Written evidence from Lilly UK (BRP0013)

Introduction

Lilly is a US-headquartered pharmaceutical company with a major commitment to the UK. We are proud of our heritage in this country: Lilly UK was our first business to open outside the US in 1934, and today we are one of a small number of companies in the UK that not only discover, but also make and deliver medicines to patients. Lilly is committed to bringing life-changing medicines to those who need them by launching at least 20 new medicines in the 10 years from 2014 through 2023.

Lilly has three sites in the UK: Research & Development (Erl Wood, Surrey), Manufacturing (Speke), Sales & Marketing (Basingstoke). We employ 2,500 staff, providing a large spectrum of jobs, from research to production line work to marketing, and more. Lilly’s UK research facility at Erl Wood is our biggest neuroscience research site in the world. Over the last decade we have spent over £1.1 billion on our UK research operations, invested more than £85m in our UK R&D facility and are currently conducting more than 60 clinical trials in the UK in areas including oncology, diabetes, immunotherapy, pain and neurodegeneration – with a specific focus on Alzheimer’s disease. We have been manufacturing animal and human pharmaceutical products at our site in Speke, Liverpool, since 1963 and invested £29m in constructing a new biotech manufacturing facility in 2014, supported by a £3m grant from the Government’s Regional Growth Fund. In every aspect of our work, we pride ourselves in acting in a responsible, ethical and transparent manner.

We welcome the opportunity to respond to the Business, Energy and Industrial Strategy Committee inquiry into Brexit and its implications for the pharmaceutical industry.

Overall, Lilly supports the submissions from the ABPI/BIA and the American Pharmaceutical Group (APG) and has not replicated their arguments in this response. Instead, we seek to build on their submission by highlighting those issues most pertinent to our UK business and providing further detail and context from the Lilly UK perspective.

To summarise, Lilly believes that:

1. Market access: Lilly calls on the Government to pursue an ambitious and comprehensive free trade deal with the EU that provides tariff-free trading and frictionless customs and administrative requirements on trade biopharmaceutical products and ingredients. To support a thriving industrial ecosystem, an effective, unencumbered medicines supply chain is vital.

2. Non-tariff barriers: We urge both sides to implement a mutual recognition agreement (MRA) on Good Manufacturing Practice (GMP) inspections. Moreover, unless there is regulatory harmonisation on QC batch release, there will be significant duplication of product testing if the UK requires medicines to undergo additional testing on importation into the UK post-Brexit. This would pose a considerable logistical challenge. Urgent clarity is therefore needed on the expected import and batch release requirements and GMP recognition to allow companies to adequately forward plan ahead of March 2019.

3. Regulation: The close and consistent medicines regulatory regimes that exist between the UK and EU have benefited patients and industry for decades. A common system for medicines licensing, pharmacovigilance, and intellectual property incentives is in the interests of public health and jobs, and should be maintained through a regulatory co-operation agreement that keeps the UK in scope of the European Medicines Agency (EMA). On IP, we call on Government to replicate the high standards of the EU as they currently exist to protect the UK’s status as a leading destination for discovery science.

4. Skills: Lilly believes the Government should seek to ensure any post-Brexit immigration system reflects the needs of our sector and works to facilitate streamlined access to talented workers, regardless of whether they are coming from the EU or beyond. We also urge both sides of the negotiating process to reach a swift settlement on the rights of EU nationals in the UK and UK nationals in the EU, providing a guarantee of their continued ability to work and live in their respective countries following Brexit.

5. R&D: The UK’s domestic science base is supported by a strong EU ecosystem of academic and public-private partnerships, which in turn are further reinforced by a number of EU research programmes. Lilly is the 10th largest contributor to the EU’s pharmaceutical research project, the Innovative Medicines Initiative, participating in some 19 projects and investing more than €20m to advance scientific understanding in therapy areas that include diabetes, neuroscience and oncology.

