The UK Government served formal notice under Article 50 of The Treaty on European Union to terminate the UK's membership of the EU on 29 March 2017 (following the June 2016 UK referendum on EU membership). The EU Treaties will accordingly cease to apply to the UK and the UK exit will take effect on 29th March 2019. If a Withdrawal Agreement is agreed by the UK and EU and is approved by the UK Parliament, this will include provisions for a transitional or "implementation" period to the end of 2020, during which EU law will continue to apply in the UK. Any Withdrawal Agreement is expected to include an outline of a future UK/EU relationship agreement, in the form of a political declaration, to be negotiated during the transitional period. If no Withdrawal Agreement is concluded, i.e. in a "no deal" or "hard Brexit" scenario, EU law will cease to apply in and to the UK on 29 March 2019.
The European Union Withdrawal Act 2018 ("the EU Withdrawal Act") will repeal the European Communities Act 1972 ("ECA 1972") as from Brexit (or from the end of the transitional agreement if a Withdrawal Agreement is concluded) and will also include provisions to convert the existing body of currently directly applicable EU law into domestic UK law, by means of statutory instruments. This will mainly apply to EU Regulations which would otherwise cease to apply on Brexit, and also to statutory instruments implementing EU Directives, where the statutory instruments were adopted pursuant to the ECA 1972 and would otherwise fall away on repeal of that Act.
This briefing note advises on the immediate considerations and anticipates how Brexit will impact the Life Sciences sector , and the potential implications for stakeholders in the industry both within and beyond the UK. For the purposes of this note, we are assuming that following Brexit the "Norway model" (i.e. EEA membership) will not be applied to the UK and that the UK will be outside the single market.
This article is part of our Brexit series and Life Sciences businesses will be affected by all of the implications identified throughout this series and, in particular, our note on the English Intellectual Property law implications of Brexit.
What is the immediate effect of the Brexit Vote
As the UK will remain within the EU for until 29 March 2019 and the anticipated effect of the the EU Withdrawal Act is to maintain the status quo as much as possible, in the short term the answer is that it should be "business as usual" for the Life Sciences sector in the UK. However, notwithstanding the effect of the EU Withdrawal Act, of arguably greater importance is the decision of the UK not to be part of the EEA post-Brexit. The terms of the future agreements that will be negotiated will thus determine how the Life Sciences sector is truly affected. As the UK does not intend to remain in the European Economic Area (EEA) or be part of the European Free Trade Association (EFTA), the effects on the Life Sciences sector are likely to be substantial. This is because the UK will no longer keep access to many of the benefits of the EU system, such as the centralised procedure for marketing authorisations, the EU portal for clinical trials and the Pharmacovigilance database. It is still however uncertain what the exact ramifications of Brexit are going to be and we therefore suggest the best policy at this time is to be prepared by keeping up to date as the process develops.
Prime Minister Theresa May stated in January 2017 that:
- The UK will not remain a member of the EU single market or Customs Union but would instead seek to negotiate separate trade and customs agreements with the EU, including the greatest possible access to the single market on a reciprocal basis.
- The UK would look to negotiate new trade deals with other international countries that are not EU member states.
- Guaranteeing the rights of EU nationals living in the UK is a priority, but that not every other EU member state favours such an agreement.
- Controls will be introduced on immigration from the EU (removing the existing freedom of movement for EU nationals).
As mentioned above, the above assumes that there will be some form of agreement with the EU and is unlikely to apply in a “hard Brexit” scenario.
What future issues may the Life Sciences sector face following Brexit
The Life Sciences sector is one of the most highly regulated and globally harmonised industry sectors, especially in terms of the development of pharmaceutical products. A large amount of the regulation originates from membership of the EU in the form of Directives or Regulations. In the case of Directives (e.g. Directive 2001/83/EC governing medicinal products) these have been implemented into national law and will therefore remain in place (subject to amendment). Regulations, in contrast, are directly applicable in the UK without the need for national implementation and therefore, in theory, when the UK leaves the EU regulations will no longer continue to apply. The Great Repeal Bill should go some way in buffering the effect of a lapse in applicability of regulations; if the bill serves as a way of incorporating existing regulations (subject to amendments) into UK law then the effect should be to fill the vacuum left if a regulation were to just cease to apply. There is no reason why the UK Government could not enact further equivalent rules into UK law. As the UK Government appears to have decided that it will no longer align itself with European law and therefore distance our future legislation from European laws the administrative burden of life sciences companies is due to increase significantly because regulatory requirements, for example clinical trial authorisations and marketing authorisation applications, will need to be obtained under a new and different legal framework. However, the Regulations and standards are unlikely to change substantially as the UK will wish to have the greatest possible access to the single market (on a reciprocal basis) and would not wish to build artificial barriers.
