Written evidence from GlaxoSmithKline
GSK is the UK’s largest pharmaceutical company and one of the UK’s biggest R&D contributors. We invest around £1bn in R&D each year and a further £300m annually in enhancements to our manufacturing sites, 80% of what we make in the UK is exported. We employ 17,000 people across the country largely in high-skilled, high-productivity jobs.
Brexit is a priority for GSK and we are implementing plans to avoid disruption to GSK’s supply of medicines, vaccines and health products to UK and EU patients, as the UK exits the EU. However, there are challenges that are out of our control, including the plans for the borders. Therefore, having a period of status quo transition remains critical. To prevent risk to patients, the UK and EU should seek to ratify the Withdrawal Agreement to secure a transition period and publish a political declaration on the future relationship at the earliest opportunity.
1.1 GSK’s priority is to maintain continuity of supply of our medicines, vaccines and health products to patients and consumers in the UK and the EU. Since the UK voted to leave the EU, we have been planning based on a scenario of no deal and are well into implementing this programme. However, a status quo transition period remains vital because whilst we are doing everything we can to fully prepare for the immediate impact of Brexit, there remain areas out of our control which could risk a disruption to supply for the following reasons:
1.2 Complexity and volume of change required. Our supply chains are highly integrated and have been built on the basis of the UK’s membership of the EU for over 40 years, therefore the volume and complexity of change is substantial. These changes include:
Securing these changes by March 2019 is ambitious and while GSK remains on track, we need all elements to come together to retain supply continuity to both the UK and the EU.
1.3 Border preparations. The border is one element of GSK’s contingency plans that is not under our control. If products are delayed at the border, this could impact patient access. Disruption at the border would also impact supply chains with a potentially wider effect on manufacturing over the mid to longer term.
1.4 Preparedness of all parties in supply chain. As a large multinational, we have dedicated teams in place to implement the necessary changes for Brexit. However, we are acutely aware that smaller companies, SMEs and smaller suppliers, are unlikely to have this level of resource. Without support, some of these businesses in our supply chain may struggle in a no deal situation, and this could lead to a risk of disruption beyond our control.
1.5 Delivering these complex changes by March 2019 will be ambitious and potentially disruptive in the short term and we support efforts to secure a status quo transition period to minimise disruption. Over the longer term, we continue to believe that Brexit will not have a material impact on our business.
2.1 We have evaluated the impact of Brexit on our business operations, including our supply chain, quality oversight, regulatory considerations, trade, people and research but uncertainty remains about the future relationship between the UK and the EU. As a result, we have agreed a risk-based approach to mitigation across the organisation, with an immediate focus on our supply chains.
2.2 GSK has dedicated teams and resource implementing the programme across our pharmaceuticals, vaccines and consumer health businesses to prepare the company for the UK’s exit from the EU and has robust governance process in place.
2.3 Key elements of GSK’s contingency planning are outlined in point 1.2. In addition to this, we are offering support to EU nationals in the UK and await guidance on initiating the process for registering UK nationals in the EU, and UK employees in the EU. We are also holding conversations with third party suppliers and our customs brokers to evaluate their readiness for Brexit to minimise disruption.
2.4 We currently anticipate that the cost to implement these and other necessary changes could be up to £70 million over the next two to three years, with subsequent ongoing additional costs of approximately £50 million per year, including additional customs duties and transaction or administration costs.[1]
2.5 These charges represent our estimates of the impact of Brexit based on the information currently available and we will adjust our plans and financial estimates following any significant developments.
3.1 We have had collaborative and constructive engagement with UK Government. We recognise that the UK Government is committed to securing its objectives in the White Paper on The future relationship between the United Kingdom and the European Union, but we are equally pleased to see contingency planning being taken seriously. We look forward to all parties making progress for the benefit of people in the UK and EU. Patients cannot be put at risk as a result of the UK leaving the EU and this needs to be a priority focus.
3.3 The technical notices on no deal planning published by the UK Government have assisted our planning. In particular, the technical notices on Regulating medicines and medical equipment, confirmed that the UK Government would continue to accept batch testing and Qualified Person release conducted in the EU, in the case of no deal. They also confirm that the UK Government will convert centrally authorised market authorisations into UK market authorisations to support patient access. This is a very welcome and pragmatic approach, given that this would maintain standards which already exist today in a well-established system between the EU and UK.
3.4 We also acknowledge the request from Secretary of State for Health and Social Care to stockpile medicines. We have looked at our plans and processes and feel reassured that we have the right levels of stock for the UK. We would emphasise that any disruption at the border would also impact supply chains with a potentially wider effect on manufacturing over the mid to longer term.
3.5 There remain outstanding issues for us – specifically on understanding the plan for the borders and people, as outlined in the next answer.
4.1 While we are doing everything we can to ensure we are fully prepared for the immediate impact of Brexit, there are some issues out of our control, including the plans for the borders. There are further actions the UK Government can take to support the sector and mitigate the risk to patients. In a no deal scenario we need:
4.1.1 Clear information on plans for the UK/EU border after March 2019 to avoid delays in the movement of medicines, vaccines and healthcare products. Specifically, we need to understand how the UK Government plans to manage the relevant infrastructure in the case of a no deal. This would include information on:
We are asking similar questions in the EU and Member States as both sides of the border need to work effectively to maintain supply.
4.1.2 Further reassurance is needed to effectively support our employees. We need documented confirmation that EU/EEA citizens will be able to remain in the UK under the settled status programme whatever the outcome of the negotiations. Likewise, we need this reciprocated by EU Members States, so that we can support our employees who are UK nationals living in EU/EEA countries.
4.1.3 Mutual Recognition Agreement (MRA) on product testing and site inspections. While we are pleased that the UK will unilaterally accept batch testing from the EU, an MRA would go further to avoid duplication and provide additional certainty in some areas. An MRA could be agreed between the MHRA and EMA, based on existing precedents with other third countries including Japan, Australia, New Zealand, Canada, and the US. Such agreements have frequently been adopted outside of FTA negotiations, thus could come into effect immediately once the UK leaves the EU and later be incorporated in the final FTA.
[1] Health Select Committee, Oral Evidence: Brexit – medicines, medical devices and substances of human origin, HC 392, Tuesday 19 December 2017 [online] http://data.parliament.uk/writtenevidence/committeeevidence.svc/evidencedocument/health-and-social-care-committee/brexit-the-regulation-of-medicines-medical-devices-and-substances-of-human-origin/oral/76145.html, accessed 05/10/2018; GlaxoSmithKline, Annual Report 2017, [online] https://www.gsk.com/en-gb/investors/corporate-reporting/annual-report-2017/, accessed 05/10/2018