How Novartis is Preparing Their Supply Chains for Brexit

The UK’s impending withdrawal from the European Union is sending shockwaves through almost every industry, and the pharmaceutical business is no different. This has led to companies such as Novartis taking steps to lessen the impact.

When the British public voted on the 23rd of June 2017 in favour of leaving the EU, nobody knew quite what to expect. The result itself was surprising enough, and was followed by the subsequent resignation of David Cameron as Prime Minister, a snap General Election (which saw Cameron’s successor Theresa May lose her party’s overall majority), and the general lack of progress which has been made in negotiations since Article 50 of the Treaty on European Union was triggered. These aftershocks have only served to cause more frustration and confusion on both sides of the Leave/Remain divide.

Britain’s economy has slumped, and many businesses are considering whether to continue operating from the UK due to this uncertainty. Some such companies are also taking steps to lessen the negative effects of Brexit on their supply chains.

Preparations

Novartis has joined many other rival pharmaceutical companies – including Sanofi, Roche, Pfizer, and AstraZeneca – in starting to draw up plans which will protect Britain’s stockpiles of life-saving medication, should a 'no-deal' Brexit scenario occur.

'No-deal' refers to the situation of the UK reaching the deadline for leaving the EU (29th of March 2019) without having negotiated successful access to the Union’s single market and other trade considerations. This will result in the UK having to operate under World Trade Organisation (WTO) rules until trade arrangements can be organised. While there is a possibility of extending the deadline, this would require support from the Houses of Parliament and authorisation from the European Parliament.

A no-deal Brexit will make it significantly more difficult to move products between the EU and the UK, which could make it much harder to guarantee supplies of medication in the UK and on the continent – either because they are manufactured in the UK and need to be shipped to Europe, or vice versa.

Novartis has begun securing additional warehousing in the UK in order to increase the amount of stock medicine they can store. It’s presently sufficient to keep ten weeks’ worth of stock at any one time, but the new warehousing would enable this buffer to be increased to 14 weeks, allowing the industry to more comfortably absorb any potential delays in re-stocking.

It has also been suggested that some manufacturing operations will be moved out of the UK and into Europe to help guarantee supplies in the EU. More than 2,600 drugs presently have some stage of manufacture in the UK.

“Alongside most other pharmaceutical companies, Novartis is preparing for the possibility of a no-deal Brexit,” said Novartis in a press release. “We are planning to hold increased inventories across our portfolio of medicines from both Novartis and Sandoz. Novartis has been in close consultation with the UK government about Brexit-related issues since before the 2016 referendum, both directly and via industry associations. We have apprised officials of our preparedness plans and status, including plans to increase our UK inventory holding.”

Other Plans

The pharmaceutical group has also been leaning on British policy makers to try and establish a mutual recognition deal to act as a placeholder until a more concrete arrangement has been agreed upon. Such a deal would guarantee the continued free movement of prescription drugs, no matter the state of play after next March.

The British Government has, up until now, resisted these calls, arguing that any such agreement would have to form part of a larger and more all-encompassing trade deal. However, the pharmaceutical industry is incredibly sceptical of the chances for a comprehensive trade arrangement to be struck by the deadline, and is now taking the additional stockpiling steps discussed above.

Mike Thompson, Chief Executive of the Association of the British Pharmaceutical Industry, said, “This crisis planning was typical of the preparations in the industry. Without clarity for how we’ll get medicines across the border in March 2019, companies are having to take measures to ensure there is no disruption for either UK or EU patients on day one.”

Final Thoughts

It remains to be seen what the far-reaching effects of Brexit will be (assuming it happens at all), and business leaders in all industries would do well to keep a close eye on the situation as it continues to unfold. With so many people relying on its products to maintain their health or even save their lives, the pharmaceutical industry has more to lose than most from disruptions to its supply chain, so it’s good to see the big brands putting their heads together to come up with innovative solutions.