News
BGMA Evidence To The Health Select Committee Inquiry On Brexit – 19 December 2017
Analysis
The Health Committee has published oral evidence from Hugo Fry, UK General Manager, Sanofi; Warwick Smith, Director General, British Generic Manufacturers Association; Phil Thomson, President, Global Affairs, GlaxoSmithKline; and John Wilkinson, Partner, Cooley LLP.
Content
Examination of witnesses
Witnesses: Hugo Fry, Warwick Smith, Phil Thomson and John Wilkinson.
Q265 Chair: Welcome to our second panel. As before, I stress that the focus of this inquiry is the impact on patients. You will be familiar with, and I am sure many of you have also given evidence to, the BEIS inquiry that is running simultaneously. I should also mention that we are expecting a vote round about 4 o’clock, so apologies in advance that we are likely to be interrupted. For those following from outside the room, could you introduce yourselves and whom you are representing, starting with you, John Wilkinson?
John Wilkinson: Certainly, thank you. I am John Wilkinson. I am a solicitor in a global law firm, Cooley LLP. Cooley started as a law firm in Palo Alto and has grown up through acting for life sciences companies, initially in the US and Silicon Valley but now globally. My practice consists mainly of acting for biotechnology companies rather than the big pharma companies, at the development stage rather than the launched products. Prior to becoming a lawyer, I was a development chemist for AstraZeneca, which is a little bit of the other side of the industry.
I should say that the views I represent are my personal views and not the views of the firm. With 300 partners, it is difficult to corral them all to a single view, as in any organisation. While my views are informed by my clients, they do not represent the views of any of my clients, but I am very happy to contribute.
Phil Thomson: Good afternoon. I am Phil Thomson. I work for GSK. I am on the management team and have responsibility for Brexit, operations and contingency planning.
Hugo Fry: My name is Hugo Fry. I am the managing director of Sanofi in the UK and Ireland. I am delighted that this is focused on patients. We have significant research and development activity in the UK. We have two big manufacturing sites in Cheshire and Suffolk plus big commercial operations, and we employ about 1,800 people here. I am the chairman of the Brexit committee for global Sanofi.
Warwick Smith: I am Warwick Smith, director general of the British Generic Manufacturers Association, representing the manufacturers of off‑patent medicines, both generics and biosimilars, which is roughly 75% of the NHS prescription medicines used in the UK.
Chair: Thank you. We are grateful to all of you for coming this afternoon. Johnny Mercer is going to start the questioning.
Q266 Johnny Mercer: Can I start with you, please, Phil? Talking about patients, people are talking at the moment about hard and soft Brexit, and all this sort of stuff. What are the implications of no deal at all for the UK coming out of the European Union? What impact would that have on your sales?
Phil Thomson: Thank you for asking the question, because I agree with Hugo that I think this Committee’s work is very important in the sense of patient safety, and in a no-deal scenario we have some concerns. At the moment we have enacted our contingency planning, so we are already making changes and initiating that. We are working on the basis of the worst possible case, which is a disorderly exit in March 2019.
In that case, and even in a more planned case, because of Brexit, we know we need to put in extra testing facilities both sides of the channel. That is going to take some time. We believe that we are going to need six new labs to bring on stream. We are going to have to put capacity into 10 of our existing labs, which are based both in Europe and in the UK. That takes a minimum of 18 months.
Q267 Johnny Mercer: To give people an idea, when you talk about a lab, how many labs do you have in the UK at the moment?
Phil Thomson: In the UK, as regards relevant labs for this, at the moment we have three.
Q268 Johnny Mercer: You are looking at having six new ones on the continent.
Phil Thomson: No—two in the UK and four on the continent. Essentially, we have 16 labs currently operating in the UK and in Europe. We need to put six more on, but we also need to put capacity in 10 of our existing labs. The point I want to make to the Committee is that it takes time to do this. We can do it, but, as I am sure my colleague on my left is going to say, all of us in the industry are trying to do this and access the same people, the same parties, and therefore it is a lot of pressure going into the system. The important thing I would ask the Committee to think about here is that we think it takes about 18 months to do this. I know, having talked to other major companies, that they are in the same position as we are. It may even take three years just because of the complexity and the regulatory approvals that are needed.
My point to the Committee is that on these timelines—in answer to your question, in the worst‑case scenario—we need to put in place measures that will allow us to do that. The key is obviously a transition period, which is why we are asking Government to consider this very strongly.
Secondly, we believe we need to prioritise patient safety in this first phase of negotiations in this second round. The previous panel talked about emergency legislation and the need to put in mutual recognition early enough, so that we do not have a disruption to supply. Obviously, on what I have just described to you, on those timelines we think that is really important.
Q269 Johnny Mercer: Hugo, would you basically echo that?
Hugo Fry: I echo that. I would add one aspect. We have two labs in each site, so it is all about products that currently are released. There is a qualified person who does quality control in those factories and releases them direct to the other EU27 countries. As the UK will become a third country, then the EU only recognises products released in the EU, in which we would not be any more, so that is the basic situation. We are taking the same decisions right now, and I echo the timelines that that takes 15 to 18 months.
Q270 Johnny Mercer: Do you think the pharma sector as a whole is pedalling as fast as it can in terms of trying to understand what the threats and challenges are, or is there more that the Government can do to help that process?
Hugo Fry: It is the speed of going forward. We are having to take a scenario of no deal or a disorderly Brexit. We have no other choice. If it is that, we think of the patients at the end. In fact, there is just one nuance I would put in there. The supply to the UK patients is within the UK’s control. So, the Government, with the MHRA, could say, “We recognise the release in any of the other 27 countries,” and that is fine, and the products will come in. However, the EU27 will not necessarily recognise the release of that product, so there is a bigger question mark for the patients in the rest of Europe than there is in the UK, because I am assuming, potentially—although I am still planning for a no deal—that the Government will work with the MHRA to get to a good deal on that point.
Warwick Smith: First, I agree with all that, so I am not going to repeat it. I have two specific points. For the generic industry—and Professor Boyd covered this in his evidence—because a lot of our medicines are made in places like India, there has been a natural tendency to have that quality sign‑off in the UK for cultural and linguistic reasons. That is why we have a significant number of qualified persons based in the UK, certainly for the generic industry. It would be disastrous to duplicate that role between the 27 and the UK. I know that the MHRA is looking at a way to duplicate‑lite, if I can put it that way, which is a step forward, but having a form of mutual recognition. This only being done once would be the preferable solution.
Secondly—and, again, we heard evidence earlier around regulation, which is extremely important for all of us—for biosimilar medicines, so biologics once they have come off patent, there is only an EU regulatory pathway. There is no UK regulatory pathway. The European Commission was ahead of the rest of the world in developing that pathway. It is why we have more biosimilars in Europe than we do, for example, in the US, where they were late to come forward with a bespoke regulatory framework. If nothing is done and if we are not part of the EU, there is no way of bringing these medicines to the market in the UK, and Simon Stevens has said he looks to a saving of £300 million over the next five years from those medicines.
