The impact of Brexit on the pharmaceutical sector Contents

6Trade opportunities post-Brexit

54.As we have established throughout the report, the pharmaceutical industry is a global one, with complex regional supply chains.140 For the UK, this is reflected in UK pharmaceutical exports in 2016 worth £24.9 billion and imports £24.8 billion.141 44 per cent of our exports are to the EU, while 73 per cent of imports come from the EU.142 For generic medicines, which make up around 75 per cent of the National Health Service’s day-to-day medicine use, between 80 and 90 per cent of products used in the UK are imported.143 Figure 1 below sets out the main markets overall for UK import and export of pharmaceutical products.

Figure 1: UK Trade in pharmaceutical and medical products 2017

Source: HMRC, UK Trade Info, SITC Code 54

55.The current mix of trade in pharmaceutical products shows that membership of the EU is not a barrier to wider international trade in pharmaceutical products; however, this trade currently depends on the range of free trade agreements negotiated as part of the UK’s membership of the EU. The Government has indicated its desire to secure new global trading relationships as the UK leaves the EU,144 and for increased bilateral cooperation on research areas such as genomics and precision medicines, in which the UK is a global leader.145 Pharmaceutical companies and trade bodies have welcomed this approach, which would benefit companies both UK-based, such as AstraZeneca, and those headquartered overseas such as Johnson and Johnson and Lilly.146 However, these are not new relationships. AstraZeneca is already expanding its global manufacturing operations in the USA, Australia, Russia and the Middle East. In China, it is already the second largest international biopharmaceutical company with revenues of $2 billion and 11,000 employees.147 Johnson and Johnson, the world’s largest diversified pharmaceutical company, told us that “the UK is leaving the freest and most integrated market in the world and that any future situation will be less attractive, no matter how many free trade agreements the UK signs after Brexit.”148

56.Despite the appetite for new markets from Government, senior executives from pharmaceutical companies and industry groups have told us that there are few new markets for which companies could compete, and while different companies have different potential for growth, the EU27—representing more than 22 per cent of global trade149—will remain the largest trading partner for companies across the sector.150 Looking at the potential for new markets, Mike Thompson, Chief Executive of the ABPI, told us:

At the moment, those other economies receive the same medicines out of regional supply chains in their areas, whether it is the US or the Far East. There are already manufacturing capabilities to do that, so I do not think it is the fact that they have not got these medicines and we can therefore sell them. There are supply routes that are already regionally based.151

Swiss-based pharmaceutical company Roche told us the same, already having affiliates for their products in most countries supplying their own markets, there would be limited opportunity for them to export outside of the EU.152 While there is evidence of the potential for expansion in some markets, such as the United States,153 we have received no evidence that there are new trade routes or opportunities on which the UK is missing out.

57.For the UK to continue to be one of the major global hubs for pharmaceutical innovation, it is cooperation as part of regional and global networks to develop new and innovative medicines which is likely to bring continued success. As most manufacturers are multinational with regional supply chains, any trade deals are unlikely to lead directly to a substantial increase in investment and jobs in the UK. Given that the EU represents 44 per cent of the UK’s pharmaceutical exports and 73 per cent of imports, the Government should prioritise continued friction-free access to the EU market and the roll-over of existing free trade agreements over securing new third country agreements.

Intellectual Property

58.There has been a longstanding tension between the rights of pharmaceutical companies to protect their intellectual property developed though innovation and investment, and the public health benefits of wider access to medicines. The World Trade Organisation agreed a minimum standard for the setting and enforcement of intellectual property rights and resolution of disputes, the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS).154 Bilateral trade agreements may commit parties to more stringent rules (TRIPS-plus) which have included restrictions on the sharing of test date, extensions on the length of patents and measures delaying manufacturers of generic pharmaceutical products from seeking and receiving marketing approval for their products.155

59.Restrictions on intellectual property have been criticised both by public health campaigners and by generics manufacturers. In evidence to us STOPAIDS, a network of charities and campaigning organisations, highlighted the opportunities of restricting patents:

With a stricter patentability criteria, the UK government will be able to get better access and reduced costs of medicines. Stricter patentability criteria would help block the attempts of pharmaceutical companies to ‘evergreen’ their products (for instance changing something from a pill to a powder or re-patenting a medicine if it is proved therapeutic for another disease area) and enable the entry of generic medicines. For example, the pharmaceutical company Genzyme re-patented a drug known as Alemtuzumab used to treat leukaemia when it proved effective in treating multiple sclerosis (MS). Before the relicensing Alemtuzumab cost £2,500 per MS course, after the re-licensing the cost increased to £56,000 per course.156

Generic manufacturers told us that the Government should consider enhanced incentives for the development and manufacture of generic medicines, including reviewing data exclusivity measures that restrict access to testing information for generic manufacturers and requires further clinical testing.157 However, in evidence to the Committee, Paul Fleming, Technical Director at the British Generics Manufacturers Association, told us “we want to maintain regulatory alignment. Our view is that this is not the time and place to be talking about those different elements around IP.”158 John Smith of the over-the-counter manufacturer trade body PAGB said “the benefits will be outweighed by the costs involved.”159

60.We also considered whether stronger intellectual property protections would benefit the UK pharmaceutical sector. The Government argue that the UK has “a world-class intellectual property regime”160 and we received evidence from pharmaceutical companies and trade bodies that divergence from EU intellectual property standards would make the UK a less attractive market and be a disincentive to the development of new and innovative medicine in the UK.161 Any extension to intellectual property rights in the UK, with the attendant delay in the availability of cheaper generic products, would have a negative impact in terms of cost for the National Health Service and ultimately could harm patients.162

61.The UK and EU have an intellectual property regime that effectively supports both innovation and access to medicines. Any unilateral changes to this as the UK leaves the EU would risk either the UK’s attractiveness as a base for research and development or the ability of the National Health Service to access the full range of medicines its needs. The Government should ensure that any trade deals struck as we leave the EU do not cause us to diverge from current intellectual property rules.

140 The Association of the British Pharmaceutical Industry and the Bio-Industry Association BRP0001

141 House of Commons Library, Brexit and medicines regulation, Number 8148, 20 November 2017, p27

142 Q17 [Mr Thompson]

143 Q1 [Mr Fleming]; Q70 [Mr Ballard]

144 Department for International Trade, Preparing for our future trade policy, 9 October 2017; Foreign and Commonwealth Office, ‘Uniting for a Great Brexit’ speech by Rt Hon Boris Johnson MP, 14 February 2018

145 Department for Business, Energy and Industrial Strategy, BRP0018

146 American Pharmaceutical Group BRP0010;AstraZeneca BRP0019; Johnson & Johnson BRP0015; Lilly BRP0013

147 AstraZeneca BRP0019

148 Johnson & Johnson BRP0015

149 Bioindustry Association and the Association of the British Pharmaceutical Industry, Maintaining and growing the UK’s world leading Life Sciences sector in the context of leaving the EU, September 2016, p4

150 The Association of the British Pharmaceutical Industry and the Bio-Industry Association BRP0001

151 Q23 [Mr Thompson]

152 Roche BRP0004

153 American Pharmaceutical Group BRP0010

155 As above.

156 StopAids BRP0014

157 British Generic Manufacturers Association (BGMA) BRP0008

158 Q35 [Mr Fleming]

159 Q51 [Mr Smith]

160 Department for Business, Energy and Industrial Strategy BRP0018

161 The Association of the British Pharmaceutical Industry and the Bio-Industry Association BRP0001; Lilly BRP0013

162 Q105 [Mr Ballard]

Published: 17 May 2018