The transition to Brexit: What next for the pharmaceutical and life sciences sector?

Jo Pisani Pharmaceutical and Life Science Consulting Leader, PwC United Kingdom 16/05/18

The announcement of a draft transition period during the March EU summit represented a positive step forward for opening up the discussions around trade that will determine the future relationship of the UK with the EU. However, there remain some significant issues that require substantial progress ahead of the next EU summit, in June. Of paramount importance, is the future of the Irish Border and the UK’s future customs relationship with the EU. The UK government maintains the position that the UK will leave the customs union despite a vote from the House of Lords instructing them to reconsider whilst EU negotiators demand that the UK resolves the apparent contradiction of exiting the customs union whilst maintaining a frictionless border between Northern Ireland and the Republic of Ireland.

Suffice to say, there remain some significant uncertainties impacting the UK’s journey out of the EU. However, both sides are hoping to honour the transition period that was agreed in March. As such, there is some clarity which will support companies in planning for their future and to consider how best to shape their businesses in the new post-Brexit world. This blog considers immediate and future looking priorities for the Pharmaceutical and Life sciences sector...

The transition period

The implication of the transition period is that, if ratified in November, the status quo will be maintained until December 2020. That means there is no change in critical areas of focus such as border processes, movement of people and regulation during the transition period. Specifically:

  • Marketing Authorisations (MAs) held by UK legal entities would continue to be valid
  • Movement of goods across borders between the UK and EU will continue as they are today and goods on the market before Dec 2020 will be able to remain on the market allowing for stockpiling strategies
  • EU citizens arriving in the UK will have the same rights and guarantees as those arriving before Brexit
  • Roles such as QP for batch release and QPPV across the EU and UK could continue to reside in the UK and there would be no need for duplication of testing
  • R&D programmes led out of the UK will continue to have the same validity in an EU context
  • Access to systems such as Eudravigilance from the UK will continue as it does today.
  • UK membership of Euratom will continue
  • UK-based notified bodies will continue to apply CE marks on medical devices for the EU market
  • Third country negotiations, such as those with South Korea, can commence

Furthermore, continued operation as an de facto EU member will mean that UK companies will have been working with or towards new regulations such as the Medical Device Regulations (MDR) and General Data Protection Regulations (GDPR) for 21 months longer, thus decreasing the likelihood of rapid divergence for UK industry from EU standards.

However, the MHRA will not experience the same status quo as their inclusion in the EMA will be reduced to an observer role until the future relationship is determined. The EMA has already begun redistributing the rapporteurships and co-rapporteurships, for new centralised MAs, held by the UK to the remaining EU 27 countries.

Scenario planning

Agreement around transition, however, is not indicative of the final Brexit settlement, which is now the focus of negotiations with substantial progress expected by June and key decisions expected in to be ratified following the October summit. The government is clear that the UK will leave the single market and customs union, although this will now be in December 2020 rather than March 2019. Our head of Brexit, Andrew Gray, recently shared his views on scenario insights that clients can be using for scenario planning now.

Companies should use this critical transition time to carry out full strategic reviews of their operations and scenario planning on the following bases:

  • Optimised planning – whatever the outcome of the transition and trade deal, much of the impact analysis and mitigation strategy development can be carried out now so that companies are able to respond to Brexit scenarios with agility
  • Strategic planning – informed by the UK’s Industrial Strategy, companies should understand how the future regulatory environment of the UK can provide opportunities for their own strategy and future business operations
  • Continuity planning – a ‘cliff-edge’ Brexit on 29th March 2019 could still happen if the transition deal is not ratified. Therefore, business continuity planning is still required

The Prime Minister has indicated that the pharma and life sciences sector is of strategic importance for the UK and the recently announced UK Life Sciences Industrial Strategy and Industry Sector Deal has demonstrated and detailed substantial investment for the sector.

How might the markets of the UK, EU and rest of the world change over the coming years, with Brexit being a contributing factor, and how would that play into decisions in areas such as product strategy, operating model, acquisition strategy, R&D strategy and geographical market focus?

There are six key areas that pharma and life sciences companies should immediately focus on:

  1. Staying agile - work on your Brexit implementation plan to identify the full scope of changes required, including consideration of opportunities, then complete analysis and secure budgets for transition activities
  2. Supporting your people - support EU / non-EU nationals to secure UK working permits and understand new staffing requirements resulting from changes to your operating model. Communicate key business changes to staff and external stakeholders
  3. Thinking about your supply chain and operating model – establish a Marketing Authorisation Holder in the EU / EEA and address the impact on your current supply chain and manufacturing, relocating supply hubs where necessary. Submit relevant variations and new license applications and transfer relevant activities and personnel. Address impact on current trade flows in terms of VAT/Duties/Tax changes and consider the extra resources that would be needed to process new customs activities (e.g. build customs declaration and SIC code expertise and consider applying for AEO status). Consider changes to clinical trial locations after the transition period and evaluate impact on R&D budget and partnerships
  4. Making sure you are ‘data ready’ - clean up your current data, make sure you are GDPR compliant, able to capture data for new customs arrangements and able to respond when rules become clearer on data governance
  5. Thinking beyond your own four walls - review your customer and supplier risks and revise customer and supplier contracts where feasible. Develop a plan / response to a potential hostile bid due to falls in share price and evaluate acquiring other companies within the EU / EEA member states
  6. Help shape the Brexit deal to support your strategy – continue to engage with trade associations to provide a unified voice to government negotiators, informing them of what the industry needs from the ongoing negotiations

The UK remains an attractive location for the pharma and life sciences sector and the opportunity to do business in a post-Brexit economy is vast. The key to success will be preparedness and ensuring your organisation is exploiting the opportunities of the new environment.

If you would like more information or to speak to one of our Brexit specialists please do get in touch.

Contact us

Jo Pisani

Pharmaceutical and Life Science Consulting Leader, PwC United Kingdom

Tel: +44 (0)7736 599749

Jules Kirby

Director, PwC United Kingdom

Tel: +44 (0) 7703 563 662

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