That also plays to access to patients. These are life‑changing, life‑saving medicines that take us into a new realm of treating more patients, once they have come off patent, for the same amount of money, and there is a real gap there for us. To my knowledge, there is, as yet, no plan to deal with that gap.
Q271 Johnny Mercer: John, would you add to any of that?
John Wilkinson: I concur with the views you have heard. Not being within big pharma, I cannot comment on the steps that the companies are taking, but it certainly all sounds correct.
Q272 Dr Williams: I am going to ask about research and development. I would like first to ask you what the ideal scenario would be in the longer term for the UK in relation to the EU’s research and development activities, such as the IMI and Horizon 2020?
Hugo Fry: I can talk about the IMI. Sanofi has 62 projects today in the UK. We partner with academic institutions, universities and small start‑ups. Of those, about 40% have some kind of funding with Horizon 2020 and the IMI. That is very important and should continue. The UK is the biggest contributor to those funds, and so it is a virtuous circle.
Let’s be clear: good science does not go away overnight and the UK is a good place for science, so a lot of that will continue. The thing is how to build on it and continue, as a UK scientist myself once upon a time. The important thing is that you are right in saying that Turkey and Switzerland have a certain status within that. The thing to do is to push it. They are still funding at the moment, but we are seeing a slight drop‑off. There are signs that the UK influence, even on sentiment, is waning, so it would be great to have some attention and some political pressure on that to keep it going because we do believe it is important. That is what I would call the “R” bit—the research bit.
On the development side, we invest over £45 million a year probably in late‑stage clinical trials, and those are good. There might be a short‑term drop because people are confused about what is replacing it in how to get them registered, but there is an opportunity to lighten the burden of administration there. It is heavy when you have 28 countries all approving clinical trials in this way and that way, and on top of that you have local ethics committees and things like that. So, there would be an opportunity to lighten the load. Any country that is good at science but also can rapidly enrol patients and get them through—and the UK, again, does good science—could up its investment, because companies like ours would look to countries like that and get a bigger allocation of patients in a global clinical development programme.
Phil Thomson: Johnny had a good phrase earlier, which was that the UK needs to compete globally. If you can make the UK the best laboratory in the world, that is what will create competitive advantage and will allow companies to invest. Simply making the UK the best laboratory in the world, I believe, is very good implementation of the life sciences industrial strategy.
I think John Bell’s work is outstanding. We have been involved in it and are a very big supporter of it. It has all the necessary components to improve the dynamic of how the UK sits around life sciences, whether that is the R&D and academic base that was mentioned earlier on, through to delivery of medicines into the hands of patients, and everything that comes in between. Implementing that strategy well with industry and Government, and capitalising on the NHS, is really important.
Q273 Dr Williams: Can that happen even if we do not negotiate the best deal with the IMI and Horizon 2020?
Phil Thomson: I think it is an important element of it. Somebody on the previous panel mentioned that science has no boundaries. I think we all know that, and as a country we have to try to implement that strategy and capitalise on the strengths we have. We do have some opportunities here. The risk, though, is that, if we diverge too far away from Europe, then there is a corresponding effect on how competitive you are in your own strategy.
We have to invest in the life sciences strategy, invest in the UK and capitalise on our strengths, but in the world of science and health I would make the argument that that cannot be done in isolation from the rest of the world. Therefore, we need the connection points in Europe such as IMI or access to that funding to be able to do it.
Q274 Dr Williams: Your company has made significant investments in the last six months—or announced significant investments—despite the uncertainty.
Phil Thomson: Yes, we have, and that is because, as I say, we fundamentally believe that the life sciences strategy is the right strategy. There is no doubt, as the panel previously said, that the UK has some excellent competitive advantages, some of which we know about—universities, some of the R&D work, and in fact many of the companies that exist here—and others that are there to be developed further. The NHS was mentioned earlier, but the NHS as a data source is potentially a huge competitive advantage relative to other countries’ systems. If we can mobilise around that, which is a fundamental part of the strategy for life sciences, I believe we can be successful. But I also want to be honest with the Committee that there is a risk here in developing all of that in isolation, not just to Europe but to America. The Chinese are now investing very significantly in the way they are reforming their clinical trial structures, for example. We have to be global in our mindset, but Europe is an important part of that.
Q275 Dr Williams: Does anybody else want to comment on our relationship with the EU’s R&D?
John Wilkinson: Yes, certainly. Speaking with experience of trying to negotiate Horizon 2020 agreements, they are horribly complicated, and the flexibility in them is limited. The implementation cost of Horizon 2020 in my experience is higher than is ideal. They do get people and companies collaborating with academia across Europe. The one I did most recently, which was only finalised this month, was an EEA country rather than a European company, collaborating with European Union academic institutions, including a UK academic institution. Another Swiss client of mine has been involved in Horizon 2020 agreements as well. So, membership of the European Union is not a bar, from the experience I get from my clients. I think the UK does need to focus on investment.
One aspect that is challenging around the world, but particularly in the UK, is what we think of as translational science. We have fabulous universities and fabulous pharma companies, but there is a gap between the two. Getting those products from the lab to the clinic is a challenge. One client that I have spoken to, and they are happy for me to mention, is a client called the CRT Pioneer Fund. That was originally set up as a joint fund between Cancer Research UK and the European Investment Fund. Without that European investment money, that would not have happened. It was a £50 million-fund. They have in‑licensed 12 programmes. They now have something like four or five things in the clinic from those programmes. Some were in already when they were licensed but some they have taken into the clinic. They have out‑licensed two of those.
This is a very significant success that was driven from European investment. If we leave the European Union, we need to replicate that, not on a Horizon 2020‑type basis, where it is a call for requests for grants, but something that is a little more free-flowing in the same way as the European Investment Fund to ensure that those difficult‑to‑fund bits of not science, not development, but the bit in between, can continue. For me, that is one of the cores that we need to try to make sure we keep.
Warwick Smith: My members do not focus on empirical research but more on incremental research, so we have been working with the Association of Medical Research Charities to see how we can repurpose older medicines for new uses and new indications. The R&D tax credits that were in the life sciences strategy are really important for that. The joint report is going to Ministers in January, which we hope will unlock a lock on making the best use of older medicines.
Q276 Andrew Selous: Staying with the life sciences sector deal, which we have been talking about a bit so far, it was launched earlier this month on 6 December. The Government talked about making the UK the world’s most innovative economy in this area. To me, it does seem a very positively ambitious programme. Where would those Government aspirations be for this sector deal if the UK were to leave the EU without any sort of deal at all? What would happen to the strategy? What would be the impact on it in terms of its effect as far as the industry and patients were concerned?
Phil Thomson: In some respects, the strategy becomes even more important, because if there is a hard exit from the European Union without these points of connectivity, whether it is on regulatory, trade or supply, how the UK then develops itself to be competitive is very important. The life sciences strategy is absolutely designed to do that, going back to some of the comments I made earlier.
