What will Brexit mean for the Life Sciences sector – in a deal or a no deal scenario?
Published on 13th Dec 2018
With less than four months until the UK officially leaves the EU, amid confidence votes and delayed votes in the UK Parliament, the uncertainty around what exactly Brexit will look like shows no immediate signs of clearing. Life Sciences businesses, particularly those that rely on regulatory authorisation in their business or supply chains, may need to take action now (if they have not already) to protect against the potential disruption that a no deal Brexit could bring.
After two years of negotiations, the UK and the EU have agreed on the text of the Withdrawal Agreement, and the Political Declaration on the future relationship between the UK and the EU. But implementation of the deal can only go ahead if it is approved by the European Parliament (which is a strong likelihood) and by the UK Parliament. The latter is currently looking much more uncertain, with a vote by the UK Parliament unlikely to take place before early January 2019.
- If the Withdrawal Agreement is ratified, there would be a transition period until the end of 2020 (with the possibility of that being extended for up to two more years), during which the position for businesses would remain essentially as it is now.
- If the Withdrawal Agreement is rejected, a 'no deal' or 'cliff-edge' Brexit remains a very real possibility.
If the Withdrawal Agreement is ratified
The Withdrawal Agreement provides that EU law will continue to apply to and in the UK during the transition period, unless otherwise provided in the Withdrawal Agreement. This allows the UK to benefit from being part of the Single Market and the Customs Union during the transition period. To all intents and purposes, life sciences businesses trading between the EU and the UK would be able to continue to do so as they currently do until at least 31 December 2020, and longer if the transition period is extended.
Goods placed on the market
The Withdrawal Agreement provides that any goods that were lawfully placed on the EU or UK market before the end of the transition period may continue to be made available and circulate between the two markets until they reach their end-user. This provides businesses with some security in relation to goods that are placed on the market towards the end of the transition period.
The various EU medical devices directives will continue to apply during the transition period. Notified bodies in the UK will therefore be able to continue issuing conformity markings that are valid throughout the EU. Hence, there will be no need to re-certify or affix new conformity markings or adapt the product to any new product requirement during the transition period (this includes the indications to be affixed on the product or the information to be provided with it).
The Withdrawal Agreement further requires notified bodies in the UK and the EU to provide any information they hold to any requesting certificate holders on either side before the end of the transition period. This is presumably supposed to allow medical device manufacturers with a UK notified body to transfer to a notified body in the EU27 at the end of the transition period.
During the transition period, the UK must accept market authorisations (MA) authorised by a competent authority in the EU, but the UK loses the right for its regulators, such as the MHRA, to act as leading authority for approvals or authorisations under EU directives relating to medical directives. Medicinal products placed on the market by the end of the transition period can continue to be circulated freely as with any other goods.
The Political Declarations provides only a very limited amount of information in relation to the potential regulatory landscape for life sciences businesses after the transition period. The Political Declaration reiterates that the UK and the EU envisage a comprehensive free trade agreement, combining regulatory and customs cooperation. It also states that both parties will seek to set out common principles in the fields of conformity assessment and market surveillance.
Dependent on both the terms of a future trading agreement and when those terms are agreed, some of the considerations discussed below in relation to a no deal (such as the grandfathering of MAs, the recognition of CE marking or the need to have a MA holder established in the EU) may become relevant at the end of the transition period.
No deal scenario
If the UK Parliament (or the European Parliament) rejects the Withdrawal Agreement, there are a range of possibilities as to what might happen next. The eventuality that would have the greatest impact on trade, and which business should be prepared for, is that the UK leaves the EU on 29 March 2019 without a Withdrawal Agreement. This would mean UK-EU trade taking place on WTO terms with customs procedures in place as is currently the case for third countries.
The UK government has published six technical notices on what this would mean for the regulation of medicines and medical equipment. The European Commission has published a notice on industrial products, a notice on medicinal products for human and veterinary use, and a Q&A document on medicinal products for human and veterinary use if there is a no deal Brexit; and the Co-ordination Group for Mutual Recognition and Decentralised Procedures (human) (CMDh) has published a Q&A document on the impact of Brexit with regard to national authorised medicinal products for human use.
