With the UK set to leave the EU on 31 January 2020, there are still no guarantees as to the terms on which this will happen. An agreement may be reached during the transition period ending on 31 December 2020, however, if this is not the case a ‘no deal’ exit may yet happen implying a series of potentially disruptive consequences for the life sciences and healthcare industry.
While specific sectors have already benefited from regulatory revisions in anticipation of a Brexit without a deal, businesses should similarly prepare to the eventuality of the UK becoming a third-party country trading with the EU on World Trade Organisation terms, and to what it means for their activities. With this in mind, we have compiled a few key points for the life sciences and health industry to consider in their future activities.
Bad news: some sectors such as health and life sciences are susceptible to disruption
- The UK has benefited for 46 years from more than 50 EU international trade deals. Companies should prepare for potential difficulties trading or obtaining new contracts whatever the deal with the EU
- Businesses should expect a decline in stability for short and long-term contracts binding for EU and UK businesses, due to the unknown impact of Brexit on many economic aspects (the value of the pound, immigration flows and labour force shortages and research programmes among others)
- In specific areas, businesses might expect to see the UK distance itself significantly from EU legislation or EU mechanisms
- In terms of data protection, the UK’s exit from the EU without a satisfactory deal could also imply the end of the protections guaranteed by the GDPR regarding international transfer of data
Good news: the health and life sciences sector might benefit from regulatory revisions
- The UK has already adopted or planned to adopt EU legislation, and transposed it into national law. This will create a temporary patchwork of applicable legislation harmonising both legal orders and preventing significant business disruption
- Regarding the EU Clinical Trials Regulation 536/2014 (CTR) (which is currently expected to enter into force in the EU in 2020), the UK government has already communicated its intention to align, where possible, with the CTR as soon as it comes into force in the EU. This would provide the means to maintain a high level of competitiveness of the UK and a good collaboration with the EU
- The UK MDR 2002 has already been amended to reflect the entry into force of the EU Medical Devices Regulation and the EU In Vitro Diagnostic Medical Devices Regulation (for which the implementation dates are 26 May 2020 and 26 May 2022 in the EU). The UK has transposed the key elements contained in the EU MDR and EU IVDR into UK legislation, which will enter into force in line with the transitional timetable applied by the EU for those two regulations
Our preparedness advice to business potentially affected by Brexit
- Businesses should audit their current contracts with businesses located in the EU and determine which commercial aspects are likely to change following the UK’s exit from the EU. Preventive measures should be included in contracts, either through amendments or by adding termination clauses dependent on certain Brexit-related issues (trade barriers, significant change in law, changing the applicable currency, governing law and dispute resolution)
- Businesses should also be alert when agreeing to new contracts, consider opting for short-term agreements and take the same precautions as when trading with countries outside the EU (e.g. regarding delivery, payment, etc)
- Finally, businesses active in the health and life sciences sector should examine the implications of trading with EU-based companies. Some might need to evaluate the appropriateness of transferring their activities either to the EU or to the UK, if it best serves their interests. They should also appraise their ability to meet their contractual obligations to third parties (for example, supply chain issues due to customs disruption). Businesses will not be able to use Brexit to relieve themselves from their contractual obligations
Although the exact impact of Brexit remains unknown, it is already certain that the UK will have to recreate its own legal order to some extent. We can reasonably expect to witness the emergence of an ‘a la carte’ regulatory regime, which will increase the uncertainty of contract law and business relationships with the EU for the next couple of years. The Chancellor has recently warned that ‘there will not be regulatory alignment with the EU after Brexit’, insisting that businesses will need to adjust to new UK regulations. However, given the UK’s usually innovative and liberal legislative framework, health and medical technology businesses should be limitedly affected by the prevalence of EU legislation in the sector. Businesses will need to be prepared to cope with the disruptive impact of Brexit, but they can already count on the UK government’s intention to adjust rapidly to EU legislation beneficial to the industry.