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Overview

For many years, the pharmaceutical industry has been and remains an important sector in the UK. It has a vibrant research and development community within universities, hospitals and companies, from the largest multinationals to start-ups, and it continues to have significant manufacturing activity.2

As well as the innovator manufacturers in the UK, there are a significant number of generic manufacturers. Many commentators would say that there is a healthy balance (or even a virtuous circle) between the incentives and stimulus to the originators to maintain their research-based activities and the activities of the generic manufacturers to secure access to reasonably priced medicines.

The government has expressed its support for the sector in 'The Life Sciences Sector Deals',3 which were designed to help ensure that new pioneering treatments and medical technologies are produced in the UK and to drive economic growth. The deals involve substantial investment from private and charitable sectors, and significant commitments in research and development from the government.

In July 2021, the government further put in place the Life Sciences Vision4 initiative, which sets out the government and life sciences sector's goals for the sector over the next decade, including how to address some of the UK's most significant healthcare challenges, including cancer, dementia and obesity.

Notwithstanding the current buoyancy of the sector, to some extent its future remains a little uncertain in light of Brexit: the UK exited the European Union (EU) on 31 January 2020, and EU law continued to apply in the UK until 31 December 2020. The EU treaties, EU free movement rights (including access to the single market) and the general principles of EU law have since ceased to apply in relation to the UK, and prior EU regulations only continue to apply in domestic law if not already revoked or amended by the UK.

The effects of Brexit on the life sciences sector are likely to be substantial. This is because, as a third party to the EU, the UK no longer has access to the benefits of the EU single market, such as the centralised procedure for marketing authorisations (MAs), the EU portal for clinical trials and the pharmacovigilance database.

On the other hand, the UK Medicines and Healthcare products Regulatory Agency (MHRA) was seen to show agility and flexibility in permitting the emergency use of covid-19 vaccines and was quick to put in orders for the same, which gave it a head start in the implementation of its vaccination plans. The EU was not pleased when the Anglo–Swedish company AstraZeneca seemed to give priority of supply to the UK, resulting in legal action for breach of contract. It remains to be seen if this conflict is a one-off or a sign of relations to come.

Competition law is enforced by the UK Competition and Markets Authority (CMA). Recent cases have dealt with unlawful market5 and information6 sharing activity, excessive pricing7 and investigations into 'pay-for-delay' cases where the innovator company pays a generic competitor to delay or give up completely its plans to enter the market.8

In this chapter, we set out the pharmaceutical legislative and regulatory framework, how to bring a product to market, and the use and challenge in using patent litigation for product launch. We also provide an overview of the competition law environment in the UK, including a review of the rules on anticompetitive agreements and abuses of dominance, merger control and an assessment of case law.

Legislative and regulatory framework

Pharmaceutical products and medicines are regulated in accordance with the Human Medicines Regulations 2012, as amended9 (HMR), which retain Directive 2001/83/EC10 and other key EU legislation (as at 31 December 2020 and with necessary Brexit-related changes) and consolidate relevant UK laws.

i Patent duration

Patent protection is governed by the Patents Act 1977. Patents have a maximum duration of 20 years from their filing date, subject to payment of renewal fees and remaining valid.11 Under Regulation (EC) No. 469/200912 (as retained in the UK), a supplementary protection certificate (SPC) may be granted in certain circumstances to extend the duration of a patent relating to a medicinal product.13

ii Marketing authorisation

The MHRA is the competent enforcement authority for the regulation of pharmaceutical products. As an executive agency of the Department of Health and Social Care (DHSC), the MHRA is responsible for managing licences and MAs under the HMR.

Until the end of the post-Brexit transition period, the UK came under the auspices of the European Medicines Agency (EMA), which regulates pharmaceutical products on a pan-European level. This includes evaluating applications and providing recommendations to the European Commission (EC) for the grant of an MA through a centralised European procedure. Applications are assessed on the principles of safety, quality and efficacy set out in the Medicines Regulations, Community Code and Regulation (EC) No. 726/2004.14

iii Pricing

The DHSC manages the pricing and reimbursement of medicines in the National Health Service (NHS), on the guidance and advice of the National Institute for Health and Care Excellence (NICE). Companies typically consult the DHSC before setting a reimbursement price, which is published in the Drug Tariff. NICE analyses the cost and potential benefit of a new drug to decide whether it should be recommended for use in the NHS.

The Voluntary Pricing and Access Scheme (VPAS) is a non-contractual agreement between the DHSC and the Association of the British Pharmaceutical Industry. Under VPAS, NHS spending on branded medicines is capped at 2 per cent growth of the total annual bill, with spending above this cap being paid back by members as a percentage of product sales. To encourage innovation, exemptions are available for products containing new active substances and for small and medium-sized companies.

