The UK exited the EU on 31st January 2020. By virtue of the transition period in the Withdrawal Agreement, EU law will continue to apply in and in relation to the UK only until the 31st December 2020. The EU Treaties, EU free movement rights and the general principles of EU law will then cease to apply in relation to the UK, and prior EU regulations will only continue to apply in domestic law (by virtue of the European Union (Withdrawal) Act 2018) insofar as they are not modified or revoked by regulations under that 2018 Act.
This article sets out the implications of Brexit on the UK Life Sciences industry as from the end of the transition period. For an explanation of the finalised Withdrawal Agreement, please see this link.
This article is part of our Brexit series; Life Sciences businesses will be affected by many of the implications identified throughout this series and, in particular, our note on the English Intellectual Property law implications of Brexit and Brexit: Medical Devices Implications.
What is the current position?
As EU law will continue to apply in relation to the UK until 31 December 2020, during that so called transition period, the status quo will be maintained as much as possible, and in that short term the answer is that it should be "business as usual" for the Life Sciences sector in the UK. Plans need however to be made immediately for the significant changes that will occur thereafter. During the transition period, the nature of the relationship between the EU and the UK will be determined, including that in relation to trade and regulation.
The effects on the Life Sciences sector of Brexit are likely to be substantial. This is because, as a third party to the EU, the UK will no longer keep access to many of the benefits of the EU system, such as the centralised procedure for MAs, the EU portal for clinical trials and the Pharmacovigilance database.
It is still however uncertain what the exact ramifications of Brexit, in terms of what the relationship between the respective competent authorities will be post-Brexit and we therefore suggest the best policy at this time is to be prepared by keeping up to date as the process develops. Although many commentators have hoped for some degree of mutual recognition of standards, the UK government has indicated that this is not what they will be seeking in negotiations and European Medicines Agency (EMA) has equally given no comfort that the UK will be treated as other than a third country like any other.
What 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 UK regulation has originated from its 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, at the end of the transition period, the EU regulations will no longer continue to apply. The EU Withdrawal Act should be effective in buffering the effect of a lapse in applicability of regulations; if the Act 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. However, as the UK Government appears to have decided that it will no longer align itself with European law and therefore distance its 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 MA applications, will need to be obtained under a new and different legal framework. It remains to be seen to what extent regulations and standards will change, as the UK could lose access to the EU market if the same standards (for example in manufacturing, labelling or composition), are not supported in the UK.
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 some time during 2020). 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 (for a short time!) until its departure. Depending on both timing and the implementation of the EU Withdrawal Act, 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 (MAs) in Europe 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 will no longer be part of the EEA and has therefore established a new system for independent MA approval through the Medicines & Healthcare Products Regulatory Agency MHRA, whose workload will increase considerably (although they will lose their EMA responsibilities). The MHRA will carry out all functions currently done at the EU level, including the making of decisions on applications, variations and renewals.
Pharmaceutical companies whose presence and activities are principally in the UK risk losing their MAs granted through the centralised procedure, unless action has been 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 – separate UK MAs will need to be applied for post-Brexit, although existing MAs on centrally authorised products (i.e. those in existence at the end of the transition period) will, pursuant to the Human Medicines Regulations (Amendment etc.)(EU Exit) Regulations 2019) be converted from EU to UK MAs, as if they were granted on the date the corresponding EU MA was granted. The MHRA will require the provision of essential baseline data to be submitted electronically – there will be a one year period of grace after the end of the transition period for companies to comply with this requirement.
The MHRA will take over the renewal process for MAs granted through mutual recognition or decentralised procedures which are underway at the end of the transition period.
If nothing else having to apply for MAs 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 above, the MHRA will find that its workload increases commensurately as the centralised procedures are dismantled.
Quality Assurance and Product Safety
Quality assurance processes have to have been transferred from the UK (or at lest replicated in the EU) in line with current EU good manufacturing practices in order to ensure products can be sold in the EU. All EEA located manufacturers and importers of medicines need to hold a manufacturing authorisation; the EMA determined that all MA holders must have had by 1 January 2020 batch testing facilities in the EEA and completed all necessary regulatory submissions.
Even with the UK not being part of the EEA after Brexit, UK manufacturers could continue to export medicines to the EU and vice versa if equivalence is maintained in the UK/EU regulatory frameworks – but this does not seem to be forthcoming. 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 (but not a given, given UK government pronouncements on regulatory alignment post-Brexit) 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 has provided 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 EMA. 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 which was previously based in London has now moved to Amsterdam. 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.