6. Trade opportunities: We welcome the Government’s ambition to pursue a number of comprehensive post-Brexit trade deals, including with the United States. The development of a new industrial strategy and Sector Deal for the life sciences is an immediate positive signal from the Government that the UK will harness its strengths in the life sciences to bolster its trading proposition. We urge Government to implement the recommendations of the Life Sciences Industrial Stratergy in full. However, we also believe that doing so should recognise the potential of the NHS to shape the inward investment environment, including through recognition that access to innovation and investment are intrinsically linked.

7. Transitional arrangements: Implementation arrangements that would enable the UK to implement new processes that retain UK involvement in the single market and take effect if the future EU-UK trading relationship is not finalised by March 2019 would prevent a damaging ‘cliff edge’ situation. These implementation arrangements must protect research, manufacturing and regulatory arrangements and – above all – prevent any interruption to the supply of medicines to patients across the EU and the UK.

Lilly Response

1. Market access: how important is free access to the Single Market? What would be the impact of trading with the EU under WTO rules and tariffs? How significant are tariffs compared to other costs?

1.1.    Lilly supports the comments and recommendations of the ABPI/BIA and the APG. In addition:

1.2.    Lilly calls on the Government to pursue an ambitious and comprehensive free trade deal with the EU that provides tariff-free trading and minimal customs as well as administrative charges on trade pharmaceutical products and ingredients.

1.3.    Our European supply chains are tightly integrated; we import and export both medicines and their active ingredients across European borders and with the rest of the world. Our site at Kinsale in Ireland, for example, produces human medicines and component products that pass through the UK to be shipped internationally. Our facility at Speke meanwhile predominately manufactures animal pharmaceutical products for global export, with 44% of these products shipped to Europe. In the event of a “no deal” scenario, additional customs burdens could disrupt the supply of medicines to patients across the UK and EU, not to mention levying considerable administrative and cash flow costs on UK-based companies. To support a thriving industrial ecosystem, an effective, unencumbered medicines supply chain is vital.

2. Non-tariff barriers: how significant are non-tariff barriers potentially arising from leaving the Single Market and Customs Union? What are the most significant ones? How best could impacts be mitigated?

2.1.    Lilly supports the comments and recommendations of the ABPI/BIA and APG. In addition:

2.2.    Good Manufacturing Practice (GMP) is the minimum standard that medicines manufacturers must meet in their manufacturing processes. The EMA presently coordinates inspections of these sites to confirm compliance and ensure high standards of GMP activities across the EU. In the event that we diverge from EU medicines regulation post-Brexit, we urge both sides to agree a mutual recognition agreement (MRA) to ensure continued harmonisation of medicines manufacturing standards.

2.3.    GMP for medicinal products requires quality control (QC) batch testing by a Qualified Person (QP) for release within the European Community (EC) or European Economic Area (EEA). Lilly UK receives all human medicines for sale in the UK from manufacturing sites located in the EU. Presently, it is a legal requirement that these products are tested in the EU, at the site of manufacture, to be QP released for distribution. Consequently, unless there is alignment between the UK and EU on batch inspections, there will be significant duplication of product testing annually if the UK requires products to be re-tested on importation into the UK post-Brexit.

2.4.    Lilly does not at present have any facilities for product release testing in the UK. Therefore, in the event that no agreement is achieved on batch testing, there would be considerable implications if products imported into the country required testing and QP release. This is likely to involve: increased costs (duplicate testing, increased inventory holding, QP costs); potential QP shortages; new infrastructure and facilities; regulatory submissions for additional testing and release facilities; and regulatory inspections of testing and release facilities. Potential options include developing internal testing capabilities at existing Lilly UK sites with laboratory facilities (e.g. our research site in Surrey) or engaging a contract laboratory.

