The UK’s pharmaceutical sector may have more to fear than other sectors from a possible “hard-Brexit,” with the potential for the UK’s withdrawal from the EU to impact the entire drug development and commercialization value chain.

The UK hosts a number of major European organizations including, significantly, the European Medicines Agency. It has strong pharmaceutical and life sciences industries, underpinned by access to leading talent and leading universities, and it has benefited significantly from European Research Council funding in the past. The sector employs more than 700,000 people, seven percent of whom are EU nationals, and generates more than 10 percent of UK gross domestic product. UK organizations and researchers play leading roles in the EU’s Horizon 2020 research and innovation initiative, which is the world’s largest life sciences public-private partnership with over 50 projects currently. By some estimates, as much as £8.5 billion in funding and investment over the next four years is threatened by Brexit.

Patent protection and related challenges are the life blood of the pharmaceutical industry. Presently, the concept of a single Europe-wide patent does not exist and patent disputes have to be conducted at the national level leading to conflicting judgments across the EU. Extensive negotiations among EU member states, covering at least a decade, finally resulted in the Unified Patent Court Agreement (UPCA). The UPCA provides for a unitary EU-wide patent and for patent disputes to be determined centrally, by a Unified Patent Court having its centre in Paris, with a section in London specifically designated to manage and determine all life sciences and pharmaceuticals patent disputes. Under pre-Brexit timelines, the UPCA was due to have been ratified by the UK at the end of 2016, with the London UPC section becoming operational in May 2017. The UK’s ratification of the UPCA is a pre-requisite before it can come into force. It is now politically unlikely that the UK Parliament will ratify the UPCA without prior assurances from the EU that it will be allowed to continue to participate in the proposed unitary EU patent and UPC system. In the meantime, other EU member state signatories have started lobbying to replace London as the centre for life sciences and pharmaceuticals patent disputes, with Milan starting the ball rolling by voicing its expression of interest last month.

A View from the Regulators

A few days after the 23 June referendum, the UK’s Medicines and Healthcare Products Regulatory Agency (MHRA) issued a short statement1 to the effect that it was “business as usual” in terms of current activities such as the implementation of the new Regulations for Medical Devices and in vitro diagnostic (IVD) devices, and that it was mulling over the outcome of the vote and working with the government to understand the best options and opportunities for safe and effective regulation of medicines and devices in the UK. For the MHRA, continuing to play “a full, active role in European regulatory procedures for medicines remains a priority.” The European Medicines Agency (EMA), located in London, also issued a statement following the Brexit vote2. Again, the message was business as usual with the EMA underlining that its procedures and work streams would not be affected and that it would not speculate on implications for its seat and future operations.

The UK Intellectual Property Office (UKIPO) has similarly issued a statement stating that the UK remains a signatory state of the UPCA and confirming that it will continue to actively participate in all UPC related meetings3.

Market Authorization

A recent update from the Pharmaceutical & Healthcare Sciences Society4 points out that EU and UK pharma regulators have had good productive and cooperative relationships for many years, especially in the fields of product license review, regulatory inspections and information sharing. Other sources suggest that both the EMA and MHRA are already working on ideas for preserving unified European medicines regulations, with substantial UK input, even if the EMA headquarters end up, as we expect, elsewhere. Of course, much will depend on the Brexit model itself.

Perhaps the biggest single impact of Brexit on the pharmaceutical sector will be that of market authorization. Over the past 20 years or so, the UK industry has come to depend on the Europe-wide system run by the EMA in Canary Wharf, London. The EMA can grant pharmaceutical companies a single marketing authorization providing access to the whole EU market, and this has been very attractive for companies looking to access the EU market. Indeed, proximity to the EMA was cited by the Japanese government in its Brexit-related message to the UK and the EU as one of several reasons why many Japanese pharma companies have chosen to locate their main European operations in the UK (see our recent client alert).

Another potential impact is the UK clinical trial market which, post-Brexit, is likely to shrink because by 2018 a single EU portal for clinical trials will allow for central application and approval to conduct trials across the EU (a much larger and potentially more lucrative market of some 500 million potential patients compared with the UK’s 60 million or so). Under that regulatory scheme, companies will not wish to incur the cost of trials in the UK when they already have won EU-wide approval. There may well be a knock on effect in terms of patient access to new medicines, with companies choosing to launch products in the EU in advance of the UK itself.