In the sense of a hard exit, the issue that I am most concerned with right now is that, in the absence of a transition period that will allow us to get the work done that needs to be done, there is a real risk of disruption of supplies. Hugo was right in what he said earlier, but I would add that we have HIV drugs that are manufactured here in primary manufacturing, but in secondary manufacturing they are sent to Poland and then brought back to the UK; I am sure you have heard about this before.
We have just worked with the UK Government to bring more meningitis vaccines here to the UK to protect babies from meningitis. The reality is that they are all manufactured in Belgium, and therefore we need to be able to make sure that we can bring those vaccines into the country.
I am not trying to negate the importance of the life sciences strategy, but my strong message to the Committee would be that, even before then, we have some short‑term issues that we need to address together around how we ensure supply to patients, and that is the biggest risk I immediately see, which I am most concerned about.
Chair: We are going to come back to that specifically later on.
Q277 Andrew Selous: As to the life sciences strategy, there are quite a few different parts to it. Which aspects of the strategy are most at risk from the Brexit process in terms of the different component parts of it?
Phil Thomson: You have already identified them, but in R&D it is around movement of people and scientists accessing the UK and vice versa, and therefore having the right immigration scheme to support that. The other area is where Dr Williams was going, which was around funding. This point around having enough capital either to invest in the UK or to enable investment out of the UK is really important.
We have mentioned European funding, investors such as Neil Woodford and the Patient Capital Trust, which is in the life sciences strategy. These are very important, and of course investment is not looked at just in UK terms. Pulling capital in requires global strategies.
Those are the two areas to which I would point. If you break from the European Union without a good enough arrangement going forward, risking on scientific movement, people and also on funding, then it starts to impact strategy.
Q278 Andrew Selous: That is helpful. Hopefully, you will be encouraged by what the Government have said about wanting to have a future immigration policy that does recognise the value that scientists in particular bring to this country.
Phil Thomson: Yes, and already we saw a measure in the strategy that talks about particularly enabling scientists to transfer between Europe and the UK. We have already seen good evidence of that kind of commitment, but we have 1,400 people here in the UK who are European citizens working for us. Yes, of course, some of them are scientists, but they are not all scientists, although they are equally important. There are good signs so far.
John Wilkinson: If I could add to that, in danger of slightly repeating it but giving some examples, when I was preparing I was thinking that there are three pillars to the life sciences industry, particularly from my perspective as the development part of the industry. Again, they are access to top‑level science, access to world‑class labour and access to capital. I will pick up a couple of points there. When we talk about access to capital, I think people like Neil Woodford are very important, but the ability of the companies to grow in the UK and then license their technology out to companies outside the UK is a vital contributor.
To give you an example, a company based in Oxford called PsiOxus did a deal last year where the signature payment was $50 million. Last month they got a $15 million milestone, which was just the start. There is up to $866 million‑worth of milestones just in that one agreement. Here we see a way of capital flowing into the UK, effectively the transition of science into economic value. That company on that development programme has people from 17 different countries working on it, eight from the European Union and nine from outside.
Reiterating something that was said earlier this afternoon, we talk about access to world‑class science, not just access to European‑class science and world‑class people. Having an immigration system that allows people from all over the world to come, and to be attractive, will massively enhance our ability to be competitive in the life sciences sector. In preparation for this, I read Roche’s submission and they mentioned that in the UK they have employees from 42 different countries. Even if they have one from every single member state of the European Union, they still have 15 other countries outside the European Union. We do need to remember, while we are focused on Brexit, that this is a global business, globally regulated, and that science is a global science.
Andrew Selous: That is very helpful, thank you.
Q279 Diana Johnson: I would like to ask about the legal framework for research and development, and how it needs to be adapted when we leave the EU to maintain competitiveness, but also to ensure that we can get the rapid availability of medicines. Perhaps as the lawyer on the panel, you could start with that. What do you think needs to happen?
John Wilkinson: I think you have heard a fair amount on the approval of medicines. Partly because it is not my area and I do transactions for companies—I act for development companies rather than going through the approvals—I think it is vital that we need to get that approval system right. Replicating, to the extent that it does not get incorporated into UK law, all the aspects of the approval system, including biosimilars and the like, is very important. At the development stage, I think a number of the pieces of the jigsaw are already there and we have a clinical trials framework.
When we talk about clinical trials, everybody is taking clinical trials as one thing. We have to remember that there are three phases of clinical trial: phase I, phase II and phase III.
A phase I clinical trial is a small study, generally on healthy volunteers, unless it takes place for cancer or some disease where it would not be ethical to do it on healthy people, but that tends to be in a single centre. The UK has a great opportunity to be competitive there by making it a much more streamlined system, because an awful lot of the clinical trials directive and the clinical trials regulation is about streamlining the process for approval of clinical trials. As you heard from Professor Boyd, the good clinical practice guidelines come from the ICH, so the standard by which the quality of the clinical data is measured is very internationally harmonised, not just by the European Union but by the Japanese and the US.
A phase II clinical trial is looking at patients in a limited number of sites to get safety tolerability data and possibly some initial implications of efficacy. That is where I think we need to be very careful to be competitive, because it is where we are going to lose out if we are not integrated with Europe or at least an attractive destination.
For phase III clinical trials, you need lots of patients to get those right unless they are in the particular orphan indications. A lot of those trials—and my colleagues from the pharma industry here will correct me if I am wrong—cover not just the European Union and not just the US. They are global studies. The ones where I have worked on them included Russia, the US, Brazil, and, obviously, Europe as well, and Japanese sites. We have to think about them separately, because phase III clinical trials are being done despite the fact that there are different barriers to accessing the clinical trial network. For me, it is about making sure that we keep that framework competitive and interesting.
Q280 Diana Johnson: Anybody else?
Hugo Fry: I would reinforce the idea around phase III trials. I used to run clinical development programmes around the world, and we literally look at it and parcel out the patients around the world. They go to Russia, the US, South America, China and Australia, and so on. I will let John talk about the legal framework, but certainly it is the administrative burden, the ability to recruit and the quality of the data at the end that counts. The quality of data coming out of the UK is already great. If they can improve the ability to recruit, that would really improve things.
However, to come to your question, which is about getting access to the medicines and regulatory approval for the patients, I will touch on what was said in the earlier session, which is that even our company—and we are one of the biggest pharmaceutical companies in the world—does not have the capacity to simultaneously submit files to every regulatory board around the world. We cannot do the FDA, the EMA, Japan, Health Canada, Switzerland, Australia, and so on. There is a hierarchy that fits in.
Why? It is because we are interested in getting medicine and vaccines into patients. As to numbers of patients, the EMA is a lot bigger than Europe, so more patients will get the medicine from that point of view. Then you are back into the discussion around whether the MHRA is, in the negotiation, going to stay as aligned as possible to the EMA regulatory framework. That would be the quickest and easiest way to ensure that UK patients still got the medicine. It would get to the approval stage and then go to the EC in Europe for rubber-stamping and then Westminster. You can even gain a month or two there if Westminster were first.
