News and Publications

Brexit and the life sciences sector - what are the impacts?

Posted: 20/10/2016

It is still too early to determine the full impact of the UK’s vote to leave the EU. However, the decision is likely to have wide-ranging implications for the life sciences sector, from the management of patent portfolios to the utility of UK clinical trial data. We examine some of the key issues that may affect businesses in the life sciences sector following the vote, including consideration of the effect on R&D funding and the ownership of market authorisations and CE Marks for medicines and medical devices. For the time being, while some businesses may wish to start contingency planning, most should continue to focus on their core activities and wait for the full implications of the Brexit decision to become clear.

US Senator Robert F Kennedy is credited with ascribing the phrase “May you live in interesting times” to a Chinese curse, though it seems that no source for the quote has been found. Whatever the source, the sense of the expression is clear: interesting times may not be favourable times.

Following the vote in the EU referendum and more recently Prime Minister Theresa May’s comments on Article 50, the UK now finds itself in those interesting times, like it or not. However until the UK formally leaves the EU, EU law will continue to apply, including those that regulate the life sciences sector. There will therefore be no immediate change.

Nevertheless, until the framework of the UK’s future relationship with the EU is agreed, there will be a level of uncertainty as to what might replace the current system. One thing is clear: unless the UK joins the EEA there will be a long period of time between the date it leaves the EU (two years after triggering Article 50) and the conclusion of any new arrangement, during which time there will be a patchwork of different interim provisions for different sectors.

To ensure that the voice of biotech and pharmaceutical companies is heard during the negotiations, the UK EU Life Sciences Steering Group has held extensive consultations with businesses and presented its conclusions to ministers. The four priorities the group has identified are:

  • the ability to trade and move goods and capital across borders;
  • access to the best international talent;
  • regulatory cooperation; and
  • predictable government funding for scientific research. 

Will Brexit change how research and development is funded?

Financing through private money (Angel, Private Equity or VC) or through the Equity Capital Markets is unlikely to change markedly as a result of Brexit, provided the sector remains an attractive place in which to invest, another issue that the new government will need to address. The competitiveness and attractiveness of the UK will be key.

Access to money through EU funding such as Horizon 2020, however, is likely to change. Being outside the EU does not prevent businesses or institutions from receiving EU grant funds, but not as an applicant unless the UK becomes “associated with Horizon 2020” – like Iceland, Israel and Norway, amongst others. Companies and institutions in non-associated and non-EU countries can however still benefit as third party service providers, but this is likely to be at a much lower level than as an applicant.

How will it affect patent portfolios?

Currently patents within the European Patent Convention (EPC) countries are taken to grant through the European Patent Office (EPO). The EPC is not an EU instrument but an international convention and the EPO is not a European institution. As such, the procedure and mechanisms for granting classic European Patents will remain unchanged.

The big question is how the proposed Unitary Patent system will be affected by Brexit?

It is highly likely that the immediate effect of the Brexit vote will be a delay in implementation of the Unitary Patent system and the Unified Patent Court. Not only is the UK currently one of the three mandatory countries that are needed to bring the system into effect, it was also to host one of the three locations of the Court of the Central Division. The UK is also heavily involved in the finalisation of the Rules for the Unified Patent Court, and in the preparation of the computer system that the Court will use.

The UK cannot remain a member of the Unitary Patent system after leaving the EU unless it adopts and submits to EU law for that purpose. Mrs May’s recent comments suggest that this is unlikely to happen. Assuming the system survives the UK’s departure (which is by no means certain) the UK would not be alone in being outside it: initially at least 14 EU member states are unlikely to be within the system and a number of EPC member countries that are not EU member states (eg Iceland, Norway, Switzerland and Turkey) are also outside it. So Unitary Patents, European Patents and national patents are likely to be needed side by side for some time to come. 

How will Brexit affect clinical trials/clinical assessments?

To the extent that UK national Marketing Authorisations (MAs) are going to be sought, UK clinical trials will remain important, but with a nation of only 60 million in comparison to the EU’s 500 million the attractiveness of the UK as a market will most likely be reduced, if the UK is not an EEA member.

If the UK becomes a member of the EEA, it will still to be able to access the single market and to use the EU procedures. Clinical trial results from within the UK will still be able to give direct support to MA applications.

If the UK adopts a more distant relationship, as Mrs. May’s comments suggest, data from the UK is likely to be classified as ‘ancillary clinical data’, meaning it can only be used to support data obtained from within the EU.

How will Marketing Authorisations and CE marks be affected?

To put medicines onto the single market and to hold MAs businesses must be established in an EEA country. Unless the UK remains a member of the EEA, UK businesses will need to consider how their MAs should be held. Do they license a third party to hold them, or do they set up a subsidiary within a member state?

In either case, plans will need to be put in place to transfer such registrations, but quite how such transfers will be implemented remains to be seen. One possible route would be a variation that allows the ownership of the MA to be transferred to its subsidiary.

The CE-marking regime for medical devices is less prescriptive: non-EEA companies can hold CE marks provided they appoint an authorised representative and maintain a technical file within the EEA. The authorised representative must let relevant competent authorities know what products are being put on the market and details of the registered place of the representative’s business, which also needs to be displayed on any label or outer packaging.

Arrow GIFReturn to news headlines

Penningtons Manches Cooper LLP

Penningtons Manches Cooper LLP is a limited liability partnership registered in England and Wales with registered number OC311575 and is authorised and regulated by the Solicitors Regulation Authority under number 419867.

Penningtons Manches Cooper LLP