Navigating the perfect storm

Impact of political, tax and regulatory change on European life sciences supply chains

Recent changes in the political, tax and regulatory environment have created an unprecedented level of uncertainty for the Global life sciences industry. How will this impact European supply chains over the coming years?

A confluence of changes during the next 2-5 years will reshape both the physical and financial flows that underpin life science companies’ European supply chains. The impacts are likely to be far reaching but will ultimately depend on each company’s unique circumstances.

Drawing on analysis from Deloitte’s life sciences consulting, regulatory and tax practitioners, this paper explores four forces that have the potential to reshape European life science supply chains. Using supply chain archetypes for EU, US and Swiss headquartered life sciences companies, the paper identifies some potential risks ‘no-regret’ actions that life science companies should be considering now regardless of how events unfold.

Forces reshaping European life sciences supply chains

The four forces we identify in this report are:

  • US Tax Reform 
    • Reduction in US corporation Tax
    • Repatriation Tax
    • Border Adjustment Tax
  • Brexit
    • UK/EU trade tariffs and border controls
    • VAT and indirect taxes
    • Regulatory non-tariff trade barriers
  • BEPS
    • Aligning profit entitlement with substance
    • Increased transparency
    • Focus on what creates a taxable presence/permanent establishment
  • Annex 21
    • Imports of medical products from third countries to the EU
    • Sale of medicinal product within the EU with principal trading company structure

Navigating the perfect storm

The timings and impacts of these merging forces will overlap, however, life sciences companies should not expect any level of coordination between them. Those companies that are prepared for what this means for their supply chains in a holistic sense will be best positioned to maximise business value.

Companies answering ‘yes’ to any of the following questions will be impacted to some extent and will need to take action. As a multi-national company, do you have:

  • Complex physical and financial flows involving a principal trading company structure, toll manufacturing or limited risk distributors
  • Inventory title transfers within the EU involving a company based in a third country?
  • US headquartered operations employing principal trading structures in Europe?
  • EU import hub, import testing operations or QPs located in the UK?
  • High value imports to the US or significant trade flows between the UK and other EU countries?

Whilst there is still likely to be a great degree of uncertainty over the next few years as companies navigate this perfect storm, the recommendations highlighted in this report are actions that companies can take now regardless of how events unfold.

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