Q281 Chair: That is interesting. Did you want to add a point?
Warwick Smith: I was just going to reinforce that last point because it is critically important. For us, getting the regulation right, going forward, is the critical thing. Not having to repeat processes for the one that we have done for the 27 again is critically important. There are potential upsides here, where the MHRA in that final stage of the licensing process can move faster than 27. So, it is possible to construct a system that has product getting to the market in the UK a little faster, but only if we have shared that initial and—fundamentally—main process of regulation. If we do it separately and in a different way, it is very difficult to bring products to the market in the UK at the same time as the 27, for all the reasons Hugo has put.
Q282 Chair: You mentioned earlier, both Phil and Hugo, the amount of contingency planning you are already having to do for a possible no‑deal scenario. Are you doing the same kind of contingency planning for there being no deal and getting arrangements set up in case you do have to use other mechanisms for approvals? You mentioned you are setting up labs for qualified persons.
Phil Thomson: Yes, we are, actually.
Q283 Chair: But is there other contingency planning in which you are investing? I am trying to get a sense of how much money you are having to invest at this stage in a possible no deal.
Phil Thomson: Let me try to answer that for you. Our current estimate is that we think we have 1,700 products directly affected, if I can call it that, by Brexit. In other words, they are either being manufactured in the UK or Europe, or they are going back and forth, and therefore we need to do a couple of things. One is to put in place a testing facility, as I mentioned earlier, and the new laboratory capacity. The second is transferring marketing authorisations. Products that have been approved in the UK, now unregistered in the UK, need to be re‑authorised for Europe. We think there are about 1,200 of those that we will need to do. For each product, we need to get those re‑authorised and put through the system.
Q284 Chair: Even though they are currently authorised, you will have to get them re-authorised.
Phil Thomson: I mean re‑authorised in the sense of reregistered, not necessarily going back through the approvals process system. We need to work through that. Of the products affected, the impact of the testing changes and the reregistration is about 13,000 packs that will have to be updated as a result of what we need to do.
Q285 Chair: Each individual pack will have to be updated—gosh.
Phil Thomson: That is right, because if you change where it is registered, for example, you have to change the address of literally where the pack is. The reason why I am giving you these numbers is to give you a sense of the scale. Obviously, GSK has a significant portfolio and is very heavily invested in the UK, but I can imagine my good colleague here will have similar sorts of numbers, and I know AstraZeneca do. This is what I mean in terms of the pressure that will be going into the system to get these things done and accessed. I can tell you that our latest estimate is somewhere between £60 million and £70 million of cost for what we need to do.
Q286 Chair: That is £60 million to £70 million of cost in total just in contingency planning if there is a no deal.
Phil Thomson: Yes.
Q287 Chair: That is vast.
Phil Thomson: Over a period of three or four years, yes.
Q288 Mr Bradshaw: Excuse me, Chair. You will know before then whether it is a no‑deal scenario, within three or four years, so you think—
Phil Thomson: Forgive me, I think you were out of the room when we talked about this, but the point I made earlier is that we have to move on some of this now because the timeline to implement the laboratories, at a minimum, takes 18 months; so, we are already having to initiate cost as a result of this.
Q289 Chair: Just to clarify, this is the total cost you are estimating should a no‑deal scenario emerge. If that does not happen, common sense prevails and we reach a sensible mutual agreement, how much do you think you will have invested just putting these contingencies in place? In other words, I am trying to work out, is this amount of £60 million to £70 million the total amount should it all fall apart?
Phil Thomson: A lot of this will have to be spent. It really does depend on what the ultimate destination is. If we diverge very significantly, we will probably have to absorb a lot of these costs. We will incur these costs, because, going back to why I think what this Committee is doing is so important, we cannot and do not want to be in a situation as a company in March 2019 where we have some sort of disruption in supply. We know we have to make plans.
Q290 Chair: The sooner you have certainty, the better, presumably is what you are saying.
Phil Thomson: Absolutely, yes.
Q291 Chair: To be clear in my own mind, is £60 million or £70 million what you estimate you are going to have to spend anyway just in case, or is that the final sum?
Phil Thomson: At the moment, that is our working assumption. We are going to have to spend something like that to be as prepared as we can be in a no‑deal, hard Brexit situation.
Q292 Chair: So you are expecting that anyway.
Phil Thomson: Even if we have a smooth and orderly Brexit process, and we work through with a new FTA or a new arrangement, there are going to be costs of that magnitude anyway, but they will probably be more phased. We will probably be able to reallocate some of those costs elsewhere. It may not be as significant as the contingency plan, but the reality is that we are already going to have to spend some of that.
Q293 Chair: What about for you, Hugo?
Hugo Fry: We are not so precise in the amount that we have allocated, and it will not be quite as big as John, who has six labs and we have two, so you can see the difference proportionally. The most expensive bit is moving the labs and getting the people, and that whole 15 to 18‑month process we were talking about. Proportionally, it is likely to be in that order.
As to the regulatory bit, in actual cash terms, that is less, but in terms of slogging through the work, of getting the regulatory people, there is the fight for expertise as we were talking about before. There is a whole bunch of us out there looking for expertise who can take these several lists of products. It is a technical job, but it does have to be done and it is very important. There is a lot of work, and I reinforce the point that we have to do this now.
Q294 Chair: You have to do it anyway.
Hugo Fry: We have to do it now.
Chair: I know Ben has a follow‑up point and then we will come to Caroline.
Q295 Mr Bradshaw: Given what you have just said, and given that the discussion about alignment is absolutely live, as we speak, in the Cabinet, and we had the vote last week where Parliament finally asserted itself as an anti‑hard-Brexit Parliament, why have you not been more publicly outspoken about this? Why are we not seeing what you are saying to us everywhere on the front pages of the newspapers about the extent of this disaster and what needs to be done to rectify it? The politics of this is changing. Are you moving fast enough with it?
Phil Thomson: That is a very fair challenge and a good question. The reality is that we have been working over several months to get to understand what the true position is. We have now got that. I would say both from my engagement with the Government here, certainly with the Department of Health, and also with BEIS and DExEU, that there is a good understanding of this, certainly within the official level. I also think there is a good understanding in the Commission on this, going back to one of the questions that was asked earlier.
Having said that, one reason why I was glad to be asked to come here today was to make this public comment, because we need—and industry needs—time to make these changes. The earlier we can get clarity on a transition process, the better, and in the event of a hard Brexit scenario, we need to be putting in plans, whether it is emergency legislative plans or unilateral action that the Government have started to talk about, to make sure that in that worst‑case scenario we can manage supply and can make sure there is not disruption. The costs, I am afraid, are going to be incurred. All I would say to you is that we are going to do everything we can to minimise disruption. Obviously, that money could, though, be being put behind clinical trials, and I can tell you right now that we have a cancer portfolio we are trying to invest in, into which that money should be going, to develop the next generation of cancer medicines. That is something—I will be honest with you—that we are wrestling with internally inside GSK.
