Michael Dohmann, Georgetown University Law Center, Class of 2019

On June 23, 2016, the United Kingdom (UK) shocked the world when it held a referendum and voted to leave the European Union (EU).  This decision, known as Brexit, was due to a mix of economic concerns, nationalism, and political elitism.

 The move will have a massive impact on a variety of industries, as the UK tightens its borders and exits the EU single market. 

The UK is now in the process of negotiating a transition deal that should be ready by October 2018.  During the transition, the UK will have continued access to EU markets and will remain bound by EU rules but will not have a vote in ongoing matters.

 If all goes according to plan, the EU and UK will have a trade deal ready for implementation on January 1, 2021, and the new relationship will begin.

The medical products industry is one of the most regulated industries, especially in Europe, where the convergence of national regulatory schemes with harmonized EU schemes has created a highly complex regulatory environment. The gradual movement toward harmonization is undermined by Brexit, as one of Europe’s largest markets will take a step in the opposite direction.

This change creates uncertainty and presents difficult decisions for both governments and industry. This paper will examine the impact of these changes from regulatory, research, and economic perspectives while also taking consideration of the potential impact on human health.   

Current Regulation of Medical Products in the UK

In the UK, medical products are currently regulated by both the Medicines & Healthcare products Regulatory Agency (MHRA) and the European Medicines Agency (EMA). The MHRA assesses drugs and medical devices and determines their approval status within the UK.

The EMA has similar functions, but for the entire EU. There are three routes to market in the UK, and the rest of the EU: the centralized procedure, the mutual recognition procedure, and the decentralized procedure.

The centralized procedure requires sponsors to apply for approval to the EMA. If granted approval, the sponsor will be permitted to sell its product throughout the EU and European Economic Area (EEA).

 This procedure reaches the widest market, however, approval takes considerably longer than the other methods.

The mutual recognition procedure (MRP) allows the sponsor of a product that is first approved in a single EU nation to use the approving state as a reference in applications to other EU/EEA states.

Other nation’s authorities will then review the sponsor state’s assessment report and determine whether to adopt their conclusion.

 If a state chooses not to grant approval, the application will then be referred to the EMA for a final decision.

The decentralized procedure (DP) is similar to the MRP, except it involves simultaneous applications to several states, none of which have yet been granted approval.

 Typically, one of the states will grant approval and then choose to serve as a reference. Once a reference state is established, the procedure tracks closely to that of the MRP.

The EEA consists of Norway, Iceland, and Liechtenstein. These countries bear only a portion of the benefits and burdens of EU membership, and could offer an alternative to negotiating an individual trade deal with the EU.

EEA countries are part of the EU single market, but do not have the same voting rights.

They must accept free movement of labor and pay into the EU budget, but do not have the power to veto new member states.

 Due to these concessions, this option may be unappealing to the UK.

 However, from a medical products regulation perspective, it is the easiest and least disruptive path forward.

Switzerland is not a member of the EU or EEA, and therefore does not participate in EU marketing authorization procedures.

 Swissmedic, the nation’s medical products regulatory agency, conducts its own assessment of innovative medical products.

 For non-innovative products, they may look to other regulatory authorities including the US FDA and the EMA.

Thus, marketing a new drug in Switzerland requires independent approval by Swissmedic, which requires filing a separate application that includes some additional information.

 The UK would not need to require additional information to the same extent, so the burden on applicants would vary depending on how this model is implemented.

While Switzerland has its own distinct regulatory system, it engages with the EU/EEA on compliance with GMPs and on sharing of information that would otherwise be confidential.

 GMP cooperation occurs pursuant to a mutual recognition agreement (MRA) operationalized in 2002.

The agreement allows EU authorities and their Swiss counterparts to rely on each other’s GMP inspections, waive batch testing of products upon entry into their territories, and share information on inspections and quality defects.

 The EMA has similar agreements with other countries,

 and creating one with the UK as part of the post-Brexit model would be a logical approach. 

The EMA also has a confidentiality agreement between the European Commission, FDHA, and Swissmedic as of 2015.

 The arrangement allows for the sharing of information including pharmacovigilance data and good clinical practice reports.

Following the Swiss model would be more disruptive than joining the EEA, but it would allow the UK to accomplish its goals of creating hard borders and avoiding participation in the EU government. Under this approach, the UK will be able to consider its own interests in future negotiations,

 but it will require negotiation that may not be finished in time for Brexit. 

Under the WTO model, the UK’s MHRA will be a completely independent regulatory body.

 Companies will be required to file a separate application in the UK for approval and import licensure.

 They will also be required to get separate certification of adherence to GMPs and other safety regulations.

In addition to burdening manufacturers, this option will burden the government by shutting them out of EU’s coordinated adverse event reporting. Thus, this option would be the most disruptive of the three models.

