HDA Submission to the Health Select Committee's inquiry on Brexit

Brexit – medicines, medical devices and substances of human origin inquiry

As the trade association that represents the companies who are responsible for distributing 92% of the medicines to the NHS, the Healthcare Distribution Association (HDA UK) has been working closely with the MHRA and Department of Health on the implications of the UK leaving the European Union on the medicines supply chain.

 

The healthcare distribution sector in the UK is the vital, but often unseen backbone of a high value and secure supply chain that enables patients to get the right treatment, in the right place and at the right time. As a result, HDA members are unique in their cross-functional view of the medicines supply chain through the 24/7 service they provide to 14,000 pharmacies, 1,300 Dispensing Doctors, 500 hospitals and over 300 pharmaceutical manufacturers (generic, branded and OTC medicines, and medical devices).

We welcome the opportunity to respond to the Committee’s inquiry and have answered the individual questions about which we feel best qualified to offer insight. We would welcome the opportunity to further explain our answers to the Committee.

 

What are the key considerations that arise for companies, healthcare services and regulatory bodies in the UK as a result of the UK’s withdrawal from the EU? 

Given that in 2015, the UK’s total exports for pharmaceutical products and preparations was £25.1 billion, with total imports of £26.4 billion[1] any disruption to this cross-border flow of medicines, has the potential of placing patient safety at risk. Set out below are a number of issues that could restrict this flow if not adequately addressed during the Brexit negotiations.

 

Customs Arrangements and Tariffs

One set of issues that are, of course, a concern to all industries, but extremely so for a sector that is concerned with delivering potentially life-saving medicines, are future border controls and tariff regimes.

As an Association we welcome the Government’s Customs Bill White Paper, particularly the fact that it recognises that time dependent supply chains, including in medicines:

have benefitted from the absence of routine customs controls in intra-EU trade, because they are particularly sensitive to administrative burdens and delays caused by customs procedures.

As such, there are a number of scenarios that could be detrimental to the timely and cost effective supply of medicines to patients in the UK:

  1. Tariffs on pharmaceuticals that could make it prohibitively expensive to import medicines into the UK, with a need for clarity on the drugs where no tariff applies, through the WTO “zero tariff medicines” list, last updated in 2010.
  2. A physical border that cannot cope with a new customs regime as a far higher proportion of inbound goods will need inspecting and approving.
  3. Substantially increased administrative burden for all imports before they physically reach the UK border.

Either one of the above issues could have a significant effect on the supply of medicines in the UK as distributors could be unable to source the right medicine, at the right time and at the right price. A combination of all three could have an even greater impact on the security of the supply of medicines in the UK.

Greater automation, the use of digital technology and the overall reduction of complexity are all welcome aspirations, but appear unlikely to be in place at the time of the UK leaving the EU. Consequently, because of the potential difficulties of this and all the other issues outlined in our response, as an Association we would support a transition period from March 2019, as close as possible to the status quo, in order for businesses to only have to adapt to one new regime rather than two.

 

Medicines Licensing

It is clear that Pan-European legislation has an important role in the medicines supply chain. The loss of equivalence with these European rules could have substantial consequences on the ability of pharmaceutical manufacturers to bring their products to the UK as quickly as is currently the case. This can only negatively impact the ability of British patients to gain access to the latest treatments as the release of new medicines is delayed. The UK will further lose its attractiveness for the early release of medicines when the European Medicines Authority (EMA) moves to another EU state, with the potential loss of ancillary pharmaceutical services.

Separate medicine licensing for the UK would also increase the regulatory burden for non-UK companies and the reliance on pharmaceutical manufacturers to supply the correct amount of product to the UK. Forecasting demand for medicines can be difficult, as manufacturers often plan productions and country allocations a year in advance. That is why greater clarity on future regulatory and trading relations is required as soon as possible if patient safety is not to be put at risk.

HDA members directly support the pharmaceutical industry in getting new medicines rapidly onto the market in the UK, because of their comprehensive, frequent and uniform system of distribution.

In summary, the ability of British patients to gain access to the latest, potentially lifesaving treatments could be delayed, unless the UK is able to design a drug approval process that maintains as much equivalence with the current EMA regime as possible.

