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June 24 was a seismic day, in more ways than one. The UK's decision to withdraw from the EU may have elated more than half of the voting public, but it has caused deep disappointment, anxiety and anger among many millions more in the UK, Europe and around the world.

It has sent shockwaves through financial markets and, to the dismay of the EU institutions, encouraged far-right politicians in countries like France and the Netherlands to call for similar plebiscites, raising fears that the EU is on the road to a break-up.

On top of that, Prime Minister David Cameron, who called the referendum in the first place, has announced his resignation, although he plans to stay in office for a few months to "steady the ship" until a successor is chosen to take responsibility for the UK's lengthy exit negotiations with the EU.

As if that wasn't enough, the future of the UK itself is now being called into question. With 62% of Scottish voters wanting to remain in the EU, Scotland's First Minister, Nicola Sturgeon, said that a second independence referendum was now "highly likely". And in Northern Ireland, which was also in favor of remain, Deputy First Minister Martin McGuiness called for a referendum on a united Ireland.

Starting The Process

Amid this clutch of constitutional crises, the magnitude of the task facing those who will have to negotiate the terms of a Brexit is becoming clearer. The president of the European Commission, Jean-Claude Juncker, said the UK government had to "give effect to this decision of the British people as soon as possible, however painful that process may be."

That process will begin when the government invokes Article 50 of the Treaty on European Union, triggering a two-year period during which an agreement on the terms of withdrawal will be negotiated. During those talks, the UK will remain a member state of the EU, although it will not be able to take part in any discussions in the European Council (heads of state) or the Council of the European Union (member state ministers).

Part of this negotiation process will involve disentangling the complex web of UK and EU legislation. As law firm Taylor Wessing pointed out, much of UK law is derived from EU law, "and the way in which EU law provisions have been implemented in the UK is highly complex, often involving a combination of amendments to existing primary legislation, new primary legislation, secondary legislation and other rules."

There will be no desire to totally re-write UK law, and provisions derived from EU law will probably be retained, at least in the short term, Taylor Wessing said, but it will be "important to ensure these laws function in a post-Brexit UK and where EU institutions have direct administrative powers, these will need to be replaced with alternative arrangements."

Life Science Implications

This will be a particularly difficult task in the case of the life science sector, which is subject to more EU-derived legislation than most industries and is likely to feel the effects in a broad range of areas.

Here are some examples of where Brexit might bite, although it has to be stressed that nothing will happen immediately and the exact nature of these impacts will only become clear when we know the terms of the UK's new relationship with the EU.

EU regulatory bodies

The European Medicines Agency and the UK Medicines and Healthcare products Agency (MHRA) are both based in London and work closely together on drug regulatory matters. MHRA officials play a key role in the work of the EMA, and while those from other countries do as well, there is a particularly close relationship here. Ian Hudson, chief executive of the MHRA, said recently that having the EMA based in London "helps enormously, in that we take a lead in the greatest number of assessment works, whether new assessments, pharmacovigilance or scientific advice." He added that this helped reinforce the UK as "a strong place for the pharmaceuticals sector to have a strong national agency."

Brexit could force the EMA out of its new premises in London and into another country, with all the upheaval that involves, and the close ties between the two agencies would be severed.

The MHRA declined to comment on what might happen, saying: "Unfortunately, it is far too early to provide any comment or statement to you at this time. We are recording all enquiries and will endeavor to address them as best we can as soon as we have something concrete."

The EMA also could not comment, saying that it respected UK citizens' decision to no longer be part of the EU, and that it was now up to the UK government to decide how to act upon the outcome of the referendum. But it did say that "no country has ever decided to leave the EU, so there is no precedent for this situation. It is too early to foresee the implications of this decision and we are working closely with the EU institutions. When we have concrete information, we will share it with our stakeholders." It added that it would "continue with its work with the goal to protect human and animal health and ensure access to medicines that are safe, effective and of good quality."

