Brexit with or without a deal: Consequences for pharmaceutical companies

The timing of the brexit is approaching and the effects are already being felt by pharmaceutical companies. Last but not least, the headquarters of the European Medicines Agency was relocated from London to Amsterdam  on 14 November 2018 (Regulation (EU) 2018/1718 amending the Regulation (EC) 726/2004).

On Sunday, 25 November 2018, the remaining Member States of the EU (“EU 27”) reached an agreement with the British government on the United Kingdom’s exit from the EU. The British parliament will decide on this agreement on 11 December 2018. The EU 27 have ruled out the possibility of new negotiations.

This means there will be a preliminary decision on 11 December 2018 as to whether we will be facing a Brexit with or without a deal. This question is particularly interesting for pharmaceutical companies because it has great impact on their entrepreneurial activities:

“No-deal” Brexit

In the event of a “no-deal Brexit”, also called a “hard Brexit”, there would be no transitional period which would give companies time to adjust to the new situation and in particular to the new legal framework with respect to the United Kingdom. Furthermore, in the absence of a withdrawal agreement, at least the following effects would have to be expected:

• The exchange of information between the responsible British authorities and the authorities of the EU 27 would not be regulated, meaning in particular that in ongoing or not yet completed application procedures for pharmaceutical marketing authorisations reference could not be made to documents that have already been submitted.
• In addition, for the distribution of pharmaceutical products in the territory of the EU 27, it would be mandatory for the marketing authorisation holder to have a registered office in a Member State of the EU 27. If the marketing authorisation holder is (still) domiciled in the United Kingdom and wants to continue distributing pharmaceutical products within the EU 27 after Brexit, the company would either have to relocate its headquarters to the EU 27 or transfer the marketing authorisation to a pharmaceutical company within the EU 27 (which would also be possible within its own group). The same also applies to companies which, although they were not previously domiciled in the EU, made the distribution of their pharmaceutical product within the EU possible by appointing a European representative based in the United Kingdom.
• Moreover, (European) marketing authorisations would not automatically be recognised in the United Kingdom. Even though the “European Union (Withdrawal) Act”, which came into force on 26 June 2018, stipulates for the United Kingdom that EU regulations will initially continue to apply in the UK even after Brexit, within the territory of the UK these EU regulations would only be purely national (British) law after Brexit. Therefore, later changes and consequently deviations from EU law are possible and likely.
• The foregoing also needs to be taken into account for clinical studies if these are to be conducted in the United Kingdom. For the subsequent (European) marketing authorisation application, certain EU standards will have to be complied with, which the British standards will not have to meet in future.

Companies would thus already from 29 March 2019 have to set up dual corporate structures for the distribution of pharmaceuticals and, if necessary, for the development of pharmaceuticals. This could mean considerable additional expenditure in terms of money, personnel and resources. The workload for authorities will also increase severly, which is why company restructuring measures will also take increasingly longer. It is therefore advisable to introduce appropriate measures at an early stage.

“Deal” Brexit

If the British parliament approves the Withdrawal Agreement which Theresa May has agreed with the EU 27, the consequences for pharmaceutical companies would be somewhat milder:

• The Withdrawal Agreement, which is to come into force on 30 March 2019, provides, for example, for a “transition period” until 31 December 2020. EU law is to remain applicable for and within the United Kingdom during this period, meaning that at least some time would then remain for companies to prepare for the foreseeable consequences.
• Particular mention should also be made of Article 41(1)(a) of the Withdrawal Agreement:
   

Article 41 Continued circulation of goods placed on the market 1. Any good that was lawfully placed on the market in the Union or the United Kingdom before the end of transition period may: (a) be further made available on the market of the Union or the United Kingdom and circulate between these two markets until it reaches ist end-user; (…).

This provision would ensure that all products (including pharmaceutical (packages)) placed on the market in the EU 27 and the UK market prior to 31 December 2020 could still circulate in the same area after that date.

• Furthermore, Article 45(1) of the Withdrawal Agreement allows a Member State of the EU 27 or the European Medicines Agency to refer to marketing approval documents held by British authorities. This would ensure that generic products can still be approved in a simplified procedure in accordance with Article 10 or 10a of Directive 2001/83/EC after the end of the transitional period.
• Finally, in the event that, in particular, marketing authorisation procedures have not been completed before the end of the transitional period, the competent UK authorities would be obliged under Article 44 of the Withdrawal Agreement to hand over the documents to the competent authority of the now competent EU 27 Member State. This would probably save the applicant from having to resubmit the application documents in their entirety and start the application or marketing authorisation procedure anew.

Irrespective of these findings, risks remain that the implementation of the Withdrawal Agreement into national British law will not take place or will take place only incompletely. According to Article 4(2) of the Withdrawal Agreement, the United Kingdom is obliged to take the appropriate measures and, in particular, to ensure that the provisions can be implemented. However, this does not give rise to a separate claim for the individual company concerned.

Conclusion and outlook

The good news for patients is: a supply bottleneck in Germany is not expected by the federal government - neither in the case of a deal nor in case of a “no deal” scenario (see the federal government’s response to a question from the FDP parliamentary group, Bundestag document, 19/5161).

However, this does not alter the fact that companies have to prepare themselves thoroughly for Brexit and, in case of doubt, should proceed from the worst case scenario. This concerns in particular the impact of Brexit on pharmaceutical marketing authorisations. With regard to the distribution of pharmaceutical products, pharmaceutical companies will also partly have to restructure and reorganise themselves, which includes restructuring measures under company law. Finally, when developing new drugs, every pharmaceutical company will also have to ask itself whether it will still have clinical trials carried out in the United Kingdom.

This report is the first in a series of reports which will inform you in coming months about Brexit implementation measures, in particular in the pharmaceutical sector.

Link to the Draft Agreement on the Withdrawal of the UK from the EU:

Draft agreement on the withdrawal of the UK from the EU

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