On 29 March 2017, the UK government served formal notice under Article 50 of The Treaty on European Union to terminate the UK's membership of the EU (following the June 2016 UK referendum on EU membership). Based on Article 50, the EU Treaties shall cease to apply to the UK and the UK exit will take effect in March 2019 (subject to the unlikely possibility of the withdrawal agreement being concluded sooner and unless all Member States agree to extend the period). Negotiation of a new trade agreement with the EU could take several years beyond 2019 although the Prime Minister has declared the objective of achieving such an agreement within the two-year period.
In October 2016, the Prime Minister further announced plans for a Great Repeal Bill. The proposed effect of this Bill is to convert the current body of EU law into British law. The intention is that this will mean more "business as usual" as the same rules and laws will apply to businesses and workers after Brexit as they did before.
However, the implications of Brexit are expected to be of greater importance since the speech of Prime Minister Theresa May in January 2017 on the Brexit process, in which she indicated 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).
This briefing note advises on the immediate considerations and anticipates how Brexit will impact the Life Sciences sector. 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 Great Repeal Bill 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 Great Repeal Bill, 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 would 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.
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 entered into force on 16 June 2014. This 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 was to have been applicable from October 2018 but has been delayed until this database is ready at an unspecified time in the future. The European Medicines Agency will move from the UK which is likely to further delay implementation. When the Regulation becomes applicable, it will replace the existing EU Clinical Trial Directive (EC) No. 2001/20/EC and national legislation that was put in place to implement this Directive.
The Life Science medicinal products sector will further be affected as the scope of the Regulation has been largely widened with new definitions of “Clinical Trial” “Clinical Study” and “Low intervention clinical trial”. Additionally it will cover “diagnostic or monitoring procedures in addition to normal clinical practice” so guidance will be needed from the European Medicines Agency as to how this will relate to the EU Medical Device Legislation that came into effect in Q2 of 2017.
If the Clinical Trials Regulation comes into effect before the Brexit date and/or the possible transitional arrangements, the UK will be bound by it, depending on both timing and the implementation of the Act resulting from the Great Repeal Bill.
Data Protection: Additional questions will also arise in relation to data protection (in particular clinical trial data and use of personal data) currently falling under the EU Data Protection Directive and the UK Data Protection Act 1998. On 4 May 2016, the official texts of the General Data Protection EU/2016/679 entered into force and will apply from 25 May 2018 which will repeal Directive 95/46/EC. These should be borne in mind early, at the protocol planning stage of research. The informed consent template information will need to be updated and there may be a requirement for patients to “re-consent” to research they are already in, so that they are informed of their new data protection rights. These discussions are beyond the scope of this article but 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.
Marketing Authorisations granted by the UK will be unaffected and it is likely that marketing authorisations granted in the EU under the centralised procedure prior to the exit will be recognised by the UK. However, centralised marketing authorisations covering the EU held by UK companies will have to be transferred to companies established in EU countries unless mutual recognition agreements are put in place.
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.
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 opportunities for international research consortia to compete for funding through programmes such as the Innovative Medicines Initiative and Horizon 2020. H2020 is a rolling 7-year programme with €80 billion to provide public/private sector collaborations and encourage research and innovation. This is currently “business as usual” so UK partners can still apply for funding in the normal way. With the UK not being part of the EEA following Brexit, access to this funding may be seriously damaged. There is a significant risk that UK based research facilities may well see the loss of talented researchers and some companies are starting to set up satellite offices in Europe at great expense.
However grants may not be entirely lost to UK-based companies. Depending on future agreements, the UK might be considered an “Associated” or “Third” country EU.
The UK Government has indicated it will supplement the lost funding. It will also seek to establish bilateral and/or multilateral agreements with the EU and other nations/entities in order to access or extend 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. 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 was rejected by the government so this area is particularly uncertain. It is understood that Sweden, Spain, Denmark and Italy have already expressed interest in providing the EMA a new home.
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 defences) 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 will provide patentees with the option to apply for a single pan-EU Unitary Patent (UP) covering most of the EU. It will also create the Unified Patent Court (UPC) to hear and determine patent disputes on an EU-wide basis.
This new regime, whose future was uncertain after the Brexit vote last June, is now expected to begin in early 2018, following a recent announcement of a further delay caused by the UK election and lack of agreement on the protocols. This has been confirmed with the announcement by the UK on 28 November 2016 that it will proceed to the ratification of the UPC Agreement. To come into force, the UPC now only requires ratifications by the UK and Germany, the latter having already announced earlier this year that it will ratify it.
The UK will thus take part in the UP/UPC system before it leaves the EU and the London Unitary Patent Court Central Division, which will hear cases related to chemistry including pharmaceutical and human necessities, will remain in London. For more on the UPC following Brexit click here.
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.
Trademarks and Registered Community designs
When the UK does leave the EU, European Union trademarks (EUTMs) and Registered Community designs (RCDs) will cease to be in force. However, it is likely there will be some mechanism for these to be converted into UK rights. As a result, owners of existing EU-wide registered rights should not without further advice immediately react by filing new UK applications, as it is likely that the filing dates of their existing rights for UK will be maintained in some way. However, it is unclear how this conversion mechanism will operate, or whether there will be a fee payable to the UK IPO.
In general, for trademark and design owners filing new applications now, there is a choice: apply EU-wide and hope to be able "convert" those rights into UK rights later; or file both UK and EU-wide applications now, to avoid having to rely on any conversion mechanism. Which option to take is likely to depend on the particular circumstances.
This article is part of our Brexit series