Q296 Chair: It would be very helpful to the Committee if you could write a further note to us setting this out in more detail.
Phil Thomson: I would be very happy to do that.
Chair: That would be very helpful.
Q297 Dr Caroline Johnson: I want to bring you back to one point that we have been hearing about from the previous panel, but basically to industry. It has been said that there is a delay—some countries get the medicines first and some get them later. It has been suggested that that is all to do with the size of the market. We were given an example earlier that Switzerland, a country of about 8.3 million people, received its drugs six months later. It has also been put to me that Japan, a country of 127 million people, receives the drugs a year or two years later. How do you create the hierarchy that you have described? On that basis, it is not entirely down to population size, is it?
Hugo Fry: In a previous life I did this, so I will share my experience. You have to put Japan apart in one way because it has a very different approval pathway system. It is the same thing, but you absolutely have to have a specific critical mass of Japanese patients, and often you design the study specifically for Japan. You have to have what is called a phase I bridging as well. So, that I put apart. You can choose to do that in parallel as, in my last one, we did. We ran the Japanese programme in parallel and submitted just after the FDA, which was quite unusual, but we decided to do that because we thought the drug was particularly relevant in Japan. However, sometimes Japan can be years later.
Q298 Dr Caroline Johnson: What would be a good comparator? Switzerland, because it is such a small market, is not a good comparator, but what would be a good one?
Hugo Fry: Our goal is to get innovation into patients. That is the reason we do things. It is all about the patient. Then it is the size of the markets, in terms of patient numbers—US and Europe. That is a huge amount of work. Those two processes in parallel are as far as it stretches, because the way the process works is that you submit and then you start answering a whole load of questions you get back; these can extend to pages and pages at different points in the process. FDA is one and EMA is one, which is a great advantage. Switzerland, Australia and Canada are one each, and the fact that they are small does not mean they have any fewer questions. They still need answering, so you need the same, or almost the same, capacity to answer those questions.
Q299 Dr Caroline Johnson: But Australia would give you an opportunity for three times as many patients as Switzerland, would it not?
Hugo Fry: Yes. You might do Australia, except that, then, you have to take into account whether the patients would really get it, because the regulatory approval is the start and then you have the access to things like NICE, or whatever the health technology assessment process is in that particular country; so, you add that in as well.
Q300 Dr Caroline Johnson: You are saying that if we took the opportunities described by one of our previous panellists to be extremely efficient in the post‑licensing or post‑approval phase, that would enable us to be more competitive and be higher up in the hierarchy.
Hugo Fry: You could catch up. The UK would definitely be third then, if you want to put it in the hierarchy, but it could catch up a lot of time by streamlining that, and it is even talking about doing it in parallel. I know there is a lot of discussion around that, but, yes, it could. What I think is unlikely, thinking about it now—I cannot think of a scenario where it would be the case—is that the UK, in the pure registration period, would be ahead of the other two. However, there are opportunities to gain time elsewhere in the process.
Q301 Dr Caroline Johnson: We are looking at the effect on patients. The effect on them might be negligible, or even not there at all, if we were very streamlined in our process.
Hugo Fry: If it was very streamlined and rapid to market, to pricing, to the pharmacy shelves or the hospital shelves or wherever the distribution channel is, yes.
Warwick Smith: There are parallels with the generic industry where a number of countries around Europe have really unnecessary regulatory barriers in place after the marketing authorisation has been gained. In Portugal, typically, a generic will enter the market nine months after the UK because our post‑licensing procedures are less bureaucratic than they are in other member states. You can see that that works. There are parallels in a different market.
Phil Thomson: Just to answer your question about hierarchy, and I heard your question earlier, an analogue, I think, is Germany. That is a more sensible patient population size. Ultimately, while you have the harmonisation of the EU regulatory system with European countries, as somebody said earlier, domestically, it is how it then gets adopted. If the UK wants to be competitive, this is where it could take an advantage. I think the UK is making good strides in this space because it has started to put commercialisation officers into the NHS.
The key here, I think, and where the UK could make a big difference, is around flexibility. To give you an example, we run a huge vaccines business. When we operate tenders over a period of five or even 10 years, there is a lot we can do to make sure that we can flex on price, be flexible on cost of goods and on supply. If we were able to create more flexibility in that commercial realm in the UK, I think you could start to offer a competitive advantage relative to other countries around the world. That is one area that we could definitely look at and focus on.
The question here, of course, is that the NHS needs to take cost reduction and it needs to manage its costs appropriately, but, as everyone with a good commercial opportunity knows, it is not just about cost reduction but where you can invest for the longer term and how you get a good return. If we have that kind of mindset in the NHS adoption—not the licensing but in the NHS adoption—that could be a very interesting place for the UK.
Hugo Fry: Can I reinforce that message, because we are a manufacturer of vaccines? In adoption, the UK, in medicines, is quite far down the tree. In vaccines, it is right at the top, so I can only reinforce that point. If there could be a mechanism for medicines where the UK can have the same level of adoption and rapid adoption or uptake, as we often call it, then the hierarchies kind of go out of the window in Brexit because more patients are getting more medicine.
Chair: That is always going to be a challenging financial balance for the NHS, is it not?
Sitting suspended for a Division in the House.
On resuming—
Chair: We are quorate, so we will make a start again. Caroline will start with the next group of questions on supply chains.
Q302 Dr Caroline Johnson: We have talked about the fact that medicines are sometimes made in one country, or made in several countries and then delivered to another. What problems, if any, do you envisage with that process and at what stages, when we have left the European Union?
Hugo Fry: It really does move. There are two I will highlight and then I will leave some space for others. One is, where there was free movement before, I have not found anybody who is able to tell me the potential blockages on borders. Exactly as Phil was saying earlier, we have several products that go from the States to Europe; that we can do, because we are used to doing it. Throughout Europe, when products move from France to the UK, back to France again, back to the UK, or from Belgium, we have no idea how long they will be held up at the different borders. We do not know how much time to add in to our supply chains.
Q303 Dr Caroline Johnson: How much time do you add in to the supply chain to move things between the US and Europe?
Hugo Fry: We do not add anything in because it is built in and we know that it takes a few weeks, but that is a documented process where there is resource to do it. The paperwork is well defined and is there. We all know that we would all love to copy and paste, but it is never as simple as that. There are a number of consultants who have put together estimates of this. PWC has done one. Its estimate was so wide that it might as well have said, “We don’t know how long.” It probably will not be like that forever, because eventually there will be a fluid system, but it is that period. It comes down to companies fighting for the same resource, where we will all look for warehousing space because we need to stockpile it, if we can stockpile, which is difficult for certain complex biologicals, where we are already too late because they have lead times, or certain vaccines have massive lead times. Again, we are right at the edge of the window of opportunity for thinking about stockpiling. Ultra‑orphan drugs is another one where there are complex manufacturing processes.
Q304 Dr Caroline Johnson: Would there automatically be a blockage, or would there only be a blockage if either we or the EU decided to put one in place?