Exhaustion of rights
Interestingly, as regards exhaustion of intellectual property rights, the UK government has in The Intellectual Property (Exhaustion of Rights)(EU Exit) Regulations 2019 (the 'SI') an asymmetric regional exhaustion.
In summary, the SI provides that the present system of EEA-wide exhaustion will be retained to the extent possible. Following the end of the transition period, rights in goods put on the market in the EEA will be exhausted in the UK but, absent any agreement with the EU, there will be no such reciprocity for goods put on the market in the UK; putting the goods on the market in the UK will not exhaust the IP rights in the EEA.
Therefore, although owners of UK IP rights will not be able to prevent parallel imports from the EEA, as the UK will no longer be a Member State, owners of rights in the EEA will be able to prevent parallel imports from the UK. The Intellectual Property Office's guidelines on exhaustion and parallel trade post Brexit, therefore stress the need for parallel importers to review whether they will need the EEA-based IP rights holder's permission to export goods to the EEA.
More detail can be found here.
Specific Impacts on Intellectual Property Rights
Patents will to a great extent continue as before - patents covering the UK will continue to be granted both by the UK Intellectual Property Office (UKIPO) and the European Patent Office (EPO). Applications for patents can be filed directly with the UKIPO or EPO, or can be made pursuant to an international patent application filed under the Patent Cooperation Treaty. Neither UKIPO, nor the EPO, is an EU institution and their operation will be unaffected by Brexit.
The UK will continue to be one of the 38 contracting state to the European Patent Convention, which is the international treaty that established the EPO. Applicants will continue to be able to file their applications with the EPO and, on grant, request validation in the UK and other countries of interest.
The standing of granted patents will also be unaffected by Brexit. Following grant and validation in the UK, European patents have – and will continue to have – exactly the same legal effect in the UK as national patents granted by the UKIPO.
Furthermore, the UK will remain a member of the Paris Convention, which supports IP protection around the world. Applicants who have filed for patent protection in the UK will still be able to subsequently claim the priority of that application for a patent registration in other countries and vice versa.
References to the EU in patent licences will need to be carefully reviewed, both in relation to existing licences and new ones.
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 UK ratified the UPC Agreement in April 2018 but this ratification is of questionable relevance given the effluxion of time and the continued uncertainty regarding the UK's inclusion in the regime (following an amendment to allow for a non-EU state to be so involved).. Further analysis on this is found 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).The Patents (Amendment)(EU Exit) Regulations (“the Patents Regulations”) will come into effect after the transition period will act to preserve as far as possible any SPCs that have been previously applied for under the regulations by incorporating those regulations into UK law. The Patents Regulations will bring current EU legislation into UK law as far as possible to maintain current systems and processes, but there are clear anomalies since the existing SPC system relies on EMA MAs and the ultimate arbiter is the European Court of Justice. For a new post-Brexit UK SPC, a UK patent and a MA granted by the MHRA will be required.
After the transition period, EU Trade Marks (EUTMs) and Registered and Unregistered Community Designs will no longer have effect in the UK. The UK Government has provided that at the end of the transition period, the UK will automatically create a comparable UK trade mark for every registered EUTM, at no charge. The same will apply for Registered Community Designs (RCDs). However, this will not apply to pending EUTM applications, so tech companies with pending applications should apply to register a comparable UK trade mark in the 9 months after exit day to benefit from the same filing date as the related EUTM application.
Therefore there is technically no need for companies with existing EUTM and RCD registrations to refile for equivalent registrations in the UK, as comparable UK registrations will arise automatically. However, for new filings, companies are advised to dual-file in the EU and UK, particularly as we get closer to the end of the transition period. This is because EUTM applications pending at the end of the transition period will need to be re-filed in the UK anyway. Rights owners should also review the following:
- Whether they have any pending oppositions/cancellation actions at the EUIPO: actions which are only based on UK rights will fall away; parallel actions against the new comparable UK trade mark will need to be brought.
- Whether their existing EUTM legal representatives will remain entitled to represent them before the EU IPO after Brexit. Bird & Bird will be able to represent clients before both the UK and the EU IPOs.
- Their broader enforcement strategy: after the end of the transition period a new pan-EU injunction will not cover the UK and will not be available in the UK, meaning both EU and UK proceedings will need to be brought to cover all of Europe.
- Whether they have an EU customs notice ("Application for Action") in place which was filed via UK Customs: these will fall away and need to be renewed/re-filed via one of the remaining EU countries. A UK filing will also be needed.
- Whether they have hardware businesses affected by parallel imports between the UK and continental Europe: the ability for trade mark owners to prevent imports from one territory to the other will differ depending which way the goods are going.
- References to the EU in brand licence agreements will need to be considered.
This article is part of our Brexit series