The impact of this approach would be especially dramatic for the regulation of medical devices due to changes made to EU Medical Device Regulations (MDR).

 These new regulations expand the range of products that are considered medical devices and subjects some devices to more rigorous approval requirements.

Since these new requirements would not apply in the UK under the WTO model, there could be a divergence in approval standards, increasing the burden on manufacturers and making a future reconciliation more difficult. This change may also lead to lags in approval time as UK regulators will no longer be allowed to serve on notified bodies.

Fortunately, MHRA has made it clear that it intends to play a fully active role in European regulatory procedures after Brexit.

 In its official response to Brexit, the MHRA noted that its regulatory strategy will be underpinned by three principles: 1) patients should not be disadvantaged, 2) innovators should be able to easily access the UK market, and 3) the UK should continue to play a leading role in promoting public health.

This statement suggests the UK will adopt something akin to the EEA or Swiss model which, unlike the WTO model, involves an ongoing relationship with the EU to the benefit of both patients and industry.

The UK is currently the home of 4.1% of the world’s researchers, ranking it third in the EU.

 This figure will be negatively impacted by two main changes under Brexit. First, the UK could lose the funding it receives from the EU under Horizon 2020.

 Second, the EMA will be moving its headquarters from the UK to Amsterdam, taking almost 900 employees with it.

Uncertainty About Research and Development Funding

Regardless of the approach the UK decides to take, it will no longer have automatic access to the EU’s research and development programs,

 and it currently receives 15% of the available funding for scientific research projects.

 As an EEA member or under the Swiss model, the UK would become an associated country to Horizon 2020 and would continue to be eligible for funding.

 However, negotiating themselves into this situation would take time, and require the UK to continue paying into the funding pool.

 There are fears within the UK that in the time it takes to perform these negotiations, companies will move their projects elsewhere.

Housing the EMA has helped fortify the UK as one of Europe’s leaders in medical research and development.

 When the EMA moves, the benefit of being close to the regulatory authority responsible for reviewing trials will disappear, making the UK less appealing. This decrease in attractiveness will be compounded by upcoming EU harmonization efforts that the UK will not be a part of.

For example, in 2019, the EU will begin applying a new clinical trial regulation, aiming to strengthen cross-border clinical trials.

 It will accomplish this by providing consistent rules for conducting clinical trials throughout the EU and sharing information across borders to avoid redundancies.

 These changes will make the EU a more attractive place for clinical trials, encouraging companies to conduct their trials there as opposed to the UK. 

The UK currently ranks sixth in the EU in pharmaceutical production.

 This is due to a variety of factors, including its large research base, the strength of its financial sector, its general position as an EU leader, and their housing of the EMA.

 Thus, with the EMA moving, they could lose a significant amount of investment.

 Additionally, as the EU embraces a uniform patent approval system, uncertainty concerning the geographical validity of UK patents will be amplified.

Due to these economic fears, companies have projected large losses and the possibility of reducing investment in the UK market. For example, GlaxoSmithKline, a UK-based company, is preparing for the worst, by projecting losses of 70M Euros over the next three years.

Despite the apprehension, not all hope is lost for the UK.  It still receives the most foreign direct investment in Europe and has its own national investment programs that can help it remain attractive to businesses.

 Furthermore, independence has had little impact on Switzerland, which has one of the strongest pharmaceutical markets in the region.

 Thus, if the UK can negotiate a soft-Brexit, it should be able to continue as a leader in the pharmaceutical industry. 

The impact of Brexit on health is perhaps the least certain, because it is closely tied to economics, making it two steps removed from the changes themselves. The biggest concerns are that companies will not launch their products in the UK and that trade barriers and increased administrative costs may be passed on to consumers.

The UK currently represents 2% of the global branded drug market, making it one of the more common market entry points for new pharmaceutical products.

 However, if UK approval becomes fully independent of approval in the EU, the UK will become a much less attractive starting point for companies.

 Being the location of new drug launches is beneficial to UK consumers because they can get access to valuable products sooner.     

The UK has an important decision to make as to what its involvement will be in the EU regulatory system for medical products. The path it chooses will have an impact on research funding, economics, and public health. The least disruptive path would be to join the EEA but doing so would undermine several of the UK’s purposes in leaving the EU.

Another option would be to create a bilateral agreement that results in partial harmonization. The least desirable path would be for the UK to have no bilateral with the EU and have the same relationship with it as any other WTO country. All these possibilities, coupled with the prospective of increased trade barriers and administrative costs, could ultimately have a negative impact on public health in the UK by limiting access to new products and increasing their costs.

 George Friedman, 3 Reasons Brits Voted for Brexit, Forbes (2016) 

https://www.forbes.com/sites/johnmauldin/2016/07/05/3-reasons-brits-voted-for-brexit/#55e888f11f9d

Articles

How changes related to Brexit may influence regulatory, research, and economic perspectives, as well as human health.    