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The two ways to leave




Paul England of Taylor Wessing says there are two Brexit possibilities that pharma and medical devices companies really need to be aware of. Here he explains what their impact is likely to be on patents and regulatory rights

1 minute read
For businesses in the pharmaceuticals and medical devices sector, there are two Brexit outcomes to be aware of: the UK and the EU agree the withdrawal agreement, which includes a transition period until the end of December 2020; or there is a no-deal Brexit. Under the former, EU law will largely continue to apply to the UK during the transition period. By contrast, in a no-deal, the UK would leave the EU and its regulatory rules and legal structures in their entirety. In this scenario, the European Union (Withdrawal) Act 2018, and associated statutory instruments, will essentially ‘cut and paste’ relevant EU law (primarily regulations) into the UK statute book on Brexit day. However, this does not prevent the UK’s many structural and regulatory ties with the EU, such as cooperation between medicines regulators and mutual recognition of MAs and CE marks, from being severed overnight.

"It is foolish to speculate, but any spread bet/accumulator should include one or more of the following: vote of no confidence; leadership election for the Conservative Party; leadership election for the Labour Party; General Election; Hard Brexit; No Brexit at all."

The words of Richard Phillips, director of healthcare policy at the Association of British HealthTech Industries, were coined back in the summer of 2018 to summarise the status of Brexit then. It says a great deal about this continuing saga that they are still applicable now – with just days to go before the original exit date of March 29 2019 (at the time of writing). For businesses in the pharmaceuticals and medical devices sector, however, as with many others, there are really only two ways of doing Brexit to be aware of, even if there is an extension of Article 50 in the interim, which pushes the exit date back (assuming the UK does not leave the EU at all, in which case it is back to business as usual):

1) the UK (and European) Parliament ratifies the draft agreement on the withdrawal of the UK from the EU (the withdrawal agreement), which was agreed by the heads of government on November 14 2018. This includes a transition period until December 31 2020 (transition period) and non-binding heads of terms on the future relationship beyond this date; or

2) there is a 'no-deal', in which the UK exits the EU on March 29 (or a delayed exit date) without the terms of the withdrawal agreement in place, and so without the transition period.

What do these two outcomes mean for patents, supplementary protection certificates (SPCs) and key regulatory rights – marketing authorisations (MAs) – and their associated exclusivity periods, plus medical device CE marks?

Recognising CJEU rulings post-Brexit?
To date, the most important authorities on the interpretation of the SPC Regulation in the UK are rulings of the Court of Justice of the European Union (CJEU). If there is no-deal, then under the withdrawal act the courts of the UK will no longer be permitted to refer matters derived from EU law to the CJEU on or after March 29 2019. However, existing decisions of the CJEU (those made before March 29 2019) will continue to be binding in the UK courts, with the exception of the Supreme Court (Sections 6(3) and (4)). Furthermore, there is a discretion under the act to recognise preliminary rulings made after Brexit (section 6(2)). If the UK Parliament adopts the withdrawal agreement, during the transition period the UK courts can refer matters to, and will continue to be bound by, rulings of the CJEU (Articles 86(1) and 89(1)). The UK courts will also continue to be bound by preliminary rulings made after the end of the transition period on matters referred to it by the UK courts during that period (Article 86(2)).

The withdrawal agreement and transition period

The draft withdrawal agreement states that, unless provided otherwise, EU law will continue to apply to the UK during the transition period (Article 127). Subject to those regulatory measures discussed below, this means business essentially continues as now until the end of December 2020. The draft withdrawal agreement also deals with what happens if there is no agreement on the future relationship of the UK and the EU by this date: the highly contentious 'Irish backstop' is triggered. This continues to keep Northern Ireland in the customs territory and aligned with EU regulatory laws on goods until a solution avoiding border checks can be found. Great Britain would not, however, remain aligned on matters of regulation during the backstop.

A no-deal

If the draft withdrawal agreement is ultimately rejected by the UK Parliament, there will be no transition period. This means that on March 29 2019 (or a later, delayed exit date), the UK would leave the EU and its regulatory rules and legal structures in their entirety (except for such bilateral agreements that have been secured in certain emergency areas, such as aviation). Without more, this would raise the prospect of a 'cliff-edge' in which there are no rules in the UK to replace those formerly provided by the EU. This is partly resolved by the European Union (Withdrawal) Act 2018 and associated statutory instruments. These will essentially 'cut and paste' relevant EU law (primarily, regulations) into the UK statute book on Brexit day.

It is only partly a solution, however, because although the act allows the UK to transition smoothly into running national affairs post-Brexit, it does not prevent the many structural and regulatory ties with the EU, such as cooperation between medicines regulators and mutual recognition of MAs and CE marks, from being severed overnight. The impact is that Brexit affects pharmaceuticals and medical devices companies in the UK to a lesser or greater degree, depending on the right in question.

