Medical provisions post-Brexit

Victoria Hewson

Assessment
There are three main factors behind the fears in relation to medical provisions post-Brexit. Here we examine
what the potential problems are and the available solutions:
1. New tariffs would raise prices
It has been suggested that the prices of pharmaceutical products would jump because, if there is no free
trade agreement, the UK and the EU would have to impose duties on imports from each other in order to
maintain the level playing field required under WTO rules. In fact, most finished medicines and most medical
devices are already tariff-free, wherever they are imported from.

There are some products like active pharmaceutical ingredients where the EU does impose tariffs. But
outside the customs union, and with control over our external tariffs, the UK should unilaterally eliminate all
tariffs on pharmaceutical ingredients and medical devices. Such tariffs are acknowledged to serve no protec-
tive purpose in domestic industry, and in this country are largely borne by the NHS. We cannot compel the
EU to do the same, so if no free trade deal or transitional period is agreed they may choose to apply tariffs to
their imports of pharmaceutical products from the UK. But this will not affect prices or supplies here.

Elimination of tariffs would also avoid the administrative burden of applying for reliefs from duties where
ingredients cross borders at different stages of manufacture. Above it all, it would improve competition in
the market and value for UK consumers, including NHS patients.

2. Medicines can only be regulated by the EU

The fear here is that because medicines and medical devices are subject to rigorous licensing and regulation
which is harmonised within the European Economic Area (EEA), when the UK is no longer a member the
licences will cease to apply and we will not be able to regulate medicines safely or import EEA-licensed
products. But this is not the case.

The EMA is the EU competent authority, but the UK has its own national regulator called the Medicines and
Healthcare products Regulatory Agency (MHRA). Much of the regulatory work in medicines is in fact carried
out by national regulators and the MHRA is widely recognised as one of the most effective and expert
authorities in the sector.

The regulatory structure applies both to the products themselves, which need a marketing authorisation
(MA), and to the holder of the marketing authorisation (MAH), manufacturers, importers and distributors.
MAs can be issued by member state regulators or by the EMA. Firms that manufacture medicines or import
them from a third country need a licence known as an MIA. For manufacturers and importers in the UK that
licence is issued by the MHRA. To qualify for a manufacturers’ licence the holder must comply with certain
conditions, which include Good Manufacturing Practice (GMP), a set of principles set out in EU directives.
Before issuing a licence permitting import from a third country, the MHRA inspects the manufacturer’s
premises in that country to ensure that it conforms to GMP. Each batch of medicine imported from�
authorised third country manufacturers must then be inspected and certified by the Qualified Person (QP) of
the licensed importer, unless the manufacturer is in a country with which the EU has a mutual recognition
agreement in place in respect of GMP. Medicines manufactured in or imported to any EEA country can be
distributed in any other EEA country where the MA applies.

Electronic copy available at: https://ssrn.com/abstract=3853604

 After Brexit the UK and EEA members will be third countries to each other. This means that, unless otherwise
provided, MAs issued by the EMA will no longer be valid in the UK, UK importers will need importer licences
to import products from EEA manufacturers, and will need to carry out full batch testing on imported medi-
cines from the EEA (and vice versa).

Optimally, the EU and the UK will agree to continue to recognise MAs and MIAs issued by each others’
authorities. This will be the case for the transitional period under the proposed withdrawal agreement,
because the UK will continue to participate in the single market. If no deal is agreed, the feared disruptions
could happen if neither side took any action, but there are many things that the UK could do unilaterally to
keep our market open to medicines from the EEA. For example the MHRA could be empowered to unilateral-
ly recognise MAs issued in the EEA, and recognise GMP in the EEA, to enable imports of medicines manufac-
tured and licensed in the EEA to continue.

Medical devices (which include everything from syringes to apps) are not subject to the same process of
authorisation and licensing. They must meet applicable regulation on safety and be independently certified
by a notified body. It is common in international trade to have mutual recognition of conformity assessment.
If this cannot be agreed with the EU, the notified bodies must be EEA entities. To secure continued supply of
medical devices from the EEA if no deal is agreed, the UK could continue to recognise EEA notified bodies
unilaterally.

This would not require submission to the jurisdiction of the Court of Justice of the European Union or its
other institutions. It would be up to the MHRA and UK lawmakers to decide whether EU regulations and
operators continue to meet the standards required for our market.

3. Medicines will get stuck in logistical delays

The third concern is that pharmaceutical supplies will be caught up in delays at ports and airports. But there
are plenty of steps in respect of customs systems and processes that the government should be taking in the
interest of all trade. To the extent that they are not already, pharmaceuticals companies and their intermedi-
aries should be prioritised to become certified as Authorised Economic Operators (and for other trade facili-
tations that enable goods to be cleared without inspection, and payment of duties and VAT to be deferred).
However, the processes to streamline customs declarations and clearance that HMRC will need to put in
place need to be clarified and publicised as a matter of urgency so manufacturers, distributors and their
logistics suppliers can make the necessary arrangements.

The government is working with manufacturers and distributors to ensure that sufficient stocks are available
in the UK to cover supplies in the event of disruptions from a no deal scenario. The chief executive of the
European Association of Euro-Pharmaceutical Companies (EAEPC) has said “excess warehousing provision is
being sought by manufacturers in advance of next March so there’s sufficient supply already in place” but
this can only be a short term, interim measure.

Conclusion
The flexibility available to the UK government and regulators means that they should be able to overcome
the regulatory barriers and minimise logistical delays in the supply of medicines. The MHRA has stated that
“if no transition period is agreed, we would ensure the minimum disruption and burden on companies as the
UK exits the EU.” However its latest publication (on 6th August) only addressed how the transition period
would be implemented and does not provide any proposals on ‘no deal’ planning. Given the publicity that
stories of shortages and stockpiling are attracting, the MHRA should publish more information on the steps
it will take to avert these scenarios. The government should also underline its willingness to act unilaterally
on tariffs and regulatory approval.

Victoria Hewson,
Senior Counsel,
IEA’s International Trade & Competition Unit

Electronic copy available at: https://ssrn.com/abstract=3853604