The life sciences sector is one of the most exciting in terms of Scotland’s – and the UK’s – diversifying economic growth. It has, says David Gallagher, a commercial services lawyer at Brodies LLP, flourished over the past decade with companies launching and growing in Scotland, then attracting international attention while remaining Scottish headquartered, with healthy M&A activity.
“Most of the clients we speak to are advancing, notwithstanding the political backdrop,” he says – but he points out that the prospect of the UK leaving the EU on October 31 will create challenges that may have an impact on the UK’s hard-won and highly regarded status as a global hub for the life sciences industry – one which last year attracted investment of £2.2 billion in the biotechnology sector alone.
So how could Brexit impact this global standing? “We leverage a lot of research through our universities and academic institutions and much of that is conducted by PhD and post-doctoral students, many of whom are EEA (European Economic Area) citizens who study here then stay to work in our industries. “There are 220,000 people in the UK employed directly in the pharmaceutical and life sciences industry, of whom 7% are non-British EU citizens. Some of these highly qualified, skilled people are considering other options because of the uncertainty around Brexit and its effect on immigration. EU citizens who are in the UK prior to Brexit are entitled to settled status that would let them stay after Brexit, though they do have to apply for that.”
There is also the issue of how to underwrite the continuing success of the sector. “Government funding is critical in the life cycle of pharmaceutical products by sharing the risk associated with high risk development and a long lead time to market,” says Gallagher. “The UK currently provides between 10% and 12% of the contribution to EU initiatives and gets back about 16% in terms of Horizon 2020 funding (the biggest EU Research and Innovation programme) and the European Investment Fund.”
And, he adds, the UK has always been a greater beneficiary than a contributor to the European Investment Fund. “All this could be impacted by a no-deal Brexit and by the additional regulation that Brexit will inevitably bring,” says Gallagher. “Most medicines are known as centrally authorised products”, he explains. “They are authorised by the European Medicines Agency (EMA) which instructs the national regulators – in our case the Medicines and Healthcare products Regulatory Agency (MHRA) – to ensure that a product has been approved by the EMA and can therefore be marketed here.”
“On exit day, which the UK Government intends to keep as October 31, and assuming a no-deal Brexit, the EMA will consider the UK to be a ‘third country’ so the MHRA will become responsible for the authorisation for all medicines to be sold in the UK.”
The MHRA, Gallagher says, anticipates it will be fully resourced to be able to do this and there are ‘grandfathering’ arrangements (which will transpose the main EU body of regulation into the UK on exit day) in place to ensure that medicines already authorised and on the market are available through a centrally authorised procedure. “That means it is not giving itself a massive case load to deal with on day one – however, with new medicines coming through the pipeline this will be far in excess of what the MHRA has been used to dealing with.”
Companies who export to the EU will be required to have a registered company which is a marketing authorisation holder based within the EEA and an additional Qualified Person (QP) who certifies and releases batches in the EEA.
Registering for an Economic Operators Registration and Identification Number (EORI) will also be critical, in ensuring that paperwork at customs is processed quickly. For imported medicines there are concerns about stockpiling. According to Ash Soni, the president of the Royal Pharmaceutical Society, a stockpile lasting three months equates to around £4.5bn across the UK – and pharmacies aren’t paid until the medicines aredispensed.
Gallagher says : “You don’t know how long something is going to be sitting on the tarmac, as there may be confusion at the EU/UK border about what additional paperwork and checks are going to be necessary. Businesses therefore need to be aware of customs and VAT implications.”
And while stockpiling a packet of pills with a very long sell-by date might not affect product integrity, Gallagher says: “We work with several companies who deal with biologics, which are cell based. Many of these have a life span of between two and seven days so if there is a delay there is a significant risk that they will be spoiled before getting to the patient.”
In the case of human blood products, the UK currently imports between 6-10% of human plasma requirements from the EU on an annual basis. He adds that he is aware of businesses importing regulatory equivalent products from alternative jurisdictions as well as increasing intra-UK supply as a temporary measure until the anticipated initial disruption resolves to some degree.
Which, he believes, it will – and the mood among clients is one of cautious resilience. “There is a general acceptance that an exit day on October 31 would result in some disruption, probably lasting until the end of the year or into quarter one of next year but the expectation is that there would be a “new normal” after that. There is of course a desire to get to that point as quickly as possible.”
