PING SEMINAR 2018 BAEPD. EU Membership & IPR 01/06/2018 TUESDAY 5 JUNE 2018 BREXIT- WHAT S NEXT FOR PHARMA?

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1 PING SEMINAR 2018 TUESDAY 5 JUNE 2018 BREXIT- WHAT S NEXT FOR PHARMA? Julian Maitland-Walker Legal Counsel to the British Association of European Pharmaceutical Distributors (BAEPD) 1 BAEPD Trade Association comprising 17 members who together represent around 90% of UK repackaging capacity for parallel imported medicines from EU. c.6% of branded medicines prescribed within the UK are sourced through parallel trade. UK parallel imports are worth c. 1 billion annually (at reimbursement prices). 2 EU Membership & IPR Membership of EU has had a profound effect on IPR in pharmaceuticals The European Patent Convention Supplementary Protection Certificates (SPC) European Trade Mark Harmonisation Of Regulatory Rules The Single Market/Exhaustion of Rights 3 1

2 Impact of Brexit on IPR European Patent Supplementary Protection Certificate European Trade Mark Harmonisation of Regulatory Rules Exhaustion of Rights 4 WHAT IS PARALLEL DISTRIBUTION? Under EU rules relating to free movement of goods, pharmaceutical products sold anywhere within the EEA are in free circulation and can be resold anywhere within the EEA. Pharmaceutical prices will differ from one Member State to another primarily because different Member States have different methods of agreeing prices with manufacturers. The resulting price differences for identical medicines in different Member States creates the opportunity for parallel distributors to purchase product in lower price countries (typically Southern and Eastern Europe) and resell them in higher price countries (typically Northern Europe). 5 PARALLEL DISTRIBUTION IN THE UK PD is a function of the EU Single Market, and a prime example of frictionless trade Import value approx. 1bn annually (=25-30 m packs dispensed per annum) Export value approx. 600m annually EU market in PD = approx. 5bn ( 4.4bn); UK proportion = 22.7% of EU volume (largest DE = 57.7%) 6 2

3 THE BENEFITS OF PARALLEL DISTRIBUTION Parallel distribution undercuts the prices of the domestic incumbent manufacturer. This leads to direct savings to NHS at least 100 million per annum. Parallel imports represent the only competition for manufacturers of branded medicines, this offers a competitive constraint in Drugs Tariff negotiations, giving rise to estimated NHS direct costs savings of around 100 million per annum; indirect savings are more difficult to measure but likely to exceed direct savings. Parallel imports offer access to some specialist drugs which are only available from other EU Member States. Parallel imports can alleviate temporary supply shortages in the distribution chain. 7 THE IMPACT OF BREXIT ON PARALLEL DISTRIBUTION (1) A Brexit which results in the elimination of free movement of goods and development of regulatory divergence would result in: Elimination of parallel distribution. Loss of an estimated 3,000 UK jobs. Elimination of claw back savings currently enjoyed by NHS. Higher medicine prices as manufacturers are freed from the competitive constraint provided by parallel imports. Loss of access to certain specialist drugs. Increased risk of supply chain shortages. 8 BAEPD S APPROACH TO BREXIT (1) Objective is to maintain the free circulation of medicines within the EU through: Maintaining regulatory convergence. Preserving the application of the legal doctrine of exhaustion of rights on trade between the EU and the UK. 9 3

4 BAEPD S BREXIT CAMPAIGN BAEPD S objective is to ensure that parallel imports survive. Since the Referendum vote the emphasis of BAEPD has been on lobbying Government, MPs and the Civil Service as to the importance of parallel imports of medicines and the need to preserve them. This has been done through: - Participation in IPO consultation process. - Lobbying of Government and Government Ministers. - Giving evidence to Health Select Committee. - Lobbying BAEPD Constituency MPs. 10 BAEPD S BREXIT CAMPAIGN THE RESULTS SO FAR (1) Regulatory It seems that the Government accepts importance of continuing UK participation in the EU regulatory framework: Prime Minister stated that UK will seek to remain within the European Medicines Agency and accepts the ongoing role of the ECJ in that regard. Government seems to accept that the UK will have a continuing role in FMD. 11 BAEPD S BREXIT CAMPAIGN THE RESULTS SO FAR (2) IP Exhaustion of Rights (IPER) The position remains unclear but the options appear to be: National IPER which would effectively kill parallel distribution. Regional IPER within the EEA, i.e. preservation of status quo which is what BAEPD supports. International IPER which Government currently appears to favour. 12 4

5 EU S EXISTING RELATIONSHIPS WITH THIRD COUNTRIES (1) Canada FTA (CETA) free trade for goods, not for services. No IPER, no free movement of persons. Association Agreements (Ukraine, Georgia and Moldova) No IPER, no free movement of persons, binding arbitration for disputes, referrals to ECJ limited to interpretation of EU law. 13 Switzerland not a member of Single Market or Customs Union but free trade for most goods, IPER but excluding pharmaceutical patents, free movement of persons. EU S EXISTING RELATIONSHIPS WITH THIRD COUNTRIES (2) Norway - part of EEA but not Customs Union so operates an independent trade policy; IPER and free movement of goods. Turkey has a Customs Union arrangement covering industrial goods, but not agricultural products, services or public procurement. No IPER. The Channel Islands and Isle of Man participation in full Customs Union and adherence to Single Market IPER and free movement. 14 CONCLUSION It will be seen from the above that there are significant differences in the current range of EU FTAs suggesting that there is scope for a bespoke deal for the UK. BAEPD members are reassured that the Government is seeking to maintain regulatory convergence. It is also reassuring that Government appears to favour international exhaustion which would effectively include IPER, although it is difficult to see how this will allow maintenance of regulatory convergence. BUT we shall have to wait and see. 15 5