Adapting to Brexit in the pharma industry

Nov. 23, 2021
Exploring the impact of Brexit on UK pharma supply chain

Since leaving the European Union on Jan. 1, 2021, UK companies across every sector have been preparing for the profound changes the exit will bring, on top of those brought by the global pandemic.

But what has this meant for the pharmaceutical industry so far?

While the UK is no longer subject to regulation by the EU’s European Medicines Agency (EMA), the Medicines and Healthcare products Regulatory Agency (MHRA) — the UK’s regulator — remains aligned with the EMA for the time being in a number of areas, including the list of approved drug products. This means that UK pharma companies can continue to supply medicines to the EU and vice versa without significant cost or loss of market access. How long this alignment will continue remains to be seen.

Preemptive measures

While the current alignment supports continued trade of finished medicines, there is now new friction at the UK-EU border that companies on both sides of the Channel have to contend with. This is particularly the case when sourcing raw ingredients and commodities, such as primary packaging and single-use (SU) production line components. Many pharma companies and their suppliers put measures in place well in advance of Brexit to mitigate against this issue. These steps included:

  • The onshoring of production of APIs, raw materials and commodities, such as packaging and line components.
  • The diversification of supply chains to reduce reliance on European and UK-only suppliers, as around 80% of pharma’s raw materials are sourced from the UK or EU.
  • The stockpiling of raw ingredients, primary packaging and SU components in order to mitigate against the impact of the new friction at the UK-EU border on established just-in-time (JIT) supply chains.

These preparations stood pharma companies and their suppliers on both sides of the new border in good stead to mitigate against the disruption experienced by companies in other sectors when the new trading rules came into force in January 2021. For example, many suppliers based in the UK now hold six weeks of inventory on-site, especially when sourcing from overseas. Not only are suppliers of APIs and intermediates holding stores of raw ingredients, but manufacturers of split butterfly valves and other SU equipment are stockpiling materials to produce their finished components as well.

Many line equipment suppliers are also working with EU customers to build their own on-site inventories of manufactured SU components. This can ensure they too have adequate access to vital parts when they need it, without the risk of supplies being delayed at the border.

Supply chain adaptations

In the future, we can expect these preparations by both suppliers and their customers to become an established feature of the UK and EU pharmaceutical landscape. We can expect more companies to nurture supply chains composed of a mix of local and international suppliers — ensuring that they are less reliant on partners in specific countries to mitigate against future shortages and adapting their supply chains away from pre-Brexit JIT approaches.

It is likely that buffers such as the stockpiling of material and finished commodities, as well as supply chain onshoring, will continue. Research has found that up to $31.5 billion worth of trade could be onshored over the coming 12 months as firms continue to mitigate against new border frictions.

We can also expect suppliers to boost collaboration with pharma companies to help them continue to build stockpiles of essential ingredients, packaging and SU components to further mitigate against the impact of the friction on established supply chains.

About the Author

Chris Eccles | Chief Executive Officer