Patents

Patents are on the less affected side. The EPO is not an EU institution, although its members include the EU member states. The UK's participation in the system by which the EPO examines and grants European patent applications centrally will not change after Brexit; patents granted by the EPO will continue to be registered as national rights in the UK when so designated. Likewise, UK European patents will remain subject to possible opposition in the EPO within the first nine months of grant.

If there is a managed no-deal, however, the UK would no longer be subject to EU and EEA-wide exhaustion of patents. As matters stand, this means the EU will not recognise as exhausted in its territory goods protected by a patent that are first placed on the UK market with the patent owner's consent. The UK government has, nonetheless, stated that it will unilaterally recognise exhaustion of goods first placed in the market in the EU/EEA, allowing parallel trading of products into the UK from the EU/EEA to continue.

Participation in the UPC and unitary patent

The proposed Unified Patent Court (UPC) is also not an EU body. It is, however, different to the EPO by being designed only to admit contracting parties from the EU member states. Without amendment to allow the UK's participation as a non-EU member state after Brexit, the UK would seemingly be excluded. Moreover, the accompanying unitary patent is governed by an EU regulation. As a result, debate continues to focus on whether the UK could participate in these projects (assuming that the UPC and the unitary patent come into force in the near future). The UK government has said merely that it will explore whether it would be possible to remain within the UPC and unitary patent in a no-deal scenario.

Supplementary protection certificates

Unlike European patents, the system of SPCs, by which exclusivity for certain pharmaceutical products may be extended, is governed by EU Regulation 469/2009 (the SPC Regulation). The SPC Regulation currently has direct effect in the UK, which will have ended on March 29 in the event of a no-deal. The continuing grant of SPCs in the UK therefore requires the implementation of the SPC Regulation into UK law further to the act. The UK government has confirmed that this system will continue under UK law, operating independently from the EU regime. SPCs will therefore continue to be granted on a national basis by the UKIPO. If the UK agrees to the draft withdrawal agreement, the SPC Regulation will continue to apply with direct effect to those SPC applications made during the transition period that are ongoing at the end of that period. These must provide for the same level of protection as that provided for in the SPC Regulation.

An issue at the moment is whether amendments to the SPC Regulation allowing for a manufacturing and stockpiling waiver will come into effect in the UK. This again depends on whether the UK agrees to the draft withdrawal agreement or not. If not, and subject to delays in the Brexit date, the waiver will not be effective in the UK, because it is expected to come into force after the date of Brexit on March 29 2019. In this case, the UK may decide to implement its own, domestic version of the waiver. But it will not be compelled to do so.

Paediatric extensions to SPCs

A further EU instrument, Regulation 1901/2006 (the Paediatric Regulation), permits extension of an SPC by six months on the basis of the submission of a paediatric investigation plan (PIP) and a decision made centrally, within the European Medicines Agency. Like the SPC Regulation, in the event of a no-deal, the Paediatric Regulation will be transposed into UK law on Brexit day. In these circumstances, it is expected that the Medicines and Healthcare Products Regulatory Agency (MHRA) would make decisions about the grant of paediatric extensions for the UK, based on the administration of its own PIPs, or their equivalent. This is an example of where cooperation and mutual recognition between authorities will end, requiring separate applications for the MHRA and the remaining EU member states after Brexit. The more widespread effect of this split is seen in the area of regulatory rights.

Regulatory rights under the withdrawal agreement…

Despite the fact that EU law, including the new medical devices regulations, will continue to apply to the UK during the transition period, there are a number of provisions in the draft withdrawal agreement relating to MAs, market surveillance and CE marking of medical devices by notified bodies to be aware of (see Table 1). Perhaps most surprising of these is that under Article 128(6), MHRA would be prohibited from acting as the lead authority for MA applications at the EU level during the transition period – the UK cannot be a reference member state for MA applications made under the decentralised or mutual recognition procedures during this period.

Table 1: Transition period arrangements under the withdrawal agreement

Any good (including pharmaceuticals and medical devices) lawfully placed on the market of the EU27 or the UK before the end of the transition period may continue to circulate until it reaches its end user (Article 41).

Exchange of information between UK and EU market surveillance bodies (including where requested in respect of conformity assessments by notified bodies). The European Commission must be notified of goods posing a serious risk (Articles 43(1) and (2)).

All relevant files or documents relating to procedures led by the MHRA including MA applications under Directive 2001/83 that are ongoing on the day before the entry into force of the withdrawal agreement must be transferred to the competent authority of a designated member state (Article 44).

The obligation to transfer MA dossiers for products authorised before the end of the transition period, where they are necessary for the assessment of an abridged application under Directive 2001 /83. This applies upon a 'reasoned request' made by a competent authority of a member state (or the EMA) to the MHRA, and vice versa (Articles 45(1) and (2)).

If requested by the certificate holder, information held by a conformity assessment body established in the UK, in relation to its activities as a notified body before the end of the transition period, must be made available to a notified body established in a member state, and vice versa (Article 46).

