Brexit – Breaking up is hard ….

But building a new relationship will be harder ‘Brexodus’ has begun. Amsterdam has been chosen as the new location for the European Medicines agency, which will depart from London, its first and only home so far. This first tangible sign of the fall-out from the British vote to leave the EU came as a rude awakening to many who thought Britain had more to gain than lose. The loss of the EMA is a major blow to the UK, not only in economic terms but also because there are fears that pharmaceutical companies will see it as a disincentive to make the UK an early launch market or to invest in the UK, which would be a blow to patients and to medical research.For pharma companies, Brexit will mean at least two years of uncertainty. While the major impact will be on UK-based organisations, the repercussions are likely across the industry as Brexit will have an effect on medicines regulation, research/clinical trials, the supply chain, and pharmaceutical trade

Medicines Regulation

After Brexit, the UK would not be an EU or EEA member state and thus would not be able to co-operate in the same way with the EU. This makes it doubtful whether it could continue to participate in the three main EU procedures: the centralised procedure; the mutual recognition procedure; and the decentralised procedure. Thus, some kind of co-operation agreement would be needed with the EU for the UK to take part in these procedures.

There will be legal ramifications for holders of centrally approved marketing authorisations (MAs) as, under EU law, MA holders must be established in the EU. Also, some activities, such as pharmacovigilance, must be performed in the EU or EEA. Companies may need to submit applications for the transfer of licences for many products, move batch release sites and duplicate quality testing for products or move staff. This will take a significant amount of time and result in capacity issues which cannot be resolved before the Brexit deadline of 29 March 2019, industry associations have warned.

UK regulators will aim to work closely with the EU in areas such as clinical trials, inspections, medicines safety, and exchange of information. The government believes it could do this by building on specific agreements with countries such as the US, Canada, Japan, Switzerland, Australia, etc. But again, this could take a long time.

On the surface it appears that Britain will be the biggest loser in terms of medicines regulation. At the same time it should not be forgotten how much the UK Medicines Agency contributes to EU work. It is heavily involved in European assessment and is a popular choice as rapporteur or co-rapporteur for companies seeking approval through EU procedures. The EMA’s work programme for 2017 notes that UK experts make up 15% of its expert base, conducting around 20% of its scientific work.

UK ministers say that, whatever the outcome of the Brexit negotiations, any future licensing system will match the current timescale and that fees will remain competitive. Industry will hold them to that. But, in the absence of any concrete plan, it is not clear how far this promise can be kept. Professor Sir Michael Rawlins, chair of the MHRA, suggests that one way to prevent delayed access to new medicines would be for the UK drug licensing process to be done in parallel with the assessment by NICE. Many companies would feel uneasy about this, however, given their reservations about NICE procedures. The MHRA chair also points out that, if the UK left the EU, there would be no need to wait for final EC sign-off of an MA, which takes 67 days on average. A further suggestion is that the MHRA could recognise the approvals of other agencies, such as the US FDA. But at present these are all just possibilities and would take time to put in place.

R&D

Loss of R&D investment and disincentive to invest in clinical trial work in the UK is a major concern for pharma companies. After Brexit, UK researchers will lose access to major EU research programmes. No doubt with this in mind the UK government has now launched the Life Sciences Sector Deal, a wide-ranging programme designed to encourage life sciences research in the UK. Several companies, including GSK, MSD, and AstraZeneca have already announced major investments on the back of the deal, also citing the underlying strength of the UK science base. And the agreement thrashed out by Theresa May and Jean-Claude Juncker on 8 December, which includes an agreement on citizens’ rights, will help allay concerns about retention of key personnel.

End of First Phase

While there has been much excitement about the conclusion of the first phase of negotiations, and the European Council’s subsequent agreement that the next phase can start, there are major obstacles still to be overcome. The next hurdle will be achieving agreement on a transition period after the Brexit deadline during which the UK could remain part of the single market and customs union. Two years has been suggested. This may not be enough for the pharmaceutical industry, which has suggested a 3-year transition period as being more acceptable.

Also, in that transition period, the UK would have to accept free movement of goods, capital, services, and labour (people), and abide by all the EU laws and regulations, including any new ones, without being able to play a part in the decision-making process.

It would be wrong to get over-excited about the conclusion of the first phase of negotiations. This was supposed to be the simplest phase and it has taken more than 6 months of wrangling to reach what is essentially accepted as ‘sufficient progress’ on the three key issues of citizens’ rights, the financial ‘divorce bill’, and the Irish border question. There are still ambiguities and these issues will have to be resolved in the next phase in which the transition period and then the tricky issue of Britain’s future relationship with the EU will be negotiated.

Future Relationship

Negotiations on Britain’s future relationship with the EU will include trade. The risk is that, on leaving the EU, pharmaceutical products could be subject to import duties and additional bureaucracy and complexity associated with import/export declarations and inspections. The UK could lose access to free trade agreements negotiated by the EU with countries such as Switzerland and South Korea, and under negotiation with countries including the US. Loss of the Swiss FTA, in particular, would have significant impact on Swiss-based life sciences companies operating in the UK. Thus some type of bilateral agreement would be needed.

According to EFPIA, 82 million packs of medicine move back and forth between the UK and Europe every month. In the event of a 'hard Brexit', 45% of pharmaceutical companies expect delays to trade and medicines supply if the UK had to resort to World Trade Organisation rules.

Perhaps Brexiteers should have heeded Barack Obama: “If, right now, I’ve got access to a massive market where I sell 44% of my exports, and now I’m thinking about leaving the organisation that gives me access to that market and that is responsible for millions of jobs in my country and responsible for an enormous amount of commerce and upon which a lot of businesses depend, that's not something I’d probably do.”

Political Machinations and Dissent

Achieving a successful outcome to the Brexit negotiations will be frustrated by political machinations and dissent within the UK. Mrs May has political difficulties at home, as seen by Tory rebels forcing the right for Parliament to have a meaningful vote on any Brexit deal. She will have to cope with divisions in her own party in the face of what has so far been a united front by the 27 EU member states.

At present, it looks like a ‘soft Brexit’ is an option. This would be unpalatable to Brexiteers and make it difficult for the Prime Minister to hold her government together. She is in a weak position and is dependent on the Irish Democratic Unionist Party.

Also, time is pressing. EU negotiator Michel Barnier says that the agreement needs to be finalised by October 2018 so that it can be ratified by the member states and the European Parliament by 29th March 2019. If, as is being currently suggested, the negotiations on a framework for Britain’s future relationship with the EU don’t start till March 2018, they would have to be concluded much more swiftly than the first round.

In the words of Donald Tusk, president of the European Council:

“The most difficult challenge is still ahead. We all know that breaking up is hard. But breaking up and building a new relationship is much harder.

I wish you all the Compliments of the Season and a Healthy and Prosperous 2018!