What is Brexit?

Brexit refers to a potential British exit from the European Union.

 Why could Brexit happen?

The UK government has committed to renegotiate its membership of the EU and to giving the UK electorate the chance, in a referendum, to choose between the revised membership terms or Brexit.

How soon?

he UK government recently concluded negotiations concerning EU membership at an EU Summit. Following these negotiations the Brexit referendum will be held on 23 June 2016.

Is it important?

he precise impact of a vote for Brexit is uncertain. It would fundamentally change the nature of the UK’s relationship with the rest of the EU and the wider world and may also result in significant changes for
those doing business in the UK. These changes may be particularly relevant to the pharmaceutical and medical device industries.

Is it real?
Polls have been mixed but currently suggest the Brexit campaign is gaining ground with some showing it in the lead. Bookmakers’ odds, which the Financial Times indicates might be a more reliable measure than polls, give Brexit a 30% chance. Either way it is a real possibility.

What happens if the UK votes for Brexit?
Brexit would not occur immediately.

Article 50 of the Treaty on the European Union envisages a negotiation period leading to exit on a mutually agreed date – the default is two years. The only real precedent is Greenland which left the EU in 1985, almost exactly three years after their exit referendum.

The UK would lose the automatic benefit of access to the EU single market and free trade agreements concluded by the EU. It is expected that the UK would seek to secure access to the EU single market in its exit negotiations, and the UK would also seek to negotiate new country-specific bilateral trading arrangements with the rest of the world. Unless and until those came into force, current EU rules would not govern the UK’s trading relationships. These relationships would be governed by WTO rules. 

Brexit would also bring into question the large amounts of UK law based on EU rules. In each area, the UK would need to decide whether to continue to follow the EU lead or go its own way and risk damaging trade with the EU which is currently based on the adoption of consistent EU wide standards.

Moreover, even if the UK were to decide to continue to follow the EU lead this may, in some circumstances, be insufficient to permit the continued marketing of UK products in the EU. As an example, the pharmaceutical and medical device sectors are among the most highly regulated in the EU. Demonstration of compliance with related legal obligations currently permits UK manufacturers to market their products throughout the EU.

Brexit would mean that UK manufacturers would no longer be bound by related EU legal obligations. The laws governing pharmaceutical products and medical devices following Brexit would be UK-specific laws, rather than current or future EU laws. Consequently, a voluntary undertaking by UK manufacturers following Brexit to continue to comply with EU obligations may be considered insufficient to support a claim of compliance with related legal obligations.

How would Brexit impact the UK pharmaceutical industry?
A fundamental obligation related to the marketing of medicinal products in the EU is the requirement of a valid marketing authorisation. Only entities established within the EEA, most commonly within the EU, may apply for and hold a valid marketing authorisation. Brexit would mean that entities in the UK could no longer either apply for or hold EU marketing authorizations for medicinal products. For marketing authorizations granted to UK entities through the centralized, decentralized, or mutual recognition procedures prior to Brexit to remain valid these would need to be transferred to entities established in one of the remaining EU Member States.

With the forthcoming entry into force of the Clinical Trials Regulation, applicants for authorisation of multi-jurisdictional clinical trials in the EU will, in part, benefit from a centralized approval procedure. Following Brexit, UK sponsors of clinical trials would not have an automatic right to benefit from this procedure. They would be obliged to appoint a legal representative in an EU Member State through which application for authorization in accordance with the new rules would be submitted.

How would Brexit impact the UK medical device industry?
The right for medical device manufacturers to affix a CE mark to their products is based on demonstration of compliance with the obligations laid down in the EU medical device directives and related guidance documents that are currently the basis of related UK law. Brexit would mean that UK medical device manufacturers would no longer be permitted to claim automatic entitlement to market medical devices throughout the EU on the grounds that they have conducted a conformity assessment on the basis of EU device rules and affixed the CE mark to their devices. Like all other non-EU manufacturers, in order to continue to market their products within the EU UK manufacturers would be required to appoint a European Authorised Representative established within an EU Member State.  In addition, UK notified bodies would no longer be entitled to conduct a conformity assessment on the basis of the Directives. As a result, manufacturers working with UK notified bodies in relation to the conformity assessment of their medical devices would be required to appoint a new notified body established in an EU Member State. This is likely to lead to a new conformity assessment to permit the continued marketing of their medical devices in the EU.

The UK could follow the example of Switzerland and agree to mutual recognition between UK and EU medical devices. Following the Swiss example, this mutual recognition would be on the basis of a bi-lateral agreement negotiated between the EU and the UK.

How would Brexit impact current data protection obligations related to clinical trials?
EU data protection rules require non-EU sponsors of clinical trials to appoint a Data Protection Representative in each EU Member State in which there is a clinical trial site. Brexit would mean that UK sponsors of clinical trials for both medicinal products and medical devices would be required to appoint Data Protection Representatives in each EU Member State in which a trial site was established.

How would Brexit impact the healthcare industry?
Brexit also has potential implications for the healthcare industry more generally, in particular with regard to reciprocal access to healthcare, monitoring of diseases and mutual recognition of qualifications, which are largely regulated or undertaken at an EU level. More specifically, Brexit could impact on:

  • The UK's access to and participation in the EU's early warning and response system for the prevention and control of communicable diseases.
  • The right to reciprocal access to healthcare between the UK and EU member states.
  • The automatic mutual recognition throughout the EEA of the qualifications of health and social care professionals who qualified within the EEA.
  • The free movement of UK healthcare workers to work in the EU or the ability of UK health care providers to utilise EU qualified healthcare workers.
  • The harmonised approach throughout the EU on the procurement, storage, use and monitoring of all human tissue and blood.

The EFPIA Position
On 24 February 2016, the European Federation of Pharmaceutical Industries and Associations ("EFPIA"), an organisation representing national pharmaceutical associations and leading pharmaceutical companies operating in Europe, published a press release stating its belief that the UK’s continued membership of the EU is in the best interests of the pharmaceutical industry in the UK and across Europe. EFPIA considers that, as part of the EU, UK pharmaceutical companies can continue to benefit from pan-European collaborations in research and development, the EU marketplace, EU advocacy on global trade issues and a harmonized regulatory environment.

EFPIA also called attention to the fact that Brexit has the potential to impact not only regulation, but also the status of the EMA, finance, employment, the transfer of personal data and the European research ecosystem.

What happens if the UK stays?
If accepted by other EU Member States, the revised terms currently proposed by the UK will make changes in four main areas:

  • reassurances to EU Member States (like the UK) who do not use the Euro regarding the impact of steps to deepen the economic and monetary union of countries in the Eurozone;
  • commitments that EU will increase efforts to enhance competitiveness;
  • a mechanism for a group of national parliaments to block proposed EU legislation on the basis that the issues should be addressed at national level; and
  • a potential “emergency brake” in certain circumstances on the payment of state benefits to people moving between EU member states whilst respecting core EU principles of free movement and non-discrimination.