2.5.    With regard to contract laboratory options there is limited capacity in the UK and therefore likely to be significant competition for this capacity amongst other pharmaceutical companies if the need were to arise. The same can also be said for suitable QPs. Moreover, the amount of time required to set up a contract laboratory, or even to transfer methods from one Lilly facility to another, is considerable. Therefore once a decision is made either way regarding testing or no testing it might not be physically achievable in the time frame required. Pharmaceutical companies can mitigate this somewhat through stockpiling (incidentally, not without its own challenges with regards to infrastructure such as warehousing and refrigeration) but due to expiry dating this cannot be relied on as a longer term strategy.

2.6.    The feasibility of these options will be assessed however the implementation is expensive. We have estimated the cost of additional testing, depending on the precise final settlement, to be somewhere between £1.2m and £2.2m. This would be on top of costs already incurred in the EU. Committing to such investment remains difficult at this stage given the uncertain nature of the Brexit negotiations. For example, if an agreement were to be reached between the EU and the UK on joint acceptance of product testing and release processes then no additional analytical testing investment would be required. However, given the finite timescale of the Brexit process, and in consideration of the lead-in time required to implement changes in preparation of any new system, we urgently require clarity on the expected batch releasing requirements and GMP recognition.

3. Regulation: what are the opportunities and potential disadvantages of seeking regulatory divergence from EU product, safety and other standards? To what extent should the UK seek to retain influence on these standards? Is it preferable for the UK to: establish an EU association agreement (or equivalent); replicate EU regulation; diverge from EU rules and standards? What dispute resolution processes would be most desirable? Should the UK seek to align professional qualifications with those in the EU?

3.1.    Lilly supports the comments and recommendations of the ABPI/BIA and APG. In addition:

3.2.    The close and consistent medicines regulatory regimes that exist for the UK and EU have benefited patients and industry for decades. A common system for medicines licensing, pharmacovigilance, and intellectual property incentives is in the interests of public health and jobs, and should be maintained through a regulatory co-operation agreement that keeps the UK in scope of the European Medicines Agency (EMA) and maintains alignment with the EU’s strong rules around IP incentives and rewards.

3.3.    Market authorisation: initial licensing and maintenance

3.3.1. In the event of a ‘no-deal’ scenario, marketing authorisations (MAs) held by a UK MA holder will no longer be valid to supply medicines into the EU. This would necessitate transfer of UK-based MAs to an EU-based legal entity, a task that is both costly and administratively challenging. Moreover, there is concern that a large number of licence transfer applications may overwhelm regulators as we get closer to the Brexit deadline. Indeed, the EMA have issued a notice urging companies to plan such transfers sufficiently in advance of the EU departure date.[1] Nevertheless, without clarity on the nature of future arrangements, forward planning is problematic.

3.3.2. A separate UK MA system would force companies seeking to market existing medicines or new or launch new medicines in the UK to undergo an additional licensing process, at increased cost and associated administrative burden. This applies not only to initial approvals but also to all regulatory procedures required to maintain the MAs up to date.  In the absence of a harmonised MA process between the UK and the EU there is a risk that companies will prioritise the larger market first, a scenario that would be disadvantageous for UK patients and their ability to access the latest breakthrough medicines.

3.3.3. All implementation measures should be pragmatic and proportionate. For example, for administrative changes driven purely by Brexit there should be a deferred submission deadline, when other changes, non-Brexit related, are necessary. In addition, implementation measures should be vetted by stakeholders through public consultations.

3.4.    Pharmacovigilance:

3.4.1. Once medicines have reached patients, ongoing monitoring ensures we collect data to assess the ongoing risk benefit of our medicines across Europe. This monitoring provides a wealth of data, enabling us to spot trends or concerns that can be acted upon to protect patient safety.

