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Lack of certainty adding Brexit-related contingency costs to pharma industry

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By Nuala Moran
Staff Writer

LONDON – The U.K. is not due to leave the EU until the end of March 2019 but time has already run out for the pharma industry, which is being forced to activate plans based on the worst-case scenario that there will be no agreement on regulatory alignment or any transition period.

Most immediately, companies are setting up duplicate batch testing facilities to ensure they continue to comply with quality control requirements if the U.K. ends up outside the EMA.

Aside from the capital cost of those facilities, there will be an ongoing cost of duplicating batch release for the U.K. and the EU. Johnson & Johnson Inc. said that will mean carrying out 50,000 extra tests at a cost of £1 million (US$1.4 million) per annum. Lilly U.K. estimates the cost of additional testing to be between £1.2 million and £2.2 million.

Glaxosmithkline plc (GSK) has announced it is to build batch release sites in mainland Europe. Astrazeneca plc, too, currently conducts batch testing and release in the U.K., and said it will take three years to set up and validate a new European testing facility.

Companies are contemplating those moves despite the fact that everyone involved, from governments across Europe to regulators and the industry, wants the U.K. to remain part of the EMA regulatory system.

The problem, said Mike Thompson, chief executive of the Association of British Pharmaceutical Industries, is that even if there is to be mutual recognition, the industry will not know until it is too late.

As a result, GSK is "spending millions of pounds for a facility it may not need," Thompson told a parliamentary committee investigating the effects of Brexit on the pharma industry.

It is not unusual for politicians to think they do not need to do a deal until the absolute last minute, but the industry works on long time scales and needs to plan ahead. "The fact that we haven't had the time to plan ahead has meant companies have had to take these contingency decisions, which is costing them an enormous amount of money," Thompson said, giving evidence on Tuesday.

As it is, Brexit negotiations are mired in phase one, which is dealing with the issues of reciprocal citizens' rights, what happens to the only land border between the U.K. and the EU in Ireland, and the U.K.'s divorce bill for leaving.

Discussions on trade and regulatory alignment will not start until January at the earliest, and, the committee heard, in the absence of any precise guidance, companies are starting to hedge.

Thompson's message to the government is that the industry is in desperate need of some certainty. "Can you please get into phase two as quickly as possible, because we need to have some decisions so we can plan to ensure the continuing supply of medicines to patients across Europe," he said.

The generic medicines sector is also being bounced, Paul Fleming, technical director of the British Generic Manufacturers Association, told the committee. "To register a new generic takes 15 months so we are right at that tipping point now."

Over the past decade, the U.K. Medicines and Healthcare products Agency (MHRA) has given a good, consistent service, allowing generics companies to plan reliably. Now, reluctantly, manufacturers are considering using other agencies, according to Fleming. "If a process is going beyond [March 2019] you've got to think about using MHRA or not. . . . Companies are trying to hang on, to understand if there will be a transition period or a clear statement saying there will not be regulatory divergence."

Industry's hand is being forced by the EMA and the European Commission, which in April issued an edict telling companies to be prepared for the possibility of a "hard Brexit" where negotiations fail and the U.K. becomes a third country from March 2019.

Although startled by that, companies have been holding off and waiting and see what happens in the Brexit negotiations, which began in June. But last month when it was announced the EMA is moving its headquarters from London to Amsterdam, the agency reiterated that companies should take all necessary steps to be ready by March 2019, "to avoid problems in supply." (See BioWorld, Nov. 22, 2017.)

Thompson said the EMA is playing "hardball" in telling companies to prepare for the third country scenario. He also questioned the agency's ability to move its headquarters from London to Amsterdam by March 2019, noting Amsterdam has one of the hottest property markets, 600 children need to be found schools and partners to find jobs.

"It will be a serious challenge effecting that sort of transfer. At the moment, no one is being honest about the challenge," said Thompson. The EMA has a long and unbreakable lease on its building in London, and staff members who do not want to relocate could continue to work from there, he said.

The workaround

The industry across Europe supports the proposed workaround that MHRA continues to play the same part as an assessor in the EMA's scientific committees and that once there is a recommendation to approve a drug the decision is referred simultaneously to the EU-27 and to a U.K. approvals body.

That would give the U.K. total control of what products were licensed and it would be clear of the European Court of Justice's jurisdiction, but the drugs would be exactly the same as across Europe.

"It's a very, very neat solution, which is acceptable to the U.K. government and, I believe, is acceptable to Europeans," Thompson said.

Rachel Reeves, the member of parliament who chairs the committee, suggested there could still be a concern that the U.K. loses its influence over regulatory standards. However, Thompson said, "If the outcome is that the MHRA is still involved, the quality of its capabilities and expertise will still have huge influence, whether it has a vote or not." Drug assessments, said Thompson, "are about scientific decisions."