Where’s the Exit? An Update on Brexit

By a narrow majority, the U.K. voted in June 2016 to leave the European Union. Under Prime Minister Theresa May, the U.K. government indicated that by the end of March 2017 it would  trigger Article 50 - the legal instrument by which a member state begins the process of withdrawing from the Union.

In the aftermath of the referendum, the likelihood of Brexit taking a “hard” or “soft” profile was debated at length. A “hard” Brexit, synonymous with the U.K. leaving the EU single market in order to restrict the free movement of people, was finally confirmed in a speech made by the prime minister on Jan. 17. A government white paper followed in early February, laying out priority areas and goals for the two-year period of negotiation that will follow once Article 50 is triggered. Brexit’s  wide-ranging potential effects on the pharmaceutical industry, discussed in an earlier article, will be examined again in this article in light of information presented in the white paper.¹Legal Basis for Drug Regulation/Licensing

With the Great Repeal Bill, all existing EU-level legislation will be converted into domestic U.K. law in order that the same rules and laws will apply immediately following a U.K. exit from the EU. In theory, this provides reassurance that regulation will not change overnight; however, the status of the European Medicines Agency as regulator and U.K.’s role with respect to the EMA remains unclear. The pharma industry has warned government that withdrawing from membership in the EMA may precipitate delays in new drugs being approved with U.K. waiting in line with Canada and Australia while the industry focuses initially on the larger U.S. and EU markets.

Location of European Medicines Agency

Notwithstanding the above, the government makes clear its intention to remove jurisdiction of the European Union Court of Justice from U.K. law. As EMA is subject to EUCJ, the departure of the EMA from the U.K. seems inevitable. As many as 20 member states are in apparent competition to host a post-Brexit EMA at last count. The uncertainty surrounding the agency’s future has already manifested in an exodus of senior talent, difficulties in recruitment and low morale, according to Guido Rasi, executive director of the EMA, in an interview given in January 2017.²Mobile Workforce

With the government committing to control immigration from EU member states, the pharmaceutical industry will no longer have unlimited access to a mobile workforce following U.K.’s departure. Securing the rights of EU nationals currently residing in the U.K., as well as U.K. nationals resident in EU member states, has been highlighted as a priority. However, in the future, some level of qualification must surely be foreseen before newly arrived EU nationals are permitted to be employed in the U.K.

Trade

With a commitment to control EU migration, the government has unsurprisingly confirmed its intention to leave the single market and aims to renegotiate the “freest possible trade in goods and services between the U.K. and the EU.”¹ The U.K. will have to rely on goodwill and perceived common sense from remaining EU member states given the risk that those left behind may wish to punish the U.K. for daring to abandon the European ideal.

A withdrawal from the EU single market will also require new trade deals to be brokered with third countries. The long-term effect of this trade uncertainty on the U.K. pharmaceutical industry, as part of the U.K. economy, is not yet known. In the nine months since the referendum result, the sterling has devalued against the U.S. dollar by approximately 16 percent. The FTSE 100 index has risen on aggregate to sit almost 1,000 points higher than the day before the result.

Preserving Science and Innovation Excellence

The government aims to preserve the U.K. as one of the best places in the world for science and innovation, recognizing the reputations of U.K. universities and associated scientific and academic communities. Researchers are encouraged to continue to apply for EU funding, e.g., Horizon 2020, with any award being underwritten by the U.K. government if necessary following departure from the EU. Despite government reassurance, universities may be concerned about a potential reduction in applications from foreign students and the consequent loss in fees. Additionally, there may be fewer experienced foreign academics wishing to work in the U.K. sector.

A Hope for Clarification During Negotiations

Although the government white paper serves to clarify key questions such as the intent to control EU migration and leave the EU single market, many questions remain as to the specifics of pharmaceutical regulation following the U.K.’s exit from the EU.

The industry, through groups such as the EU Life Sciences Steering Group and Public Policy Projects, continues to be vocal in its lobbying of the government to thoroughly assess the potential impact the separation may cause and to focus on the details of an exit.^3,4 However, the relationship with the EMA, the role of the Medicines and Healthcare products Regulatory Agency, and the future process by which new medicines will be approved for use in the U.K. and monitored for safety are all as yet unknown.

With formal separation proceedings to begin by the end of March 2017, a two-year period of negotiations will soon begin. The pharmaceutical industry can only hope the significant uncertainties will be clarified early in negotiations to enable proactive planning ahead of a U.K. exit from the EU, now expected in March 2019.

Emma Beausang, PhD, MRPharmS, Director, Regulatory Affairs, Chiltern

References:

1. “The United Kingdom’s Exit From and New Partnership With the European Union,” Prime Minister Theresa May, February 2017. https://www.gov.uk/government/uploads/system/uploads/attachment _data/file/589191/The_United_Kingdoms_exit_from_and_partnership_with_ the_EU_Web.pdf
2. “London-based Regulator for EU Drugs Fears Staff Exodus,” London Times. https://www.ft.com/content/2ca416ba-c8f8-11e6-8f29-9445cac8966f
3. “Maintaining and Growing the U.K.’s World-Leading Life Sciences Sector in the Context of Leaving the EU,” U.K. EU Life Sciences Transition Programme Report for the U.K. EU Life Sciences Steering Committee, Sept. 6, 2016. http://www.abpi.org.uk/our-work/library/industry/Documents/UK-EU-Steering-Group-Report.pdf
4. “Finding a Cure,” Report by Public Policy Projects, QuintilesMS. http://www.publicpolicyprojects.com/wp-content/uploads/sites/4/2016/11/PPP-QuintilesIMS-Finding-a-cure-report.pdf