The new Clinical Trials Regulation 536/2014 was adopted on 16 June 2014 but has not yet been implemented (it is expected to be in force by October 2018). The new Regulation provides for a single application for clinical trials across the EU (through a single portal) with an associated EU wide database. This Regulation will apply to clinical trials for medicinal products and, if it comes into force before Brexit, the UK will be bound by it until its departure. Depending on both timing and the implementation of the Great Repeal Bill, it is possible that specific provisions of the Clinical Trials Regulations will be converted into UK law. If the Clinical Trials Regulations are converted into UK law then, subject to necessary amendments and negotiations with relevant EU regulatory bodies, we may see an approach to Clinical Trials that is harmonised with the EU approach. However if the UK adopts significantly different national legislation to Regulation 536/2014, this is likely to make the clinical trials procedure increasingly complex with greater administrative burden and cost for companies wishing to conduct multi-centre clinical trials in the EU and the UK. In particular, UK companies will not have access to the single portal for applications for clinical trials, or if they do there may be a substantial fee, and separate centralised and national clinical trial authorisation procedures will need to be followed. Furthermore, companies will have to ensure that sponsors of a clinical trial have legal representation established in the EU but, for large life science companies at least, this is unlikely to pose a significant administrative issue. Additional questions will also arise in relation to data protection (in particular clinical trial data and personal data) currently falling under the EU Data Protection Directive which should be borne in mind but is beyond the scope of this article. These discussions are beyond the scope of this article. More detailed advice may be found here.
The majority of Marketing Authorisations are applied for under the decentralised procedure (national) or the centralised procedure (EU wide); each application process is determined by Directive 2001/83/EC. Following Brexit, the UK not being part of the EEA anymore will have to adopt a new system for independent Marketing Authorisation approval. In the scenario of “No Deal”, the UK Government has essentially proposed unilateral recognition of existing EU processes (as set out in its August technical notices) to minimise disruption, and has set up a Brexit Medicines Supply Contingency Planning Programme. However, greater clarity is needed around how the complex regulation and supply of medicines would work (consultation will be undertaken during the Autumn). In a “No Deal” scenario, pharmaceutical companies whose presence and activities are principally in the UK risk losing their marketing authorisations granted through the centralised procedure, unless action is taken to transfer key operations and activities to an EU Member State. Other rights, such as the EU support for small and medium enterprises, the “minor use minor species” status for veterinary medicines and the qualification as an orphan medicinal product may also be lost. Conversely, pharmaceutical companies will also need to consider UK activities and presence if they are currently based in the non-UK EU and EEA. If nothing else having to apply for marketing authorisations in the UK as well as the EU will add to the regulatory burden, increase barriers to the market and costs for the life sciences industry. As mentioned below, the Medicines & Healthcare Products Regulatory Agency (MHRA) will find that its workload increases commensurately as the centralised procedures are dismantled. MHRA published in October 2018 its proposals for a life sciences regulatory framework after Brexit. The relevant documents be found at https://consultations.dh.gov.uk/mhra/mhra-no-deal-contingency-legislation-for-the-regul/ These are now subject to public consultation.
Quality Assurance and Product Safety
It is likely that quality assurance procedures will need to be maintained in the UK in line with current EU good manufacturing practices in order to ensure products can be sold in the EU. This requires all EEA located manufacturers and importers of medicines to hold a manufacturing authorisation. Even with the UK not being part of the EEA after Brexit, UK manufacturers could continue exporting medicines to the EU and vice versa if equivalence is maintained in the UK/EU regulatory frameworks. This is likely to be the case for the UK in order to facilitate importation through mutual recognition agreements with the EU and other trading nations. However, the cost of importing into the EU may increase if the EU imposes additional requirements and inspections on non-EU imports. Furthermore, uniform product safety laws, as applied currently across the EU (e.g. the General Product Safety Directive (2001/95/EC)), are likely to continue post Brexit in common with those of the EU and globally so as to maintain the competitiveness of UK goods and suppliers.