Hugo Fry: If you kept open borders, whatever that means politically, then no, there would not. The status quo is no blockage.
The second point I want to make is about WTO rules, and this is something again we discovered ourselves. Even though we have committees and people looking into it, we discovered relatively recently that although it is tariff-free for pharmaceuticals and their component products, it is an understanding. The list dates back to 2010 and has not been updated since. It is a bit more of an understanding than an actual list, because the actual list does not contain everything that has been registered since 2010. Okay, that could potentially add cost to the system, because there will then be tariffs, you will have the administration of collecting them and all the rest of it. I will put the cost into context, though, just so that everyone knows. The cost pales into insignificance next to the loss in the value of the pound; because prices are fixed for the NHS in pounds, the difference costs us millions and millions every year already. But still, it is a cost.
Q305 Dr Caroline Johnson: What about you, Mr Thomson?
Phil Thomson: It is quite hard to answer your question honestly, given the levels of uncertainty. To give you a sense of the scale, every month we have about 44 million packs of products moving between the UK and Europe, so there are very significant volumes going across. If, as Hugo said, we are not part of a customs union, and if—in answer to your question about what goes in—the barriers that go in are either financially around tariffs or administratively around borders, such as when on either side of a border a VAT form needs to be filled in, that is an administrative cost to us, obviously, but it is also a resource implication as well, and that is a time burden. Those are the things that we are trying to factor in. In all honesty, it is very difficult to do that not knowing where, ultimately, we are going to be in our relationship with the EU.
Q306 Dr Caroline Johnson: Have you had discussions with Ministers about those issues, and how have they responded?
Phil Thomson: I would say that officials and Ministers have been very receptive to understanding that, but I would say they are also challenged because they are not able to provide us with the specifics so that we can start to say, “This is how much it costs,” and what the ring fences are. All we can really do at the moment is work on the scenario that, if we are not part of the customs union, we have to assume that some of these burdens—if we can use that word—or barriers are going to be put in place. How, therefore, we minimise that should be part of what we discuss in the next arrangement or the future arrangement with the European Union.
Q307 Dr Caroline Johnson: It is basically that you are waiting for the negotiation process to complete, but in the meantime you are preparing for the scenario in which there are barriers.
Phil Thomson: We are preparing as much as we can do, but, to be blunt, until we are clear about what that future relationship is, it is quite hard to prepare for. Of course, at a company level, we can put more resources in to our import/export organisations. I could not tell you right now whether that is 20 or 50 people, and how much that is going to cost, because I just do not know what the future looks like in that.
Q308 Dr Caroline Johnson: You talked about the issue of VAT forms, but also about the qualified people. Can you explain how that qualified persons process works and what changes you may or may not need to make after Brexit?
Phil Thomson: Essentially, when the product is released it has to be tested to make sure that it is bona fide product and it is the same—
Q309 Dr Caroline Johnson: Is that for every batch or every time you have a new product?
Phil Thomson: It is for every batch. You have laboratory‑type facilities, usually in your manufacturing sites, where you are essentially, literally, testing the products—chemical testing. That has to be done according to regulatory standards in the right kind of clinical environments and also with what they call qualified people—so, qualified personnel. They exist, but there is a limited pool of those people, and, as we talked about earlier, there are the timelines required to implement this. In our case, we are looking at third party laboratories, not building our own labs, because it will take too long for us to build the lab, kit it out and get it approved. We are going to have to look at third party suppliers here.
Q310 Dr Caroline Johnson: How long does it take to train someone to be a qualified person?
Phil Thomson: I do not know. I would have to come back to you on that.
Hugo Fry: Different companies have different aspects and ways they treat this. Sanofi always prefers to have our QP—our qualified person—in the factory releasing in situ, because they understand the manufacturing process and where the problem might be, and sometimes it can be fixed. Again, you gain efficiencies in time and money, and get more patient output available, which is very important in biologicals and vaccines, in particular, where there are sometimes chronic shortages. When you start offshoring your QC and QP, you lose that. There is a danger of more wastage in the system and the chances of shortages go up when you start moving to that system.
Q311 Dr Caroline Johnson: Presumably it is a short‑term solution, is it not? In the short term you outsource it; in the long term you build your own and put it back in-house.
Hugo Fry: Or—and I am not saying this is happening—one of the scenarios is that you move the manufacturing out of the UK.
Q312 Dr Caroline Johnson: But, Mr Thomson, you have invested heavily in the UK recently, so you do not, presumably, agree with that scenario of wishing to move, because you have invested in more facilities here.
Phil Thomson: As I said earlier, we strongly believe that the UK can be very competitive, and it is competitive genuinely, but that is contingent, in my view, on implementing the life sciences strategy well. Depending on what our future arrangement is—but if it is, let us say, more divergent—then the UK really needs to think about where else it can improve its competitiveness. We talked about the commercial aspects before, for example. If the UK adopts a more, can I say, convergent approach—so, in other words, there is more regulatory alignment—then ultimately that is supportive for the UK, because you are then building a competitive UK proposition, which is still very connected with Europe, China and the US and wherever else it is, and you get the best of both worlds. If you do not invest in the UK and you do not stay connected, it makes the UK less competitive, and that is the risk we face as a country. I personally think we have to do both of those.
Warwick Smith: This is where, if you like, competitiveness of the industry and safety of patients and the security of supply come together. As I think Hugo said, you can batch‑test on your own account or you can go to a third party laboratory. On the numbers that we have calculated, if you are doing it yourself, the revenue cost is maybe £600 per batch; if you are outsourcing, it is £1,000 a batch. A sizeable generic company will release 24,000 or 25,000 batches per year. At the moment, that will be done, potentially, through one QP for the EU, who will be based either in the UK or elsewhere in the EU. The laboratory work will be done in the EU, which could be the UK.
If there is no arrangement between the EU27 and the UK going forward, the risk is that all those facilities and people have to be duplicated. That plays to cost and to delays in the supply chain because you are not as efficient, going to the point that Hugo made. It plays to the point that you are scattering your safety-critical procedures rather than having them concentrated. So, to reinforce the point I made earlier, duplication is exactly the wrong way to go. Therefore, we need some sort of mutual recognition, if things are going to go the way they are, not just for the transition period but for thereafter, otherwise, we are putting up costs, we are potentially weakening safety and we are not looking after patients as we should.
The same applies—I think Professor Boyd made this point—to pharmacovigilance and keeping records of reactions of patients to medicines. Just basing that on the UK does not give the same degree of safety and security for patients as basing it on the EU. So, a mutual recognition, or in some way arranging for the UK regulatory processes to remain part of the EU or allied to the EU, or whatever form of words becomes acceptable, but fundamentally in the same ecosystem, is crucial to efficiency and patient safety.
Q313 Dr Caroline Johnson: Does that apply in both directions? The EU, presumably, will not wish to duplicate things either.
