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Life sciences companies urged to prepare for various Brexit scenarios

ANALYSIS: A stalemate in Brexit talks means businesses in the life sciences sector face a number of uncertainties over their future operations. The situation requires those companies to prepare for a variety of possible Brexit scenarios.05 Oct 2018

A deal on Brexit is still possible, but while the EU27 negotiators and their counterparts on the UK side talk bullishly about reaching agreement it is incumbent on life sciences companies to prepare for the possibility that the UK will leave the EU in March next year with no transitional arrangements to smooth that exit.

Both the UK government and European Commission have issued guidance in an effort to highlight what the implications of Brexit, including a potential 'no deal' Brexit, are for businesses.

For life sciences companies, important information is available on how the UK plans to regulate medicines and medical devices, how it intends to treat parallel imports, and what its hopes are on data protection, amongst other things.

However, with a lack of certainty on how the Brexit talks will pan out, businesses should be engaging in scenario planning, if they have not already done so, to ensure that they understand the potential commercial and other implications of what a 'no deal' scenario would mean for them.

Waiting for clarity on the detail of the Brexit deal is risky and it is doubtful if the negotiating timetable permits this strategy.

Brexit talks stalemate

An impasse seems to have been reached between the EU and the UK in the Brexit negotiations. The EU, it seems, has rejected the UK government's vision for its future relationship with the EU as set out in the July white paper – the Chequers agreement – and with this the odds on a 'no deal' exit are increasing. It is difficult to see how the differences, which include the Irish border question, can be reconciled.

There are other uncertainties. If a withdrawal agreement cannot be agreed within the two year time limit, by 29 March 2019, it is unclear whether the two year period allowed for under Article 50 could be extended or, although it is not government policy, whether the Article 50 notification could be withdrawn. Article 50 is silent on this.

While the UK government has said that it wants to remain involved as a 'third country' in certain EU programmes and agencies, including the European Medicines Agency (EMA) and chemicals regulatory framework REACH, it is still unclear if this is possible and what the cost will be.

Data flow uncertainties

It is also still unclear on what basis UK-based businesses and authorities will be able to exchange data with the EU and EEA after the UK exits the EU. In its white paper the government reiterated its call for a new 'adequacy-plus' style deal with the EU27 on data protection to apply post-Brexit. 

An 'adequacy decision' would allow for the continued transfer of personal data between the EU and UK upon the UK's withdrawal from the EU, however the UK government seeks an arrangement that goes further than the traditional 'adequacy' arrangements. 

However, there is still the possibility that the flow of personal data between the UK and 27 other EU countries will be disrupted following Brexit. Businesses should consider their data transfer options for a range of scenarios that could arise post Brexit, including the possibility that the UK will not immediately benefit from a so-called 'adequacy decision'.

Guidance in preparation for 'no deal'

Medical suppliers are amongst those predicted to be significantly impacted by a 'no deal' Brexit in a new report. The report predicts a slowdown in the economy, suggesting that a recession is “clearly possible” in the short term although the UK economy should continue to grow slowly in the longer term. The medical industry is predicted to face threats where there could be delays in obtaining drug supplies or approving new drugs.

The government has said it is preparing for ‘no deal’. Publication of a series of guidance  papers on preparing for this possibility is a wake-up call for those businesses that have not yet thought about the potential implications for them of a 'no deal' outcome. These complement a series of 60 papers issued by the European Commission over the past year.

Included amongst these papers is useful guidance on the regulation of medicines and medical equipment if there is no Brexit deal. This document makes clear that the requirements of the current EU directives and future regulations, such as the medical device regulations, will remain applicable in the UK, at least in the short term, under the provisions of the European Union (Withdrawal) Act 2018.

It also explains what a 'no deal' Brexit would mean for the UK Medicines & Healthcare products Regulatory Agency (MHRA).

The role of the MHRA

The UK government has outlined in the guidance that to "ensure continuity of supply in medicines" in the event of a no deal Brexit "the UK will continue to accept batch testing of human medicines carried out in countries named on a list set out by the MHRA".

However, unless the EU changes its position on pharmaceuticals regulation UK companies will be unable to supply medicines in the EU based on UK testing.

The MHRA has also announced a consultation on how the legislation and regulatory processes that guides its activities would have to be modified in the event of the UK not securing a deal with the EU after the UK’s exit, with no implementation period.

Under the proposals manufacturers of new biological or biosimilar medicines could obtain a licence to sell their medicines in the UK within 67 days of making an application. The new scheme aims to minimise the impact of a 'no deal' Brexit. Legislation to underpin the proposals has also been prepared in case a 'no deal' Brexit materialises.

Parallel imports

The UK government has also warned that parallel importers involved in repackaging medicines placed on the UK market and exporting them for sale elsewhere in the EU could be in breach of intellectual property (IP) rights in a 'no deal' Brexit scenario.

Scenario planning

While the negotiating process continues and may still lead to a deal between the EU and UK and the possibility of an implementation period,  we recommended considering what steps need to be taken to prepare for the worst case scenario – a 'no deal' Brexit.

Life sciences companies need to consider what measures they need to be taking to ensure that they retain access to both the EU and UK markets and that any disruption to their supply chain is minimised after March next year.

Helen Cline is an expert in life sciences at Pinsent Masons, the law firm behind Out-Law.com.