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

Posted: 14/02/2020


Brexit will 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 now that the UK has left the EU. These include the effect on R&D funding, and the ownership of market authorisations and CE Marks for medicines and medical devices.

US Senator Robert F Kennedy once ascribed the phrase “May you live in interesting times” to a Chinese curse. While no definitive source has been found for the quote, the sense of the expression is clear: interesting times may not be favourable times - and that is certainly the sentiment held by many in the sector.

The UK left the EU on 31 January 2020 with a withdrawal agreement that provides for a transition period until at least the end of 2020 during which negotiations to establish a future relationship with the UK will take place. The transition period is extendible by one or two years by mutual agreement, but such an extension must be agreed by 1 July 2020 and currently this seems unlikely. The British Prime Minister has said that he will not agree to one and this is written into the legislation implementing the withdrawal agreement into UK law.

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. If the negotiations during the transition period fail to produce a new trade agreement, and no extension is granted, a ‘no trade deal Brexit’ is possible at the end of 2020: until a free trade agreement is ratified by the UK and EU, all future trade would take place on World Trade Organisation (WTO) terms.

To ensure that the voice of biotech and pharmaceutical companies is heard during the negotiations of the future trade agreement, 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, an issue that the Government will need to address. The competitiveness and attractiveness of the UK will be key.

Access to money through EU funding is likely to change. Post Brexit, the UK can participate in, bid for and lead Horizon 2020 projects, as if the UK remained an EU member state. The UK Government is encouraging UK organisations to continue to bid into calls for new Horizon 2020 grant funding for the lifetime of the Horizon 2020 programme (including Horizon 2020 calls that extend in 2020) and, if successful, funding will be provided by the EU Commission. A limited number of UK Horizon 2020 projects, which involve access to security related sensitive information, may be unable to continue now that the UK has left the EU. The EU Commission will inform affected participants and these projects will be eligible to enter a continuation process, which will provide funding to UK beneficiaries whose Horizon 2020 grant is so terminated. The next EU Framework for research and innovation, Horizon Europe, is currently being negotiated by the EU and is due to run from 2021 to 2027. The UK Government has indicated that it wishes to explore UK association to the programme as a non-EU member, with negotiations on this  expected to begin once the Horizon Europe text has been approved. If the UK does not associate to Horizon Europe, scientists based in the UK may still be able to participate in schemes that are open to third countries but may not have access to the European Research Council, some Marie Skłodowska-Curie Actions and European Innovation Council schemes, which are presently only open to EU member states and associated countries.

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 itself is not a European institution. As such, the procedure and mechanisms for granting classic European Patents will remain unchanged for the UK.

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

The UK intends to stay in the Unitary Patent system, and indeed it ratified the Unitary Patent Court Agreement in April 2018. The Unified Patent Court and Unitary Patent will take effect three months after the UPC Agreement has been ratified by thirteen countries including all three of France, Germany and the UK. France has also already ratified it along with a further 14 countries, meaning there are now 16 ratifications in total.  Although Germany has passed all the laws that are needed to bring the UPC into effect in Germany, ratification is still outstanding and is dependent on the outcome of a complaint pending before the German Constitutional Court. It is possible, if the Court dismisses the complaint, enabling Germany to ratify the UPC Agreement, that the UPC system will take effect during the transition period up until December 2020, with the UK as a participating member.

As currently drafted, the UPC Agreement can only take effect in EU member states and the UPC cannot be based in a non-EU member state. There has been much debate on the question of whether legally the UK could continue to participate in the UP and UPC, and the weight of opinion is that it could, if the political will is there. Continued participation in the UPC and UP would require a new international agreement between the UK and the participating EU member states, and would require the UK to submit to EU law, and the supervisory jurisdiction of the European Court of Justice (CJEU), in relation to proceedings before the UPC. The UK would also have to sign up to an appropriate jurisdiction and enforcement regime, such as the Lugano Convention.

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.

In the UK clinical trials are managed by the Medicines and Healthcare Regulatory Agency (MHRA), and regulated by the EU Clinical Trials Directive, which was transposed into UK law in 2004. The UK law governing clinical trials will continue in force in the UK post Brexit (amended as necessary using powers granted under the EU (Withdrawal) Act to make sure it still functions appropriately).

In 2014, a new EU Clinical Trial Regulation was agreed that aims to improve clinical trial transparency and simplify the application process for clinical trials across EU member states. The regulation provides for a shared central application portal with an associated EU wide database. This new regulation was expected to be applicable from October 2018, but has been delayed until the database is ready. It is expected to be implemented during 2020. If this happens the UK would be bound by it during the transition period. The degree to which the substance of the regulation will apply after the transition period will depend on the level of co-operation agreed between the UK and EU in their negotiations to establish their future relationship. If the regulation does not come into effect during the transition period, the UK Government has confirmed its intention to align with it, where possible, without delay when it comes into force in the EU, subject to the usual parliamentary approvals. The two key elements of the new regulation that the UK would not be able to implement on its own after the end of the transition period are the use of the shared central IT portal and participation in the single assessment model, both of which would require a negotiated agreement between the UK and EU.

How will Marketing Authorisations and CE marks be affected?

To put medicines onto the single market in Europe, and to hold MAs in Europe, businesses must be established in an EEA country. Marketing authorisations for centrally-authorised medicinal products held by UK-based companies will therefore need to be transferred to an EEA-based company before the end of the transition period. Marketing authorisation applications by UK-based companies expected to receive a Commission decision after the end of the transition period must change to an EEA-based applicant. Centrally-authorised applications that have not yet reached a decision by the end of the transition period will need to be resubmitted to the MHRA. Transitional provisions will be made for medicines in the process of being authorised by the mutual recognition procedure or the decentralised procedure as at the end of the transition period.

After the transition period ends, UK based Notified Bodies will no longer be recognised by the EU. An EU Notified Body based in an EU Member state is required to place new medical devices on the EU market after the end of the transition period. Manufacturers with a UK based authorised representative will therefore need to appoint an EU based authorised representative to place new medical devices on the EU market. The UK will continue to recognise the validity of certificates issued by UK based Notified Bodies prior to the UK’s departure from the EU. CE marking will remain in place in the UK until the end of the transition period, at which time a new UK product safety mark, the UK Conformity Assessed (UKCA) marking is expected to be introduced. It is likely there will be a further grace period (possibly one or two years) following the end of the transition period during which both the CE marking and UKCA marking will be recognised in the UK. Products already marked and placed on the UK market before the end of the transition period should be able to continue to circulate without any changes to their marking. However, products which have not already been CE marked will likely need to be assessed and fixed with a UKCA mark.

Businesses exporting to the EU after the end of the transition period will need to either  ensure that products which have been assessed by a UK notified body are re-assessed and re-marked by an EU Notified Body, or organise a transfer of the file from the UK to an EU Notified Body in advance of the end of the transition period.

 

This article has been co-written with Laurence Nelson, a trainee solicitor in the IP, IT and Commercial team.


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