U.S. pharmaceutical giant Merck & Co. is planning for the possibility of a temporary supply blackout when the U.K. leaves the European Union, and may stockpile as much as six months worth of goods and revise trade routes in preparation, according to a person familiar with the matter.
The contingency plans, outlined in a May report, include factoring in as much as two extra days of travel on routes between U.K. and EU destinations to allow for delays caused by document checks, according to the person, who asked not to be identified because the plans aren’t public. Merck, based in Kenilworth, New Jersey, is also looking at adding about 30 employees at its Haarlem, Netherlands, facility to cope with regulatory demands, according to the person.
Merck is among thousands of firms deciding how to maintain business activities in light of the U.K.’s impending departure from the EU. Global drugmakers have warned of added costs and supply disruptions due to Brexit’s potential trade and regulatory hurdles. U.K.-based AstraZeneca Plc and GlaxoSmithKline Plc have said the rupture may force them to expand their use of facilities in the EU to allow timely testing and release of drugs.
With the U.K. determined to leave the customs union and single market, businesses are trying to limit their exposure to border checks and delays in moving goods between the EU and Britain, as well as preparing for a potential divergence in regulation. Drugmakers have warned that Brexit may raise barriers to patient access to their products, as they contend with the upheaval in the U.K. pharma sector. Regulatory alignment is at the heart of companies’ concerns as they try to plan for drug testing and distribution.
Taking on Stock
“At this stage, these are just contingency plans and therefore may not be implemented,” said a spokeswoman for MSD—the name Merck uses outside North America—declining to comment on the specific arrangements. “Our first and foremost focus at this time is to develop plans which ensure continued access to our medicines throughout the Brexit process.”
Merck is also considering asking some customers if they can take on as much as two months of extra stock in advance, the person said. While the drugmaker’s plans could change as the government’s Brexit negotiations progress, they provide an insight into the options companies are looking at as they prepare for a range of possible outcomes from the divorce. A number of companies with trade routes between the U.K. and EU are increasing storage capacity to avoid trade barriers.
In a corporate filing earlier this year, Merck outlined Brexit risks including potential restrictions on imports and exports. Glaxo, the U.K.’s biggest drugmaker, said it started implementing its contingency plan in January, focusing on supply chains. The drugmaker has estimated Brexit-related costs rising as high as 70 million pounds ($93 million) over the next two to three years, due to retesting medicines, transferring marketing authorizations in the U.K. to the EU, changing manufacturing licenses and other steps.
On Monday, U.K. businesses told Prime Minister Theresa May to get on with taking key Brexit decisions as they start putting contingency plans in place, according to a person at the meeting in her London office. May gathered leaders of companies ranging from aerospace to retail along with Chancellor of the Exchequer Philip Hammond and Brexit Secretary David Davis to discuss Brexit, investment and the government’s industrial strategy.
Brexit talks have stalled over the difficult question of how to avoid a hard border between the U.K. and Ireland when Britain leaves the EU. Negotiations resumed in Brussels Tuesday, with the clock ticking down to a crunch summit of EU leaders starting on June 28.
The European Medicines Agency, a key pharmaceutical regulator, is set to relocate to the Netherlands from London because of Brexit. In an interview with Bloomberg News last week, Executive Director Guido Rasi said the agency was bracing for higher-than-anticipated staff departures, although he doesn’t expect a slowdown in approving new medicines.