3.4.2. A single European database exists for the collection and verification of Adverse Drug Reaction reports, ensuring an efficient and highly effective single reporting point for countries within the EEA. If the UK were forced to pull out of this reporting system it could delay patient safety information being shared, making it harder to detect adverse events. In addition, as part of the high standards of pharmacovililance in the EU, each MA holder is required to submit the name and details of a qualified person responsible for pharmacovigilance (QPPV). At present, Lilly’s QPPV is based in the UK. In the event that we have to pursue divergent pharmacovigilance systems, we would have to duplicate this role within the EU. A separate system also raises the prospect of separate safety decisions being reached on medicines in the UK and the EU.

3.5.    IP incentives and rewards:

3.5.1. Current EU regulations provide important incentives for firms to develop IP in the UK, but it is presently unclear whether these would continue to apply after Brexit. As Patents are typically filed early in the development cycle of a new drug, the period of market exclusivity applied to a drug is often substantially shorter than the 20-year timeframe of the patent. The EU Supplementary Protection Certificates (SPC) regulation therefore extends exclusivity for a limited duration (maximum 5 years) in order to compensate for the lengthy process of undertaking clinical trials and securing regulatory authorisation before a medicine can be brought to market. This incentive is on a par with those in the United States and Japan and therefore ensures that the EU is not at a global competitive disadvantage.

3.5.2. Regulatory Data Protection (RDP) is another important IP right that protects the safety and efficacy data that manufacturers are required to submit to regulators in order to gain market authorisation for a medicine. This data protection is valid for 10 years. In some cases, an additional year of protection can be granted if there is a second authorised medical use.

3.5.3. In addition to these protections, and the medicine’s patent, there are further protections that run concurrently where the risks and costs of development and research can be highest, namely paediatric and orphan medicines. Paediatric medicines are granted a six-month extension to the SPC, and paediatric orphan medicines are granted a further two years’ market exclusivity. Orphan medicines are granted 10 years’ market exclusivity.

3.5.4. Taken together, these incentives play a crucial role in incentivising pharmaceutical R&D by providing companies with a limited period of protection from copy and competition. This provides companies like Lilly with the security they need to invest in the long, complex, risky and costly process of delivering new medicines to patients. Any divergence from these high standards would undermine the innovation process that patients and healthcare systems rely on for new medicines and would also put the UK at a competitive disadvantage to the EU and other major pharmaceutical R&D hubs, including the US and Japan. We encourage the Government to consider how it can enshrine these regulations as they currently exist into UK law.

4. Skills: how dependent is the sector on workers from EU countries, at all skill levels? What is the potential impact of restrictions on freedom of movement? How far can gaps be filled by UK workers?

4.1.    Lilly supports the comments and recommendations of the ABPI/BIA and APG. In addition:

4.2.    Discovering, developing and manufacturing medicines is a global endeavour, with biopharmaceutical companies relying on access to the best talent from around the world. This is particularly true in medicines R&D: at our research site in Surrey 17% of staff are non-UK nationals. Of this proportion, 12% are from the EU.

4.3.    The reliance on foreign workers in R&D reflects the specialised nature of those roles. Often such individuals are expert in a highly developed skillset, reflecting many years of experience and advanced education. Frequently they have skills and expertise that are in short supply nationally and consequently they are recruited from a global talent pool. Our continued ability to recruit and retain these highly talented workers is vital if the UK is to remain a leading destination for investment in medicines development. We therefore urge the government to ensure any post-Brexit immigration system reflects the needs of our industry and works to facilitate streamlined access to these talented workers, regardless of whether they are coming from the EU or beyond.

4.4.    The uncertainty created by the referendum result has led to significant anxiety amongst UK nationals working in the EU and EU nationals working in the UK. Indeed, there have also been reports that this uncertainty – and the ongoing perception that the UK is now ‘closed off’ to foreign workers – is making it hard for companies to attract and retain international talent.[2] We therefore urge both sides of the negotiations to reach a swift settlement on the status of these individuals, providing a guarantee of their continued ability to work and live in their respective countries after the UK leaves the EU.

