companies across the EU to continue their preparedness for the UK’s withdrawal. It says it is well prepared for Brexit and has finalised authorisations for nearly all the 400 drugs under its watch that required further clearing because of Britain’s impending departure.Over 37 million patient packs are supplied from the EU-27/EEA to the UK each month.
In the UK, the Department of Health and Social Care (DHSC) has determined that around three-quarters of the medicines and over half of the clinical consumables used in the UK come from or via the EU. Following an analysis, DHSC has put in place processes to minimise any supply disruption, through a combination of securing freight and warehousing space, building up safety stocks and providing regulatory flexibility. The impact on medical supplies will also be felt beyond the UK. About 45 million packs of medicines are shipped from the UK to the rest of the EU27 every month, in trade worth nearly 12 billion GBP in 2016.
Many biopharmaceutical companies have been building up safety stocks of raw materials and finished goods where possible (and shelf life permitting) as a contingency. Investing in trusted trader accreditations e.g. Authorised Economic Operator (AEO) has also been a wise move for companies who have achieved this. If queues of trucks build up at Dover or Calais for example, prioritisation will be given to companies who have a trusted trader status.
The other key areas that will be impacted by Brexit for biopharmaceutical manufacturers and marketing authorisation holders are:
- GMP certification
- Qualified Person (QP) release
- Clinical trials
- Product coming from the UK (including Active Pharmaceutical Ingredients)
- Release testing
- Sample storage
In the event of a hard Brexit there may be other areas or issues that become problematic for all the actors in the biopharmaceutical supply chain and it is these unknowns that are of most concern.
Understanding and aligning your supply across the differing legal, tax, customs, finance, regulatory and compliance framework to ensure successful supply can be challenging. Orphan Drug consulting is here to navigate these legislative frameworks on your behalf and ensure that your patients receive seamless product first time and every time across the world.
The information presented within this article is for illustration purposes only and is not to be considered as professional advice.
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