Companies not participating in VPAS are subject to the statutory scheme, governed by the National Health Service Act 2006 and the Branded Health Service Medicines (Costs) Regulations 2018.15 Under this scheme, companies pay rebates based on a percentage of their UK revenues.

iv Public purchasing

Medicines are procured using collective purchasing and framework agreements. Formerly governed by the Public Contracts Regulations 2015,16 purchasing is now governed by the Health and Care Act 2022.

Uniform rules across the whole of the UK are complicated by differences in devolved administrations. England is expected to apply these through the new Provider Selection Regime, which is planned to take effect ahead of the new Procurement Bill. The Commercial Medicines Unit of NHS England is responsible for awarding and managing frameworks across regional pharmacy purchasing groups, while hospital trusts are responsible for managing the contracts awarded.

In Wales, the contract process is managed by the NHS Wales Shared Services Partnership, while the All Wales Drug Contracting Committee acts as the awarding body and ensures compliance with legal and governance requirements.17

Following Brexit, the UK became a signatory to the World Trade Organisation's Government Procurement Agreement in its own right. It intended to simplify the procurement rules by having one set of rules (replacing public sector, utilities, concessions and defence);18 however, living up to this objective is proving to be somewhat of a challenge, as witnessed by the length of the UK Procurement Bill and the exclusions already included.19

There is as yet no certainty on the position in Scotland.

v Competition laws

UK-specific legislation comprises the Competition Act 1998 (Chapters I and II), which prohibits anticompetitive agreements and abuse of dominance that may affect trade within the UK, and the Enterprise Act 2002. Anticompetitive agreements that extend beyond the UK to other EU Member States are prohibited by Articles 101 and 102 of the Treaty on the Functioning of the European Union (TFEU), which continue to apply post-Brexit to agreements or the conduct of UK businesses that have an effect within the EU, in much the same way as agreements or conduct of US and Asian businesses are currently subject to EU competition law where their agreements or conduct affect EU markets. A UK participant in a global cartel will, therefore, continue to face investigation and fines by the EC.

A key difference is that the EC now has no power to carry out on-site investigations (dawn raids) in the UK, nor to ask the CMA to do so on its behalf; the EC's powers of investigation are limited to making written requests for information, as it does on a regular basis to businesses based outside the EU.

Since 1 January 2021, the UK has complied with its commitments on subsidy control set out in its free trade agreements with other countries, including the UK-EU Trade and Cooperation Agreement (TCA). The TCA includes a commitment by both parties to maintain effective competition laws to address anticompetitive agreements and abuses of a dominant position, essentially maintaining the status quo of the existing EU and UK competition law rules. A number of changes have already been made to the UK rules, including those outlined below.

On 28 April 2022, the Subsidy Control Bill received royal assent, becoming the Subsidy Control Act 2022. It aims to move away from the 'bureaucratic' EU state aid rules and to adopt an approach based more on self-assessment in accordance with a set of principles.

Instead of requiring that all subsidies, except those falling under a block exemption, be notified, as is the EU approach, the UK rules will operate on the basis of an assumption that the subsidy is permitted once certain UK-wide principles are followed; namely, that the subsidy delivers good value for the British taxpayer while being awarded in a timely and effective way. Importantly, more power is being delegated to the devolved governments of Scotland, Wales and Northern Ireland, who will now be responsible for deciding on the issuance of subsidies in their own jurisdiction.

The CMA is responsible for advising issuing authorities on the compatibility of certain subsidies with the applicable principles. Unlike the EC, it has no power to adopt binding decisions in respect of subsidies. A newly established government body, the Office for the Internal Market, will also help the CMA to monitor the market and subsidies in the UK, between England, Wales, Scotland and Northern Ireland. The Competition Appeal Tribunal (CAT) will have jurisdiction to judicially review decisions to award subsidies.

On 16 March 2021, a multilateral working group – including the US Federal Trade Commission (FTC), the US Department of Justice, the Canadian Competition Bureau, the EC's Directorate-General for Competition and the CMA – was launched at the initiative of the FTC to analyse the effects of mergers in the pharmaceutical sector. The EC stated that, because of the increasing number of mergers in the pharmaceutical sector, there is a need 'to scrutinise closely to detect those that could lead to higher prices, lower innovation or anticompetitive conduct'.20 A public consultation was carried out between 11 May and 25 June 2021 with a view to gathering ideas and views from stakeholders.