The MHRA will not act as a lead authority for MA applications at the EU level during the transition period (Article 128(6)).


…and under no deal

This is where the severing of ties between the UK and EU is most evident. Again, while rules on MAs and related data and market exclusivity, medical devices, orphan drug exclusivity, and many other areas such as batch-testing will continue to apply under UK law, the common systems of recognition of these between the UK and the EU will end. Subject to some grace periods discussed below, the consequence is that these will need to be managed separately in each of the UK and EU, post-Brexit.

To this end, the UK government and the European Commission have both published a variety of guidance notes raising key points of advice and action relating to MAs and CE marking of medical devices, which will apply in the case of a no-deal. Key points from these notes are summarised in Table 2. A recent report by the UK government, titled Implications for Business and Trade of a No Deal Exit on 29 March 2019 (February 26 2019), explains that it has taken a continuity approach in which there is some form of continued recognition of EU product requirements and associated compliance activity that will continue for a limited period after a no-deal Brexit. This is an apparent reference to the unilateral measures recognising EU-batch testing, EU-CE marking and certain grace periods in relation to EU MAs (see Table 2), which are intended to ensure that goods continue to flow onto the UK market.

It is nonetheless disappointing that abridged MA applications will not be possible in the UK for drugs where the MHRA does not have access to the data underlying the original authorisation; the implication appears to be that generic companies must file a complete set of regulatory data, including clinical trials, at the MHRA in order to obtain abridged authorisations for products where the original dossier is located in an EU member state or the EMA.

Table 2: Key points from the UK government and European Commission guidance notes

Centrally authorised MAs will be 'grandfathered' onto the MHRA register as UK MAs.

Separate MAs must be filed for the UK to those for the EU/EEA – the UK will no longer participate in the centralised procedure (operated through the EMA), and will not participate in the decentralised or mutual recognition procedures (either as a reference state/lead authority or by recognising EU reference states).

MA applications that are still progressing in the centralised procedure at the time of Brexit must be transferred to the MHRA. Applications that are still in the decentralised or mutual recognition procedures at the time of Brexit can be completed and approved by the MHRA.

Abridged applications will not be possible for drugs where the MHRA does not have access to the data underlying the original authorisation.

MA holders of 'grandfathered' MAs, and qualified persons, must be established in the UK for the purpose of market access in the UK. There is a grace period for this purpose until the end of 2020. Except for the grace period, this requirement mirrors measures that the EU will put in place for the EU/EEA market.

The UK will continue to accept batch testing of human medicines carried out in countries named on a list set out by the MHRA (including EU/EEA). This arrangement has not been reciprocated by the EU.

The UK will continue to recognise CE marking conducted by EU notified bodies post-Brexit, for a 'time-limited' period. This arrangement has not been reciprocated by the EU.


Are life sciences businesses prepared?

The overall picture of the regulatory system is of the UK and the EU splitting into two parallel streams. Businesses therefore need to duplicate their regulatory activity between the two. Are they ready to do so?

The Implications for Business and Trade report makes sobering reading on the level of UK business preparedness for a no-deal Brexit: "Despite communications from the government, there is little evidence that businesses are preparing in earnest for a no-deal scenario and evidence indicates that readiness of SMEs in particular is low." It should be emphasised, however, that this is not a specific reference to the pharmaceutical and medical devices sector or life sciences generally. The life sciences sector is a broad, varied and complex church. It is also sophisticated and, in the form of its industry bodies, has been pro-active and vocal about the challenges of Brexit ever since the vote in 2016. As the UK BioIndustry Association has put it:

"All of us involved in the life sciences sector know that Brexit poses significant risks. Every month, 45 million packs of medicines move from the UK to the EU and 37 million go the other way. The life sciences sector knows that it is patients who are at the end of their supply chains. The work our industry has done over the past two years to prepare for Brexit has been tremendous."

In the area of medical devices, the British Standards Institute (BS), the leading UK-based EU medical devices notified body has also been quick to prepare for a no-deal Brexit, announcing on November 13 2018 that it had achieved full designation as a Medical Device Notified Body in the Netherlands. This is to assist, to use BSI's words, the "straightforward process which is primarily administrative to migrate existing CE certificates to the new Netherlands Notified Body". The BSI is confident that it can fully migrate all of its clients to its new notified body in time. However, it has warned that CE mark holders must be pro-active and initiate this process themselves before it is too late. And, in the pharmaceuticals area, while we can be confident that many companies have well-developed Brexit contingency plans, the preparedness of others is unclear.

As the most disruptive scenario in the short-term, preparation for no-deal is essential even if there is an extension of Article 50. But there is one thing for companies in the sector to remember if the withdrawal agreement and transition period are the outcome: a future relationship must still be agreed by the end of the transition period. If not, the industry will have to prepare for many of the same issues all over again. Let's hope that when that time comes, the words of Richard Phillips will no longer apply.

Paul England

© Taylor Wessing. Paul England is a senior professional support lawyer at Taylor Wessing in London.


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