Warwick Smith: It is important that we do not just focus on medicines coming from the 27 to the UK. Medicines go in both directions. We are a significant manufacturing base. Twenty-five per cent of the production of my largest UK manufacturing member leaves the UK. Most of that will go to the EU, so there is an impact; but it is again the difference between the impact being spread across 27 and the impact being borne by one.
Q314 Dr Caroline Johnson: The 27 to one, in terms of population, is not 27 to one, is it, because it is about eight? We are about one in eight of the European population.
Warwick Smith: Yes.
Q315 Dr Caroline Johnson: So, the volume of data collected on people in the UK is a much more significant proportion of the EU data as a whole than one in 28.
Warwick Smith: Sure. It is still a significant factor whether it is eight or 20.
Phil Thomson: I think you are making an excellent point, and you may have said it in your opening, that this area is win-win potentially.
Q316 Dr Caroline Johnson: For both sides.
Phil Thomson: Maybe win‑win is the wrong way to describe it because it is just fundamentally important for both sides to get this right. I think you are absolutely right to be thinking about how Europe sees this and the loss of the UK, whether it is pharmacovigilance or that the UK gives more approvals for post‑approval studies than any other European country. We have enormous excellence and capacity here in the UK. The UK contributes disproportionately in many regards to what Europe does around health. Therefore, it is in both our interests to prioritise health and the impact particularly on patients in this next round, and what happens with the future arrangement.
Q317 Chair: Presumably, as well, it is the opportunity cost of all this. You are spending money on all of this bureaucratic process rather than spending it on repurposing drugs, for example. Have you made an estimate, Warwick, of the cost of all this if there isn’t a deal?
Warwick Smith: I have lots of individual figures. We have not managed to get a figure across the industry, but I was impressed with some of the figures my colleagues gave earlier. It will be at least that for the generic industry—a typical generic company. Once a medicine comes off patent, a dozen or 20 companies will pick it up, so there are many more generic licences out there than there are originator licences, if I can put it that way. The risk there is that, as costs go up, some companies will relinquish their licences and their marketing authorisations, so there could be fewer manufacturers in the marketplace, and that, at the moment, keeps the market, in normal times, pretty resilient. The more manufacturers there are of the same molecule, the more options we have if there are supply difficulties. That is a key objective for the generic industry in keeping that competitive multi-source market going.
Q318 Chair: The multi-source market has a potential impact on patients. If we lose that, we are more likely to end up with supply chain problems if a manufacturer experiences difficulties.
Warwick Smith: We are.
Q319 Chair: The other point, I guess, is the cost of drugs to the NHS—how much they could potentially rise. Have you made any estimate of that at this point?
Warwick Smith: I support the point that Phil made that currency fluctuations have been the most significant impact so far, and when your cost of goods increases by 20% that is obviously quite significant.
Q320 Mr Bradshaw: I am sorry, but can I just ask something about that? How much of an impact has that had on NHS costs?
Warwick Smith: I do not have a number. I have not seen a number.
Hugo Fry: There are a couple of exceptions, but, generally speaking, it has not added anything. What it does, though, is it impacts us. As a European‑based global manufacturer, we absorb the 20% decline directly.
Q321 Mr Bradshaw: Can you put a ballpark figure on it?
Warwick Smith: It is just a 20% cut in your income.
Hugo Fry: It is 20% of our turnover—
Q322 Mr Bradshaw: Gone.
Hugo Fry: Gone.
Q323 Dr Williams: I want to go back briefly to customs. I am interested in what the impact would be on patients if there were delays or disruptions to imports or exports.
Phil Thomson: Obviously, it depends on what kind of custom barriers go in or not, as the case may be. The concern for patients is more if that is done in a disorderly way in a hard-Brexit scenario. That is where you could potentially see impact. That kind of scenario is certainly again where I have the anxiety around the supply chain because of the time, frankly, to be put in. We need to be able to have a transition period and understand how it will operate. We need to ask the Government for clarity not just on whether there will be a transition period, but what will be the operating principles of that transition period, if it is status quo. Certainly, from our perspective, no change to the regulatory scheme, and to operate on a status quo basis while we make these changes and put these contingencies in place, is by far the best scenario for us. If we can do that, we can say that, hopefully, we will be able to minimise disruption as much as possible. If it is in that first scenario, though, it is less certain.
Q324 Dr Williams: Are there any medicines that are particularly time-sensitive or temperature‑sensitive that could potentially be affected by a long or complex customs process?
Phil Thomson: I think in the manufacture of our current products, from a GSK perspective, we have those well controlled and well managed. While obviously there is freedom of movement and it is frictionless at the moment—for example, with regard to vaccines that need to be refrigerated—it is already in our processes, so I think the risk is not necessarily there.
Coming to your question, if there is no clarity on customs, that obviously creates uncertainty and possibly results in disruption. If you get into a scenario where you have very hard, draconian barriers as a result of customs issues, the companies can work through it, but if there is not that transition period to do it, it becomes challenging.
Q325 Andrew Selous: I want to ask about the World Trade Organisation rules and what the impact would be on the life sciences sector and the trade in life sciences. If we move to those WTO rules on 29 March 2019, what would be the practical impact on your businesses and how would that affect patients as a result?
Hugo Fry: I mentioned it a little bit earlier. There is a mutual understanding about WTO rules around pharmaceutical products and their component parts today, which is understood, and they move without any tariffs. However, the official list was last updated in 2010, so there are things missing from it. If that was implemented to the letter of the WTO rules, then there would be tariffs come 29 or 30 March, or whenever it is. Therefore, that would add cost into the system.
It adds costs several times, again coming back to the point that the component parts move one way across and then they move back to be what we call secondary operations when we package them and fill, and all those sorts of things. If they were not on the list, there is that potential. So, that needs some working through. I am pretty sure about that.
Q326 Andrew Selous: Without wanting to lead the witnesses, as it were, I imagine that if we were on those WTO rules it might have a bit of a deterrent effect on future investment within the UK life sciences sector.
Hugo Fry: It comes back to the point that the biggest impact on those kinds of decisions is the strength of the pound today for a company such as ours, which is a European-based, global pharma company that sells in bands of a fixed NHS list price that does not change, and then we bring it back into euros and have a euro P&L, and therefore you have lost that value.
Phil Thomson: We are obviously in a different place. To answer your question, if moving to a WTO regime resulted in tariffs, obviously that means we are not competitive. As Hugo said, the issue here is that there is what I would call an administrative need to update the WTO list of medicines. If that is not done, that potentially is an issue. Frankly, I think that is more administration.
The issue, much more fundamentally, is that if WTO rules around medicines were to change in the future and there were tariffs enacted, the UK is operating to that, and obviously the European system is not, which is a competitive disadvantage.
Q327 Andrew Selous: I am curious about this last updating in 2010. I think there are 1,000 products and 700 component products awaiting introduction on to the list. It seems quite a lengthy period of time not to have done any updating. Do you know if there are any plans to try to make it a bit more of a live, ongoing current process, or perhaps you are not overly familiar with the inner workings of the WTO?