”What we have to be aware of,” continues Gallagher, “are the potential longer term implications. Beyond immediate potential tariffs and supply chain issues, the sector will have to ensure it can retain and continue to attract a globally mobile workforce.
“Add to that the innovation and the quality of papers being published in countries that are already not too far behind us in the league tables, and are willing and ready to take the EU funding that the UK was previously receiving and use that to increase their academic and R&D capability … how will that affect our worldwide standing in the life sciences sector?”
Continuity is the aim for provision of vital medicines
CURRENTLY, the majority of medicinal products marketed and sold in the UK are authorised centrally by the European Medicines Agency – these are known as “CAPs” or Centrally Authorised Products. If the UK leaves the EU without a deal, its involvement with the EU regulatory framework, including the EMA, will come to an end. This means that the UK’s regulator, the MHRA (Medicines and Healthcare products Regulatory Agency) will be responsible for authorising products for marketing in the UK.
For centrally-authorised products which are ‘on market’, the existing authorisation will automatically convert into a UK marketing authorisation on exit day (unless the Marketing Authorisation Holder, typically the manufacturer, opts out).
At present, there are certain compliance requirements which a Marketing Authorisation Holder must abide by to market medicines in the EU (including the UK): they must be registered in the European Economic Area and they must have a Qualified Person for Pharmacovigilance (the professional responsible for monitoring adverse events and side effects after the product is on market) based in the EEA.
While these requirements will continue, if the UK is no longer a part of the EEA after Brexit, then Manufacturing Authorisation Holders will require to mirror these arrangements if they want to market their product in the UK – having a registered body in the UK as the holder of the manufacturing authorisation and a Qualified Person responsible for Pharmacovigilance in the UK (although there is a grace period, subject to some caveats, for these arrangements until the end of 2020).
After Brexit, any new products looking for a marketing authorisation in the UK will need to submit a separate application to the MHRA for UK national assessment as the UK will no longer be a part of the centralised assessment process operated by the EMA.
For clinical trials, the UK’s participation in the European regulatory network will end on exit day.
However, the UK Government has indicated that the MHRA will take on responsibilities for those functions which currently fall to the EU. For ongoing clinical trials, the MHRA will recognise existing regulatory and ethics approvals, meaning there will be no need for trial sponsors to reapply.
Current rules, based on the 2004 clinical trials regulations, will continue to apply but will be modified by the EU Withdrawal Act to ensure they still work after Brexit.
While transition arrangements should ensure some form of continuity in the near term, the MHRA currently has significant influence in the development of European regulation and we could see a divergence in the years to come.
Action points for life science companies:
- Check and keep tabs on government advice regarding Brexit as this is updated regularly. The Bioindustry Association, the trade body for UK life science innovation, has a well-developed Brexit portal which contains relevant information for Life Science companies (biabrexit.org);
- Find out what tariffs your business may face in the event of a no-deal Brexit- forewarned is forearmed. UK Government technical notices are easily accessible online;
- Obtain an Economic Operator Registration and Identification (EORI) number. Your business will need one to import or export goods to the EU and could speed up customs and VAT processes, for which there will be increased paperwork at the border. It’s also worthwhile briefing your logistics company or regular courier on these requirements, particularly if you’re importing or exporting products with short shelf lives.
- Medicinal product regulation will change post-Brexit. Ensure you have a Marketing Authorisation Holder registered in an EEA state and the UK as well as a Qualified Person for Pharmacovigilance requirements in both regulatory frameworks.
- Conduct right to work checks for all new employees (current arrangements apply until the end of 2020) and don’t discriminate against EU citizens.Support employees applying to the EU Settlement Scheme and inform employees arriving after exit day about European Temporary Leave to Remain.
The magic number
DOES your business need both a UK and an EU EORI number? Maybe. If your business only deals with import or export declarations in the UK, with a customer/client completing the equivalent declaration on the EU side of the border, then you will only need a UK EORI number. If you are registered for UK VAT, a UK EORI number should already have been assigned to you by HMRC.
Contact HMRC if you have not received details of it. If you are not registered for UK VAT, you should register for a UK EORI number now.
However, if your business is responsible for completing the export declaration as goods leave the UK, as well as the import declaration when the goods are imported into the EU, you will need both a UK and an EU EORI number.
This will include situations where you are the importer on record in the EU as well as being the exporter from the UK; for example a UK business with a branch in the EU.
This article appeared in The Herald on Saturday 28th September
For more information please visit www.brodies.com
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