The UK would continue to recognise CE marked devices approved for the EU market for a limited time period. The government would give businesses "sufficient" time (yet to be specified) to prepare if any new UK requirements are introduced. New UK conformity markings (which the UK would introduce in a no deal Brexit scenario) would, however, not be recognised in the EU.
UK-based notified bodies would also lose their status as EU notified bodies. This means they would no longer be able to assess the conformity of medical devices for devices to receive the CE mark and enter the EU market. Pharmaceutical companies wishing to place products on the EU-27 market may therefore wish to consider applying for a new certificate from an EU Notified Body. Alternatively, they could arrange for a transfer of the file and the corresponding certificate from the UK Notified Body to an EU-27 Notified Body, which would then take over the responsibility for that certificate.
The UK will no longer be part of the European Medicines Agency (EMA) once it leaves the EU (whether under a deal or a no deal Brexit). The MHRA will pick up any functions previously performed by EU bodies.
The most immediate implications of this are for market authorisations required to place medicines on the UK market in the event of a no deal Brexit:
- MAs for centrally authorised medicines would automatically be converted into UK MAs on 29 March 2019 (known as 'grandfathering'), unless the MA holder opted out. The MHRA has said it will write to all MA holders of centrally authorised medicines before 29 March 2019 to inform them of the conversion process.
- Medicines that received a UK MA via the mutual recognition or decentralised procedures prior to 29 March 2019 will be unaffected.
- Applications for new UK MAs after Brexit will all be assessed by the MHRA because centralised and decentralised procedures will not extend to the UK. A new application will have to be made to the MHRA for those medicines still in the middle of the application process with the EMA on exit day. But the MHRA intends to adopt a streamlined approach to approving UK MA applications.
The implications for businesses using MAs for the EU market are that:
- MA holders must be established in the EEA. UK-based MA holders would need to transfer applicable MAs to holders established in the EEA before 30 March 2019 for the MA to be valid in the EU.
- MA applicants must also be established in the EEA. UK applicants would therefore have to transfer any applications to applicants established in the EEA before 30 March 2019 (if they wish to obtain an EU MA).
- Generic/hybrid MAs granted on the basis of a UK authorised reference medicinal product before 30 March 2019 will remain valid. Subsequent authorisations will only be granted on the basis of a reference medicinal product authorised by an EU-27 Member State or a contracting state of the EEA.
A no deal Brexit would also have implications for legal presence requirements. The MHRA would continue to require a named individual – the Qualified Person for Pharmacovigilance, who can be contacted if there are any safety issues. The MHRA will, however, also require that the person be established in the UK after exit day in a no deal scenario. For existing MA holders, there would be a grace period until the end of 2020 if they did not already have a Qualified Person in the UK. The EU has not reciprocated this. Therefore, companies operating in the EU would need Qualified Persons established in the EEA from 30 March 2019.
Finally, the MHRA would also assume all responsibility for overseeing pharmacovigilance activities in the UK. This means that UK holders of MAs would have to submit pharmacovigilance data directly to the MHRA.
What should businesses do to prepare?
As there are no guarantees that the Withdrawal Agreement will be approved, businesses may consider that they need to prepare (or continue to prepare) for a no deal Brexit. As well as considering direct implications such as ensuring the continued validity of MAs or applications, businesses should consider their supply chains.
This includes reviewing which manufacturers or importers in the supply chain are established in the UK and the EU27 and on this basis identifying areas of potential risk. Businesses may then need to consider whether any contracts need amending, or whether they may potentially need to source new suppliers or logistics arrangements.
Businesses should also assess whether regulatory compliance currently relies on UK or EU-27 legal bodies, as it may be necessary or make sense to transfer compliance functions to a new jurisdiction or legal entity.
If the Withdrawal Agreement is ratified, some of these steps may not be necessary. Nevertheless, with a transition period of just 21 months (subject to any extension), preparing for the worst case scenario now may give some much needed comfort that you are prepared however, the future trade negotiations play out.