Phil Thomson: It is a very good question and I asked the same question and do not have an answer for you. I do not know why, and I am certainly not aware of any plans at the moment for that to be updated.
Q328 Chair: Is that something with which you are more familiar, John?
John Wilkinson: Unfortunately not, because my clients tend to be still at the development stage, and the products they use are in very limited numbers for clinical trials. If there are tariffs as they bring things in to the UK or other countries, it tends to be a minor part of the cost of a clinical study.
Chair: Thank you. All of you, I think, were here to hear the earlier panel, and you will know we had quite some discussion around regulatory alignment and the impact of that. The consensus seemed quite clearly that there would be major problems if we moved away from regulatory alignment around the infrastructure about recruiting patients. Is there anything that you heard earlier that you would disagree with or you would want to add to from the evidence that we heard earlier? No. Right. Thank you.
I am conscious that I do not want to detain you unnecessarily to repeat things, so, if you feel you are in agreement with that, we could probably move on to Andrew. Did you feel you had anything else you wanted to add?
Q329 Andrew Selous: Not really. Probably the same applies for the next set of questions here on the international influence of the UK in the life sciences sector. Is there anything more the Government can do to try to maintain that? You have spoken favourably of the life sciences strategy announced on 6 December, and I think we have been through the various pitfalls. I do not know if there is anything else you would like to add to that, but possibly not because it has been covered.
Phil Thomson: At the risk of not detaining the Committee too much longer, the only thing I would add, which is where the UK has competitive advantage, is in the global health space. The UK under DFID and under different premier leadership has demonstrably had an impact in the global health space, whether it is in malaria, HIV or tuberculosis. Those issues are global in their risk, but they are also global in the way in which they need to be dealt with. Antimicrobial resistance is a great example of this where the UK has, frankly, helped lead this agenda and how we solve it.
All I would say, to add to what was said earlier, is that in that space the UK has leadership and can still make a big difference, and certainly whatever happens with Europe, in interacting with bodies such as the United Nations and the WHO in the health space, the UK has a clear role there and should play a role in that going forward.
It is not necessarily directly related to Brexit, but to your question about influence, in health, as we talked about, science has no boundaries and health has no boundaries, geographically speaking at least. Therefore, for us to play the UK as a global player is really important.
Andrew Selous: That is helpful, thank you.
Q330 Mr Bradshaw: What length of transition, if we can get a transition, would you like and on what terms?
Phil Thomson: I said earlier that our preference would be the status quo, so it would be easier on current terms, and certainly we would see that on the basis of it as a transition period not to delay but to implement, but with the certainty of the current system.
The timelines, which I mentioned earlier, in terms of putting in new facilities, are anything up to 18 months to three years. Obviously, we will work with the timeline we are given and we will have to prioritise, but, quite honestly, the longer the period can be, I think the more we can respond and say that there is less disruption or less risk of disruption and less impact.
Q331 Mr Bradshaw: Two years does not sound long enough to me.
Phil Thomson: I think two years is challenging, but, again, I would also say that a transition period is far preferable to no transition period.
Hugo Fry: Just to reinforce that, anything that maintains the status quo to give us that extra breathing space is beneficial. The only other thing I wanted to add to what Phil said was that I read somewhere a couple of things about people talking about “graded transitions.” Certainly for Sanofi, that would not be a good thing at all because it just moves the goalposts halfway down the road.
Q332 Chair: You just want to change it once. That is a clear message that we are hearing. It is just to make sure that you do not have to make several changes.
Q333 Mr Bradshaw: Finally, Chair, returning to the big picture, Mr Thomson, you said a moment or two ago that you hoped the Government would treat your sector with priority in the negotiations going forward. That is what every sector wants and has told us—and every other Select Committee. The financial services sector, the farming sector and the manufacturing sector all want some special deal. It has been completely clear to everybody, or to most people, but perhaps not our Government Ministers, that there are no sectoral, cherry‑picked deals out there. There is Norway, or there is Canada, or there is the status quo. There is no “Canada plus plus plus,” so why are you not just arguing clearly and openly, given that there is probably a parliamentary majority for this, for us to stay in the single market and the customs union?
Phil Thomson: First, I would like to say I am not sitting here pleading for special status for the sector. I am, though, pleading for patient safety to be prioritised in the next round of negotiations. I want to be absolutely clear about that. The reality for us as a business is that we must respond to the environment, and the environment is obviously dictated by the vote and the will of the people. Clearly, for business, as you very well know, more certainty is better for us. The European regulatory framework in our space, in pharmaceuticals in particular, is very strong and works well. That does not mean that the UK cannot move forward on a different pathway, but if it is going to move forward on that different pathway we absolutely need time and it needs to be done well.
Going back to my earlier point, at the same time as we move away from that, if that is where we go, we also need to invest in the country and deliver on that strategy.
Q334 Mr Bradshaw: I want to pull you up on something you said. You said your strategy relies on the vote and the will of the people, as it has been interpreted by the Government to mean leaving the single market and the customs union. That was not in the referendum, and the vote last week, as I repeat, was a very significant moment for Parliament putting its mark on this. It will be interpreted by Parliament in the end, not the Government. Parliament is sovereign. As I say, I believe there is a perfectly strong chance that we can stay in the customs union and the single market. I think that is where we will end up, so why are you not arguing for it? You are one of our main sectors, and thousands of jobs and millions of pounds, as we have just heard, are in the balance here. You seem to be incredibly timid about standing up for what you think is in your companies’ best interests.
Warwick Smith: I am willing to be a little less timid because I do not have shareholders, if I could put it that way. My position and the position of my association would be that we are not a political body. We do not have political views. We represent the interests of our member companies and, through them, how we best serve patients. I think it is reasonably and responsibly our job to tell you, our lawmakers, what we need to be able to perform that function most effectively. I do not think we should try to supplant you in saying what that means in policy terms, and certainly in the slightly frenetic situation we are now in around these corridors.
For me, it is very simple, and we have gone through most of the issues this afternoon. There is a big issue about batch testing and batch release that we will face if we go ahead without some sort of alignment, some sort of mutual recognition, or something like that. There are risks about hard borders, if I can use that phrase. We have been very clear openly in forums like this and behind the scenes with the Government in setting out clearly what we need to be able to make this sector work for patients. I do not think it would be responsible of us to try to give political lectures to Ministers or parliamentarians, but we will be very open in terms of what we need.
Q335 Mr Bradshaw: I am not inviting you to give political lectures. I am just inviting you to draw the logical conclusion of what you have said to me, which is that you cannot have just what you asked for outside the customs union and the single market. That is patently obvious to everybody, including the soft Brexiteers in the Cabinet, so why are you not helping them and us make this argument?
Warwick Smith: I personally am very happy to walk you to the lake, show you the water and leave you to decide whether to drink it or not.
Chair: On that note, that is a very nice point to end this, unless any of you on the panel have any points that you feel you have not been asked that you would really like us to know about. As there are none, we are grateful to you all for sharing your expertise this afternoon. Thank you.
