Impact of Brexit on the Pharmaceutical Sector

On 17 May 2018, the Business, Energy and Industrial Strategy Committee (the "Committee") published its report: "The Impact of Brexit on the pharmaceutical sector" (the "Report"). The full report can be found here.

The Report highlighted the dangers for the UK pharmaceutical sector if the UK leaves the European Union ("EU") without a formal exit deal. Whilst welcoming the UK Government's collaborative approach with the sector so far in negotiations with the EU, the Report urged Government to seek to preserve and build upon the success of the UK pharmaceutical sector. In doing so, the Report identified seven key areas, with its recommendations for Government in relation to each summarised below.

1. Tarrif Barriers

The Report recommends that Government pursue a trade agreement with the EU that includes all finished and component pharmaceutical products and not limited to those currently listed under the World Trade Organisation ("WTO") rules. Whilst the WTO Pharmaceutical Tariff Elimination Agreement means the pharmaceutical sector would not be as affected as other sectors in a "no deal" scenario, such an agreement would prevent damage to the UK's position as a manufacturing base and a global supply hub of medicines. To that end, the Report also recommends that Government work internationally to ensure the WTO update the list of pharmaceuticals and components covered by the Pharmaceutical Tariff Elimination Agreement.

2. Non-Tariff Barriers

As burdensome customs procedures would diminish the productive nature of the pharmaceutical sector and potentially harm patients, the Report recommends that Government seek to achieve as frictionless a border as possible and put in place arrangements to ensure the continued cross-border transfer of short-life pharmaceutical products for emergency treatments for patients in the UK and the EU.

3. Regulatory Alignment

The Report welcomes Government's recognition of the benefits to the UK and EU of the UK's continued membership of the European Medicines Agency ("EMA"). The Report recommends regulatory alignment with the EU market and a form of membership with the EMA. As part of the latter, the Report recommends that Government should seek to retain a presence for EMA jobs and facilities in the UK to support UK business continuing to access the European market and European business accessing the UK market.

4. Transitional Arrangements

The Report states that the agreement of a 21-month transition period as the UK leaves the EU is "less than the minimum amount of time we were told is required to avoid serious issues for some businesses." However, it does welcome the provision of certainty to businesses and recommends Government and the European Commission come to a speedy decision on a new relationship with the EMA to minimise contingency costs being borne by the sector.

5. Trade opportunities post-Brexit

As the EU represents 44% of the UK's pharmaceutical exports and 73% of imports, the Report recommends that Government prioritise continued friction-free access to the EU market and the roll-over of existing free trade agreements over securing new third country agreements. Further, the Report recommends that any trade deals struck as the UK leaves the EU do not diverge from current intellectual property rules that make the UK attractive as a base for research and development ("R&D").

6. Skills

Skill shortages are already a problem and so the Report recommends Government ensures that the industry can continue to have immediate access to the skills it needs which includes effective circulation of staff from around the world in the short term and further investment in increasing the number of UK nationals working in the sector in the long term.

7. R&D

The Report welcomes Government's commitment to underwriting Horizon 2020 funding. It recommends that Government provide certainty to businesses and research institutions by setting out its approach to R&D.

In conclusion, as the UK pharmaceutical sector is heavily integrated into the EU landscape, it is the view of the Committee that the UK must seek the closest possible regulatory alignment and minimum border friction as possible to prevent further damage to the sector caused by Brexit. In fact, the Committee explored potential benefits to the sector from Brexit but found any small gains were outweighed by the additional costs or limited access to existing markets. It remains to be seen if the recommended approach is adopted by Government and in turn welcomed and adopted by the European Commission.