Everything you need to know about the latest Brexit White Paper
By Joanna Fernandes, Analyst
Email: [email protected]
As the countdown to Brexit draws near, a flurry of activities has emerged from the UK government, the EU and the pharma/biotech industry. But central to the conversation is the recent white paper released by the UK government on July 12 elaborating the UK’s future relationship with the European Union.
So far, the EU’s chief negotiator Michel Barnier has rejected Theresa May’s white paper. The European Union appears to be placating the UK government until the all-important backstop in the Irish board has been decided.
Many agree with Barnier that the white paper is cherry picking the best parts of the EU single market. There is dissent even within the UK government, with Tory Eurosceptics pushing for a greater divergence from the EU than currently proposed, and Labour insisting that the plan isn’t soft enough.
Given such resistance from all sides, it is doubtful that the all aspects of the white paper will be agreed. However, it does provide a good indication as to what UK government has set out to achieve with Brexit.
So, what does this mean for pharma…
Four main conclusions can be drawn from the Brexit white paper relating to the pharmaceutical industry:
1.UK to remain within EMA remit
- The UK has expressed its intention to continue its participation in the European Medicines Agency (EMA), agreeing to all the rules that this entails. Through this, the UK will have no voting rights and will contribute to the agency’s costs but be allowed to conduct technical work and act as a “leading authority”. Any decisions already made by the EMA will continue to be valid throughout the UK. However, the UK will only recognise the rulings of European Court of Justice in regards to pharmaceuticals if the ruling concerns all EU members, not if it only pertains to the UK.
This is the best possible outcome for pharmaceutical companies, as it will avoid the need for a second regulatory assessment by the MHRA, and the extra cost and time this would have entailed. It will also ensure a continuous supply of medicines to the UK, as the MHRA will not have to conduct a second review on existing drugs.
Previously agreed by the UK government in the medicines regulation amendment, this was supported by opposition MPs and Conservative rebels. The alignment of UK MPs on this issue, as well as Brussels already established desire for a soft Brexit, will likely make this an easy negotiation. However, if a no deal Brexit occurs, all bets are off.
2. One test for both markets
- The white paper recommends that manufacturers only undergo one series of tests in either market in order to commercialize products in both. This includes pharmaceuticals, where a qualified person based in either the UK or the EU would be responsible for pharmacovigilance of a drug, ensuring safety and allowing release of individual batches.
If this is agreed by the EU, then this will save costs for biotechnology companies, who would have otherwise need to establish multiple pharmacovigilance teams, one in the UK and one in Europe. Or have to relocate their pharmacovigilance team to Europe and forgo the UK market and its potential revenue stream. Given that neither of these options would be ideal, there is likely to be a lot of lobbying to drive this through by pharma operating on both sides of the pond.
3. Facilitated customs agreement for a frictionless trade
- The UK is pushing for a Facilitated Customs Agreement, in the hope of maintaining frictionless trade between the UK and EU. The proposal aims to preserve the integrity of the EU Customs Union, while allowing the UK to pursue an independent trade policy. This will allow the EU and the UK to apply varying tariffs on goods.
This will be important for drugs being shipped from the EU to the UK or vice versa, to avoid extra charges. This bill ties in directly to the Irish boarder. Both the EU and UK have agreed a hard border in Ireland is detrimental to trade but have not agreed on how to avoid it. Without a decision on this, it is highly unlikely for smooth trade to be maintained.
4. Science and innovation accord
- Also, on the table is a “science and innovation accord” that allows UK participation in EU research funding programmes, including Horizon Europe and Euratom Research. As well as continued cooperation through collaborative networks, which benefit both the EU and the UK, such as the European Reference Networks.
This proposal is especially beneficial to biotech’s in the rare disease space as the ERNs main goal is to link medical experts across the EU to share expertise and knowledge when treating rare disease patients. Pharmaceutical companies can utilise this network to gain advice on current treatment options and areas of high unmet need that could potentially be addressed by their assets. The likelihood of this being agreed upon by the EU does not look promising, with six British medical experts being removed from leadership roles within the ERN last month. Unless progress is made in the negotiations, the UK may face exclusion from all EU collaborative networks.
Amends to the white paper
Following intense political discussions, four amendments were agreed by the cabinet:
One, an amendment to the customs bill in which the UK will not collect tariffs on behalf of the EU, unless the EU is willing to reciprocate.
Two, an amendment that makes it illegal to have a customs boarder under the Irish sea.
Three and four, pertain to the UK remaining out of the EU’s VAT regime, meaning new legislation would be required in the UK if the government wants to form a customs union with the EU in the future.
However, this also prevents the UK having to abide by the EU’s ultimate goal of having a single VAT area, where companies can consider cross boarder VAT trade as domestic operations. This is intended to be achieved by 2022.
The second amendment mentioned is the one to watch out for. It contradicts the EU proposal to have Northern Ireland (NI) remain in the EU customs union. However, enforcing a border between NI and the rest of the UK would have wider, potentially detrimental consequences to the UK political environment. This disagreement is the main reason no movement has been made on the issue, and why Brexit negotiations appear to have stalled.
Big Pharma prepares with drug stockpiling
Although there have been many calls for the EU Commission and the UK government to prioritise public health in the negotiations, it has taken a backseat to the Irish boarder backstop. With the Brexit deadline in March 2019 fast approaching and still no progress made on this issue, and no agreement in sight, the startling reality of a no deal Brexit must be considered.
Big pharma, including Sanofi and AstraZeneca, have already taken steps to mitigate the risks of a no-deal Brexit by stockpiling medicines. But for smaller biotechs, this is not a viable option given the high costs involved.
Over the next few weeks, more details will emerge from the UK government for the biotech sector providing technical guidance aiming to mitigate any `cliff edge’ response in the event of a no deal.
Partners4Access will continue to analyse the impact of the Brexit proceedings closely over the next few months. If you would like to hear more or have specific issues on Brexit that you would like to discuss, please email us at [email protected]