5. R&D: how significant are EU-dependent R&D activities within the sector’s broader research landscape? What R&D collaboration, funding and access to facilities and resources is the UK in danger of losing as a result of Brexit? How can future collaboration, funding and resource/facility access with EU countries be best secured? How can the UK best retain influence in EU and international research programmes?

5.1.    Lilly supports the comments and recommendations of the ABPI/BIA and APG. In addition:

5.2.    The UK’s domestic science base is supported by a strong EU ecosystem of academic and public-private partnerships, which in turn are further reinforced by a number of EU research programmes. For example, the Innovative Medicines Initiative (IMI) is the largest public-private partnership in life sciences R&D in the world. Lilly supports the IMI through active participation in some 19 projects, investing more than €20m to support research partnerships in therapy areas that include diabetes, neuroscience and oncology. These projects link Lilly researchers with academics, patient groups, SMEs and other pharmaceutical companies to spur non-competitive collaborative research in areas of high-unmet clinical need. In all, Lilly is the 10th largest contributor to the IMI and we this participation as a productive scientific initiative underpinned by open innovation and partnership that is making real progress in overcoming scientific challenges in drug development.

5.3.    Another key area of EU dependent collaboration is in clinical research. Lilly has over 60 ongoing trials involving 1,200 patients across 295 sites in the UK today, with patients who are living with breast, lung or stomach cancer, Alzheimer’s disease, psoriasis, rheumatoid arthritis, diabetes, migraine and post-operative pain. Ongoing cooperation with the EU will be critical to ensuring the UK does not lose access to these clinical trials, which run simultaneously in multiple countries around the world. The EU has developed a highly integrated system for registering and approving clinical trials, including developing a single portal for all clinical trials applications from 2019. It is yet unknown if the UK will get access to this centralised database, though failure to do so would seriously harm our ability to carry out cutting edge clinical research in this country and may even lead to a number of our most innovative clinicians moving to the EU in response. Moreover, it is important that the UK meet the EU’s stringent data privacy standards, which enables the transfer of clinical trial data between the UK and EU27.

5.4.    It is imperative that the UK can continue to access this integrated system to compete for investment and maintain clinical research as a treatment option, ensuring UK patients have access to the newest medicines and delivering £192m in free medicines to the NHS in a single year.[3]

6. Trade opportunities: what opportunities are there for the UK to improve exports to countries outside the EU? Where should the Government seek to prioritise in terms of trade deals?

6.1.    Brexit offers an opportunity to recalibrate the UK’s trading relationships with other major economies and we welcome the Government’s ambition to pursue post-Brexit trade deals with a number of countries, including the United States. The implementation of a new industrial strategy and the development of an ambitious Sector Deal for the life sciences is an immediate positive signal from the Government that the UK will continue to be an attractive prospect for foreign investors. We urge the Government to help develop the right trading environment through implementation the Life Sciences Industrial Strategy, the value of which cannot be understated in the context of intense global competition for sector investment from the US, Europe and emerging hubs in Asia.

6.2.    To maximise future trading opportunities, Government must foster a relationship that views life sciences as a true partner in UK public health and prosperity, reflecting the overall value of medicines rather than as a cost to budgets. The huge potential of the NHS as an incubator of innovation and cutting edge research must also be recognised, underpinned by addressing the major funding challenges it faces in the years ahead. This should also include recognition that access to innovation and inward investment in the sector are intrinsically linked.

7. Transitional arrangements: what should the UK seek in transitional arrangements and for how long should they apply?

7.1.    Lilly supports the comments and recommendations of the ABPI/BIA and APG. In addition:

7.2.    Implementation arrangements that would enable the UK to implement new processes that retain UK involvement in the single market and take effect if the future EU-UK trading relationship is not finalised by March 2019 would prevent a damaging ‘cliff edge’ situation. These implementation arrangements must protect research, manufacturing and regulatory arrangements and – above all – prevent any interruption to the supply of medicines to patients across the EU and the UK.

November 2017