 

Release of Medicines

Currently, pharmaceutical companies employ Qualified Persons (QPs) at the European level. QPs are legally responsible for the safe batch release of medicines, ensuring that they comply with appropriate regulations and are quality assured. Pan-European regulations on medicines make batch release less onerous for pharmaceutical companies as they can check their processes against one set of parameters.

Post-Brexit, it is highly likely that pharmaceutical manufacturers will have to separately batch release their medicines in the UK, potentially aligning their process to a different set of regulations. This will only add in extra hurdles to an already complex medicines supply chain, which in turn could impact the ability for healthcare distributors to deliver new medicines to UK patients.

 

Focussing on patients and the public, what needs to be done to ensure that any adverse impact is minimised or eliminated, and that opportunities to enhance services are maximised?

There are a number of areas within medicines distribution that may impact the individual patient. Most obviously, the issues of customs arrangements and tariffs; medicines licensing; and release of medicines outlined above. The Government must urgently agree not only a transitional arrangement with the EU for these issues, but a long-term and sustainable way forward, that provides the medicines supply chain with the much needed certainty that it requires to deliver the right medicine, in the right place at the right time for patients across the UK.

 

Parallel Trade

Another pressing concern is regarding the ability to parallel import medicines into the UK thanks to the common trademarks system operated across the European Economic Area (EEA).

Currently, once a medicine has been put into circulation in the European Economic Area the rights holder cannot prevent further free movement (‘parallel trade’ or P.I.) of the medicine within the Single Market, therefore allowing access to the drugs to patients across the bloc. This is known as ‘exhaustion of intellectual property rights’. By leaving the EU, the UK automatically leaves the EEA, as well as the single market and the customs union. If the Government favours a so-called ‘hard Brexit’, the UK will not re-join the EEA and become subject to the EEA’s trademark rules again.

This would make the parallel trade in medicines (as well as in many other sectors) impossible, which could have an almost immediate impact on patient access to medicines in the UK.  

There is indeed a higher likelihood of an increased risk of medicine shortages in the UK in the short-term at least, as manufacturers adjust their forecasting, which is often undertaken well in advance of supply. This is because medicine distributors would no longer be able to import vital medicines from the rest of the EEA to service the changing, short-term needs of British patients.

Moreover, without parallel imports the medicines supply chain will potentially become less resilient in the long term. However good demand forecasting is, there will always be unexpected supply issues, which, without parallel imports, will be harder to address as there will be no way of sourcing product from the EEA to cover the availability gaps.

PI has also led to direct savings for the NHS in the period 2004 – 2009 of €986.2 million.[2] Current annual direct savings via Community Pharmacy are estimated at £100 million. The savings are achieved by the means of the pharmacy clawback mechanism, which currently contains an element for PIs, which should disappear after Brexit. 

There are also indirect savings derived from the competitive effect of PI. For branded in-patent pharmaceuticals, parallel trade represents the only price competition in the market. It is estimated that list prices for drugs in the UK are at least 3% less than they would have been without the existence of parallel trade. A study by the Health Economics

Consortium at the University of York[3] in 2003 found that such savings were difficult to measure but were likely even larger than the direct savings in the UK market.

As a result, there is a distinct potential for price rises in NHS medicines as a result of the loss of parallel trade.

To avoid negative impacts on access to medicines and the healthcare budget, the UK Government must consider sector-by-sector deals on IP rights, agreeing to mutually recognise trademarks for certain products, such as pharmaceuticals.

 

Access to Labour

As with many other industries, we are highly concerned over the impact of Brexit on the ability of HDA members to source appropriately qualified staff to work in their service centres, to ensure the timely and cost effective supply of medicines to UK patients.

The entire healthcare sector, from research scientists in pharmaceutical companies, to doctors in A&E departments, benefit from skilled workers from the EU. The Government must be careful therefore, that Brexit negotiations do not end the advantages of the appropriate freedom of workers to come to the UK. It is also highly important that the UK maintains the parity of qualifications for healthcare professionals that ensures that British standards are sufficiently aligned with the EU’s equivalents, enabling European health professionals to practice in the UK.