R&D and Funding
The EU currently provides funding and coordinates research collaborations through funding programmes such as the Innovative Medicines Initiative and Horizon 2020 (a 7-year programme with €80 billion to provide public/private sector collaborations and encourage innovation). With the UK not being part of the EEA following Brexit, access to this funding will be lost to UK-based companies without research facilities in other EU countries. UK based research facilities may well see the loss of a number of talented researchers to research facilities in the EU. It is also unclear whether the UK Government will supplement the lost funding and seek to establish bilateral agreements with other nations in order to access other funding/collaboration options.
The EU pharmacovigilance system is coordinated by the European Medicines Agency (EMA) which, as discussed below, will need to be relocated following Brexit. UK companies will therefore need to revise their pharmacovigilance reporting system as a single person cannot perform the pharmacovigilance function for the EU and UK as the appropriately qualified person should reside and operate in the EU.
The EMA is based in London and currently employees 890 people; it is now being moved to Amsterdam.. When discussing the implications of Brexit the EMA website that "Its implications for the Agency's location and operations depend on the future relationship between the UK and the EU, which is unknown at present," a “soft Brexit” involving continued affiliation with the current system appears to be rejected by the government so this area is particularly uncertain. With the UK not being part of the EEA after Brexit, the EMA and MHRA will be significantly affected. The MHRA has stated their need to increase employee numbers to carry out the regulatory work, which would have previously been handled by EMA. In addition, where previously the EMA cooperated with the ICH, FDA, Japanese PMDA and other competent authorities, the MHRA will now need to negotiate its own cooperation agreements to replace those agreed by the EMA. There will be further, hopefully more minor, impacts made to other UK agencies (e.g. NICE) that are beyond the scope of this article.
The UK not remaining part of the EEA after Brexit means that, EU exhaustion of rights rules will cease and it is unclear what the UK government will replace them with. However, pharmaceutical companies may be able to assert their IP rights to stop parallel importation into the UK (in addition to other existing defenses) which may be seen as a benefit of Brexit by the life sciences sectors.
Specific Impacts on Intellectual Property Rights
Unitary Patent System
The new EU patent regime was intended to provide patentees with the option to apply for a single pan-EU Unitary Patent (UP) covering most of the EU. It would also create the Unified Patent Court (UPC) to hear and determine patent disputes on an EU-wide basis. The introduction of the new regime, whose future was already uncertain after the Brexit vote in June 2016, is now however further delayed and complicated by the challenges to the regime going through the German courts. The announcement by the UK on 28 November 2016 that it will proceed to the ratification of the UPC Agreement is of questionable relevance given the effluxion of time.
The additional protection afforded to patentees by Supplementary Protection Certificates (SPCs) is part of UK law by virtue of two EU Regulations. These extensions to patent protection of up to 5 years are very valuable and similar extensions are available in many countries around the world (e.g. the US and Japan).It is possible that the Great Repeal Bill will act to preserve any SPCs that have been previously applied for under the regulations by incorporating those regulations into UK law. Following this it is likely that equivalent regulations will be enacted by the UK Government but it is unclear what the nature of these will be and how far SPC rights will extend in the UK in the future.
There is a potential that community rights, such as registered and unregistered community designs and EU trade marks (previously community trade marks), will no longer have effect in the UK. In order to address this, the current draft of the withdrawal agreement currently being negotiated between the UK and the EU aims to ensure community rights will automatically convert into analogous UK rights upon Brexit. In addition, regardless of whether a final agreement is reached, the UK Government has confirmed that its aim is to "ensure the continuity of protection" and to "avoid the loss" of existing rights. Concurrently, it has also been confirmed that the UK intends to create and grant 1.7 million automatic and free-of-charge intellectual property rights (including trade marks) corresponding to existing EU-wide rights. Note however that this is subject to the agreement of the Withdrawal Agreement, and as such the government has stopped short of providing a guarantee of free-of-charge IP rights without an agreement with the EU. Ultimately the scope of any community rights applied for post Brexit will not include the UK, and it remains to be seen precisely what will happen to the "UK portion" of such rights if they were obtained before Brexit. If agreement is not reached, or if the UK Government does not follow through on its promise to ensure continuity of protection, the rights in question will be automatically reduced in geographical scope and their value will diminish, especially given the economic significance of the UK, which could result in the right-holder losing out commercially. Any organisations which rely on community rights will now need swiftly to respond to changes in this area.