BIA on Brexit

Despite the rollercoaster political backdrop since the referendum result the UK biotech sector is heading into the new decade and life outside the EU in a very strong position. As the BIA’s recently launched annual finance report showed, 2019 was the third best year recorded and the fifth consecutive year in which more than £1bn was raised. It’s clear that UK biotech companies remain an attractive investment opportunity for global investors.

 

The life sciences sector in the UK has always had a global focus, seeking to make therapies for the world. Companies are adept at managing complex regulatory processes for the approval of drugs and international supply chains that require long lead-in times to modify and adjust, mindful that unlike other sectors the ultimate destination for our products are patients.

 

Since 2016, the UK life sciences industry has assessed the risks and opportunities, making preparations for a range of potential outcomes for the UK leaving the EU – always with the patient at the heart of our thinking. Along the way we have seen repeated delays, political upheaval and changes in policy. With the UK having left the EU on 31 January, there remains continuing uncertainty about the nature of the UK’s future relationship with Europe and how we will trade with the rest of the world.

 

In the next phase the devil is in the detail and we stand ready to input our expertise. What businesses need now is rapid clarity and the opportunity to inform the Government's position going into the negotiations with the EU and our international trading partners. Industry input is critical because the UK's objectives will determine the trading arrangements for years ahead and the UK’s place in our industry’s global regulation structure.

 

At the start of the first week after Brexit, we have seen greater clarity from both sides on how they plan to approach the upcoming negotiation on the future relationship. Aside from Boris Johnson’s speech in the small print of its Written Ministerial Statement, the Government makes clear that it is seeking a sector specific annex for pharmaceuticals in the future relationship with the EU. “Annexes to the agreement could include provisions facilitating trade in specific sectors, such as organic products, motor vehicles, chemicals and pharmaceuticals”, This is in addition to more general measures on Technical barriers to trade and a desire for “mutual recognition agreements focusing on conformity assessment, with full coverage of the relevant sectors”.

 

This provides sight of a route by which the negotiations could deliver continued close co-operation on medicines regulation, for which industry has been steadfastly calling , for the benefit of patient safety, as cited in the political declaration agreed by Prime Minister Boris Johnson last year.

Similarly, the new European Commission document authorising the opening of negotiations for a new partnership with the UK reiterates that it is open to the possibility of close regulatory cooperation. In technical language paragraph 27 states: “while preserving regulatory autonomy, the envisaged partnership should put in place provisions to promote regulatory approaches that are transparent, efficient, promote avoidance of unnecessary barriers to trade in goods and are compatible to the extent possible” and  paragraph 30 says: “The envisaged partnership should establish a frame work for voluntary regulatory cooperation in areas of Union interest, including exchange of information and sharing of best practice” 

However, this glimmer of a way forward needs to be tempered by a full understanding of the incompatible red lines also established as the opening positions by both sides in their documents today.

New red lines for the negotiation from the UK include not having in future “any regulatory alignment, any jurisdiction for the CJEU over the UK’s law, or any supranational control in any area.”

The EU remains clear that dispute settlement on an interpretation of Union law should be “refer the question to the CJEU as the sole arbiter of Union law”. And it is clear that for them any deal must be underpinned by level playing field commitments to ensure open and fair competition, on areas like State Aid. 

The UK document states:  “The question is whether the UK and the EU can agree a deeper trading relationship on the lines of the free trade agreement the EU has with Canada, or whether the relationship will be based simply on the Withdrawal Agreement deal agreed in October 2019.” And asks that stakeholders should prepare for the reality of the UK leaving the single market and the customs union at the end of this year.

Unlike the Government's extensive campaign to prepare for a no-deal Brexit at the end of 2019, comprehensive advice for businesses about the implications of the transition period have been less high profile and less has emerged. What we have seen is advice on customs, tax and trading arrangements from HMRC which confirmed that there are no changes to the terms for trading with the EU and the rest of the world during transition. The government has also confirmed that the UK continues to be covered by EU-third country trade agreements during the transition period.

 

New official guidance on medicines regulation was circulated by MHRA on 31 January, which confirmed that the UK will continue to stay aligned to EU law during the transition period. There will be no changes to market access, licensing, packaging, batch release and testing. However, the UK will no longer act as a leading authority for medicines and some elements of the MHRA’s role will change. For example, the UK will no longer have voting rights in the European Medicines Agency (EMA) and EU committees but will continue to respect their decisions regarding regulation of medicines and medical devices. We've added full details on what changes and what doesn’t to the BIA Brexit portal.

 

The transition period ends on the 31 December 2020, unless both the EU and UK agree to extend before 1 July 2020. The UK government has legislated to commit that it will not extend, so if no trade agreement is in place by 31 December 2020, trade between the UK and EU would revert to WTO rules-based arrangements. This no future deal scenario would be equivalent to the no deal scenario industry planned for twice last year.

 

It is critical that we have a clear framework for the future relationship and a comprehensive trade agreement in place on 31 December 2020. The BIA has been very clear about the importance of getting the right deal in place for the life science sector. Our position remains that close cooperation with the EU in the regulation of medicines is essential to ensure that patients in the UK and the EU can continue to access safe and effective medicines and for the UK sector to thrive. Co-operation on the regulation of medicine predates the UK’s accession to the European Union for practical patient safety reasons and, for the benefit of patients in the EU and UK, should continue. Usefully the political declaration agreed by both sides envisions such a discussion. Duplicative red tape like repeating quality testing simply takes investment away from research and development.

 

Even with a Free Trade Agreement in place there will be an impact on customs and trading arrangements for life science businesses trading with the EU because the UK will no longer be part of the Single Market and Customs Union. EU leaders and the Commission have been clear that tariff and quota-free access to the EU market will require regulatory alignment – the so called ‘level playing field’ – meaning that higher levels of access to the Single Market would require higher levels of alignment on standards. The BIA has led a range of industry-to-government discussions on this issue, including with our members on the Regulatory Affairs Advisory Group and we continue to push for the best outcome for our sector.

We have also been looking carefully at the implications of the Northern Ireland Protocol, which forms part of the legally-binding Withdrawal Agreement treaty. The regulated supply of medicines, medical devices and the packaging in which they are contained stand to be fundamentally affected if the provisions of the Northern Ireland protocol come into legal force, next year. This is the default position if no future deal is agreed.  The Northern Ireland Protocol states that the UK regulator will be legally responsible for the running of the EU medicines regulatory system in Northern Ireland. To do this effectively the MHRA will need to maintain a role within the EU regulatory system and cannot be treated as a third country. The EU provided detailed guidance on no-deal planning two years in advance, we have just 11 months to make this different approach practical. We require urgent clarity on this. So we want an urgent technical working group of industry, regulators and health systems established under the newly established Joint committee mechanism, so that everyone has enough clarity and time to plan, and implement any changes needed to avoid disruption to patients.

Our sector relies on global talent and the new landscape for visas and rights to work is emerging. There have been positive signals about the desire of the government to remain open and we are inputting practical industrial perspective on new global talent and start up visa announcements.  We continue to work with the broad science community to access EU science programmes and have made to case about the benefit the UK entrepreneurial life science firms and VC management make the European Investment Bank.  

As we head into the next chapter things will change, but the BIA's priority will remain to help our sector navigate the uncertainty and continue to provide advice and guidance for our members and the negotiators. We will be following the negotiations closely as they take shape, seeking clarity on the Northern Ireland question and making sure that the Government is clear about our sector's priorities for a future relationship with the EU and trade with the rest of the world.

Ours is a sector of growth and the future and we look forward to continuing to innovate, translating cutting edge science into world leading products that tackle disease by growing companies to scale.