 

Following the UK’s withdrawal from the EU, what alternative arrangements for the regulation of medicines, medical devices, medical products and substances of human origin could be introduced? 

Good Distribution Practice

HDA members’ commitment to the highest levels of quality and safety is demonstrated by their adherence to the HDA Gold Standard of Good Distribution, which sets out best practice for healthcare distribution. The Gold Standard is based on the EU’s Good Distribution Practice (GDP) and there is, therefore, the opportunity for the MHRA to assess whether individual rules need to be altered to reduce the business burden on distributing medicines within the four nations of the United Kingdom.

The Government should also consider its future approach to other EU regulations that impact the medicines supply chain, including the Medical Device Regulation (MDR) and In Vitro Diagnostic Medical Devices Regulation (IVDR).

 

Global Co-operation

A possible alternative to medicine regulation post-Brexit is to align the UK more closely with other markets such as Australia, Canada, New Zealand and the United States of America. Which could include the mutual recognition of medicine licenses.

Although the exploration of such options is welcomed, the Government must be careful that such an approach does not burden the pharmaceutical industry in the UK (including distributors), with the requirement to abide by an even greater set of regulations, many of which vary between the markets so far suggested.

Moreover, if the US Government were to allow the parallel importing of medicine (it is currently prohibited) in an effort to reduce medicine prices, then a greater alignment with Federal Drug Administration (FDA) regulations could open the possibility of substantial exports of medicines from the UK to the US.

UK wholesalers have a legal obligation to fulfil orders when the intended destination is a UK patient. However, this is not the case for all parts of the medicines supply chain. As such the HDA calls upon the Government to introduce a stronger public service obligation in the UK, so that all actors in the medicines supply chain play by the same rules in terms of ensuring UK patients receive their medicines in the right place at the right time.

 

What are the respective opportunities, risks and trade-offs involved?

In addition to the issues outlined elsewhere in our submission (parallel trade; customs arrangements and tariffs; access to labour; medicines licensing; release of medicines; good distribution practice; and global cooperation), the additional big challenge for the medicines supply chain is the implication of Brexit on the implementation of the EU Falsified Medicines Directive (FMD).

Although the HDA and its members are fully supportive of the Directive’s implementation, which has already passed into UK law, questions remain over whether the target date of February 2019 for the FMD is realistic considering the substantial upheaval leaving the EU could have on the medicines supply chain. It is also unclear what legal and regulatory relationships will exist between the UK Medicines Verification Organisation (SecurMed) and its pan-European counterpart, The European Medicines

Verification Organisation (EMVO), which will hold the central medicines verification database. It is our understanding that the ongoing Brexit negotiations are yet to consider this issue.

An additional point to consider is that companies who conduct parallel imports are a constituent member of SecurMed, which if parallel imports were to cease post-Brexit, would no longer be financially contributing members of the UK Medicines Verification Organisation. This would increase the costs of running SecurMed for its other members (HDA UK; ABPI; BGMA, NPA and CCA).

 

About the Healthcare Distribution Association

The Healthcare Distribution Association (HDA  UK)  represents  those  businesses  who  supply  medicines, medical   devices   and   healthcare   services   for   patients,   pharmacies,   hospitals,   doctors   and   the pharmaceutical industry. HDA UK members operate across the 4 nations of the United Kingdom enabling a safe, efficient and high-quality supply chain for the healthcare sector.  They are responsible for distributing over 92% of NHS medicines and provide wholesaling services including working capital, stock management and IT systems to their supply chain partners. Formerly known as the British Association of Pharmaceutical Wholesalers (BAPW), the Association rebranded in February 2016 to better reflect the evolving healthcare supply chain, as innovative practices and technologies make new services possible for manufacturers and to those who dispense medicines, reflecting the needs and choices of individual patients.

 

[1] House of Lords European Union Committee Brexit: Trade in Goods, Page 16

 

[2] Enemark and Pederson. Parallel imports of pharmaceuticals in Denmark, Germany, Sweden and the UK, 2004 – 2009. An analysis of savings. 2011.

[3] West P, Mahon J. Benefits to payers and patients from parallel trade. 2003.

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