World economy

What are the possible impacts of Brexit on the NHS in the time of coronavirus?

The effects of leaving the single market are likely to affect the immediate response to coronavirus most in the areas of supplies, management capacity, and workforce. Regulation, institutions and funding will also be permanently changed.

The supply of medical products

Leaving the single market and the customs union will create a variable but extensive burden of extra paperwork and requirements that must be satisfied to get medicines and medical devices into the UK.

On the regulatory side, separate UK processes for chemicals, medical devices, and medicines will potentially increase costs and complexity for companies needing to duplicate the processes and people which assure these products as being safe and effective. These processes previously only had to happen once to cover both the EU and the UK within the single market. They include having new medicines authorised, having devices assessed as conforming to regulations, and potentially assuring the standard of manufacturing.

The UK can unilaterally relax these rules and plans to do so for many in the short term, allowing the testing and release of batches of medicine to keep happening in the EU and giving importers some time to register for the licences they will need. These steps mean regulatory changes may be limited in their immediate impact.1 Furthermore, the Withdrawal Agreement provides for goods that meet EU rules to keep being offered in Northern Ireland2, and the UK Internal Market Bill means they can be accepted elsewhere. As of September 2020, this implies that the legal position may be that it will still be permanently possible for products to be sold anywhere in the UK as long as they meet EU rules – depending on whether they are classified as qualifying for coverage under the Northern Ireland protocol.

Both unilateral changes and those relating to the Protocol mean the UK simply outsourcing key regulatory permissions to the EU, temporarily losing its capacity to regulate and control medicines and incentivising companies to locate elsewhere. This may not be permanently sustainable, but taking back control in the midst of a pandemic would carry significant risk.

When it comes to customs and checks at the border, the effect is likely to be more immediate and unpredictable. The concern here is that a huge increase in the volume of public and private paperwork and checking required across all sectors will cause bottlenecks that make it difficult to get any goods into the UK, especially from northern France to Kent. These routes accounted in 2018 for 73% of EU imported medicines, implying around half of the UK’s total medicines supply, and 90% of EU imported devices.3 The risks apply to some extent to the EU as well, where several countries have identified medicine lines which may see shortages if UK supply is disrupted.4,5

The government has told suppliers to prepare for disruption on these routes particularly “during the first three months following 1 January 2021”. It notes that delays will partly be due to checks on the EU side slowing trade back and forth, suggesting the severity of disruption will depend on part on whether there is agreement in temporarily relaxing checks and sharing data, either through a deal or general close cooperation.6 A leaked letter to road hauliers noted that these EU checks could “reduce the flow rate to 60–80% of normal levels” leaving up to 7,000 lorries stuck in Kent rather than circulating normally. This also noted that, even after three months, passport controls “could continue to cause disruption until the French relax checks or add more capacity”. 7

The UK’s plans to phase in border controls means customs declarations and tariff payments can be deferred for up to six months on its side – but not on the EU’s.8 However, this explicitly does not apply to the special declarations needed for controlled medicines or to medical radioisotopes.9

As was the case ahead of a no-deal Brexit last year, the Department of Health and Social Care (DHSC) is asking suppliers to build up stockpiles equivalent to six weeks’ worth of usual levels, and is offering support for new routes to move around the short Channel crossings into Kent which are expected to be most affected.10 A particular concern may be if coronavirus causes demand for certain products to spike well above the usual level reflected in stockpiling and booking on new routes – for example, because they are discovered to be effective treatments.

Customs changes, regulatory changes, and any fluctuation in sterling are likely to result in substantial additional costs to medicines suppliers and, all else being equal, an increase in price. The University of Sussex’s Trade Policy Observatory has estimated that scenarios in which the UK leaves the single market will tend to drive up pharmaceutical and chemical costs by 5% to 7.5%.11 A comparable estimate for medical devices is not available, but the UK government has estimated that ‘machines, equipment and energy’ imported from the EU would see a 6.1% increase in price even without any tariffs being applied.

Because the NHS has multiple levels of controls on the prices it will pay for medicines, price rises tend to be synonymous with shortages. The sensitivity of the system is illustrated by the patterns seen in off-patent ‘generic’ medicines since the 2016 EU referendum.

Generic medicines are paid for by the NHS against a fixed price list. For England and Wales a Pharmaceutical Services Negotiating Committee monitors whether that price is too low and is causing shortages for some products, and will apply to the DHSC for a waiver and a higher price if this seems to be the case. Beginning around the date of the referendum, the number of these 'concessions’ began to climb, increasing very rapidly from the following winter and then fluctuating at a level much higher than before. The control limits shown in this Figure 1 reflect a level that would be reached on average about one month in every 30 years, based on numbers of shortages in the four years before the referendum. In 2018 a new Act of Parliament took effect to try to control prices by requiring more transparency, but this appears to have had limited impact.

Source: legislation.gov.uk

The National Audit Office investigated this shift, finding that it cost the NHS an additional £315 million in the first year alone. They reported that a fall in the value of the pound and difficulties obtaining licences were likely contributing factors, though many changes remained unexplained. Both of these are plausible immediate risks of an exit from the single market.

In addition to price changes, the UK would also face being subject to any export blocks the EU introduced. The Commission responded to the first coronavirus wave by introducing controls on vital personal protective equipment which banned its export without specific permission, and it has standing powers to make similar provisions again. The UK was on this occasion exempt because of its status under the transition agreement, but will not be in future. The EU does have the power to exempt countries, and did so for states in the Balkans.

The UK would also lose rights to take part in EU procurement initiatives, which were used to procure vital supplies in a competitive global market during the acute phase of coronavirus. Some non-EU countries in the Balkans do take part in EU Joint Procurement Agreement, but extraordinary purchases by the Commission may be made outside it. The recent bulk purchase of the coronavirus treatment Remdesivir was apparently only for EU states and

the UK. A similar mechanism is being used to pay for vaccines from Sanofi at a European level. It is does not seem to be clear whether the UK would suddenly be dropped if it left the single market part way through the delivery of these products.

The UK will rely significantly on goodwill from the EU in decisions relating to export bans, and to whether it can still be included in either type of joint buying exercise.

Northern Ireland’s unique status under the Protocol agreed in 2019 means that it will effectively remain in the single market for many areas of regulation, greatly reducing the likely price and availability impacts for EU imports. However, this will mean new hurdles to importing medicines from the UK, including customs declarations for inbound goods and the need for goods to pass EU rather than UK regulatory standards if these diverge.

Any increase in prices or reduction in availability may be particularly challenging in a context which combines unusually high levels of demand, outright global shortages and sharp global price rises for certain products, as we saw during the acute phase of the coronavirus pandemic in March and April 2020. Figure 2 shows EU imports of medicines and medical devices by value, according to HMRC and indexed to the March 2016–March 2017 average.

Source: legislation.gov.uk

March 2020 saw EU imports of medical devices spike to their highest ever level: the other highest spikes occurred around planned Brexit dates in March 2019 and October 2019, with stockpiling a likely factor.

Attempting to meet stockpiling requirements and exceptional demand at the same time, immediately ahead of the combined impact of added cost, regulatory change, and possible export bans would be an extremely difficult task for the NHS and its suppliers. The risk of shortages of the products most desperately required would be high. If exit from the single market is likely to coincide with an ongoing second wave, there are strong cases for doing anything possible to improve this situation through negotiations with the EU, and for considering yet more radical measures around stockholding and regulatory exemptions.