Brexit: the implications for life sciences
Having voted to exit the European Union (Brexit) following the referendum on 23 June 2016, the legal consequences for businesses in the UK are likely to be significant.
Lawyers from a wide range of disciplines within Simmons & Simmons have identified the key potential issues that will impact upon business activities in the UK now that the UK is set to leave the EU. The life sciences sector will face several major issues on account of the vote for Brexit, and those working within the sector need to be planning now, during the withdrawal negotiations, and in the run up to the exit in order to be ready to do business in a possible post-EU environment.
We describe some likely issues for the life sciences sector to consider.
The life sciences sector is highly regulated. Nearly all of this regulation, covering matters from clinical trial approval, pharmacoviligence, joint procurement of emergency measures (eg pandemic vaccines) to marketing authorisations and addressing the trade in falsified medicines, is harmonised at EU level. It is not clear to what extent these EU regulations will continue to apply to the UK after the UK leaves the EU, and in particular to what extent the UK will be able to remain a party to measures which currently require inter-EU Member State cooperation. These matters will all be up for negotiation and political decision in the coming two or more years.
- Marketing authorisation
Currently there are three routes for getting marketing authorisation in the UK: i) the "centralised procedure" by making one application to the European Medicines Agency (EMA) (a single marketing authorisation is obtained); ii) the "decentralised procedure" by making multiple applications to each individual EU member state where marketing authorisation is sought (separate national authorisations are obtained); iii) the "mutual recognition procedure", where a medicine is authorised in one EU member state and a later application is made for this authorisation to be recognised in other member states (separate national authorisations are obtained). When the UK leaves the EU, it might, like Norway, remain part of this system (albeit with no formal legislative or administrative role). Alternatively, it may operate its own national authorisation system, for which life sciences companies will need to make a separate application, increasing their administrative burden.
If the UK chooses to operate its own authorisation system, the workload of the Medicines & Healthcare Products Regulatory Agency (MHRA) will increase, as it inherits work from the EMA. Furthermore, the EMA is currently situated in London and once Britain leaves, the EMA will need to relocate to an EU member state. The recruitment and training of additional staff by both institutions is likely, in the short term, to prevent a reduction in the efficiency with which authorisation applications are processed.
The exit from the EU by the UK is likely to have serious implications for clinical trials. The new Clinical Trials Regulation which is due to take effect this year will introduce a single portal for submitting applications to begin clinical trials in the EU, along with a new EU-wide trials database and requirements for disclosure of trial data. This Regulation will not apply to the UK post-Brexit, and this raises questions about how clinical trials that have a UK-EU cross-border dimension will be approved and run; the UK may become a less attractive location for clinical trials. Furthermore, data protection issues will arise around the transfer of clinical data between the UK and the EU.
The UK is a net recipient of EU funding for R&D programmes. When the UK leaves the EU the funding available to UK-based research companies will probably decrease.
On Brexit, R&D collaboration agreements will likely fall within separately applied and potentially diverging competition regimes in the UK and the EU. Similar issues as those raised in relation to clinical trials with regards to transfer of data cross-border will also arise in relation to collaboration agreements.
- Manufacturing & supply chain
There are no tariffs for drug products, API and many chemical intermediates between most developed countries. For other products, and for countries where there are tariffs on pharmaceutical products, it is not clear whether the UK will obtain as good terms of trade as the EU has negotiated.
If the UK negotiates access to the single market, there is likely nevertheless to be customs checks at the border (as is the case for Norway) - in effect, a “paperwork” border. Those responsible for manufacturing and the supply chain will need to take account of these changed circumstances after Brexit.
At present there are uniform safety standards across the EU in relation to the manufacture of pharmaceutical products and medical devices. It is likely, post-Brexit, that UK rules in this area will diverge from continuing EU legislation, giving rise to compliance issues for companies wishing to export to the EU from the UK.
Exiting the EU means that free movement of workers between the UK and the other EU member states will come to an end. This would undoubtedly impact the movement of scientists, life sciences companies’ staff and researchers across Europe. It also poses questions regarding the status of EU citizens currently employed in the UK in the life sciences sector.
- Growing business
There is likely to be a change in the behaviour of investors in the life sciences sector. Many firms and investors invest in the UK because it offers unrestricted access to domestic and EU markets; however, this will no longer be the case now Britian is set to leave the EU. Investors may prefer to invest in companies based within the EU in order to access the other member states. Alternatively, the exit of the UK from the EU may instead have a destabilising effect on the EU markets and cause foreign investors to invest in markets outside of Europe completely.
Leaving the EU may also have a destabilising effect on the London Stock Exchange (LSE). This could potentially make listing on the LSE less attractive; the LSE may no longer be a sought after exchange to announce initial public offerings (IPOs).
Further, now the UK is set to leave the EU, many substantial mergers will potentially be subject to two systems of merger control in parallel: thus, vetting by both the UK Competition and Markets Authority (CMA) and the European Commission.
For further information, please refer to Brexit: the legal implications.
This document (and any information accessed through links in this document) is provided for information purposes only and does not constitute legal advice. Professional legal advice should be obtained before taking or refraining from any action as a result of the contents of this document.