In an indication of how highly the EMA is valued, other countries have been expressing interest in having it on their soil – even before its departure from UK shores has been confirmed. On June 24, the day the referendum result was announced, Massimo Scaccabarozzi, president of Italy's industry association, Farmindustria, suggested Italy met the criteria for hosting the agency, saying: "We have many feathers in our cap. That is why I ask the Institutions for the new seat of the EMA to be in our country."

Drug regulation

Many of the rules and regulations that govern the life sciences take the form of EU directives whose provisions have been implemented into UK law, but others are in the form of regulations, which are directly applicable to the member states and would have to be somehow incorporated into UK law if they were to continue to have effect.

In theory, severing its ties with the EU could give the UK government more leeway in setting its own regulations in the life science area. However, given the global nature of the industry, the importance of common technical standards, and the need to minimize barriers to trade, the UK will probably want its legislation to continue to reflect that of the EU. But this means in effect that the UK would have to fall in line with future new laws passed at EU level, without having any control over how those laws were produced.

Drug Approvals

Most new drugs are now evaluated centrally by the EMA and approved by the commission, and in a non-EU UK, such approvals would presumably not be valid. Existing approvals might be allowed to remain and be converted into national authorizations, but for new drugs the MHRA might either have to duplicate the EMA's assessment or else have some kind of mechanism for recognizing EU approvals. In either case, companies would be faced with making two applications for the same product.

Things might be easier for medicines that have gone through the EU's decentralized and mutual recognition systems, as these have been either assessed or recognized by the MHRA. However, once out of the EU, the UK would not be able to take part in these procedures either.

Research

The effects of a Brexit will be felt particularly keenly on the clinical research side. The new EU Clinical Trials Regulation, whose provisions are due to take effect in late 2018, offers the possibility of a single trial application for multicenter clinical trials, and a new database that will make it easier to access trial data. Outside the EU, the UK may not be able to access that system. The CTR is seen as a great improvement on the current Clinical Trial Directive, especially in terms of boosting the number of studies conducted in the EU, and by leaving, the UK may well make itself a less attractive location for conducting trials. Similarly, the UK may no longer get access to the EU's growing Eudravigilance database of adverse drug reactions.

On the R&D front, the EU runs some major funding programs such as FP7 and Horizon 2020, from which both companies (particularly SMEs) and researchers can benefit. Horizon 2020 is a huge, seven-year research and innovation program with almost €80bn of funding that is intended to remove barriers to innovation and help public and private sectors to work together. The UK could well lose access to, or have a more limited role in, these kinds of research networks. And because the UK is a big contributor to the EU budget, the EU might have to rethink its spending priorities in this area.

Intellectual Property

As for intellectual property questions, the UK's departure will have no effect on the current arrangements for taking out and litigating European patents, which are governed by the European Patent Convention, a non-EU organization. However, it will impact the EU's planned Unitary Patent package, which, according to Mike Snodin of Park Grove IP, "will almost certainly now be significantly delayed, if not entirely abandoned." Unitary patents are intended to give pan-EU protection without the need to validate each patent at national level, with a substantial cost saving.

The UK is also likely to lose the pharmaceuticals and chemicals branch of the EU's new Unified Patent Court, even before it has set up shop in London's Aldgate.

Another issue that will have to be addressed is the future legal basis of existing EU protections such as supplementary protection certificates (SPCs), regulatory data protection, and market exclusivity, which play a major role in encouraging R&D into new drugs.

Trade

The impacts on trade between the UK and the EU are hard to predict because we don’t know at this point what the future relationship between the two will be. It could be a "Norway-style" arrangement within the European Economic Area, for example, or something like the deal agreed with Switzerland involving about 120 bilateral agreements – although in both these cases the countries have had to agree to free movement of people, a key reason Leave campaigners gave for wanting to quit the EU.

The third possibility is a full withdrawal from the EU single market, which would bring Britain under World Trade Organization rules. But this would involve the imposition of EU import tariffs and other non-tariff barriers. And as well as renegotiating its trade ties with the EU, the UK would have to forge agreements with the 53 countries, including Canada and South Korea, that already have free trade deals with the EU.

One cross-border activity that would be hit is parallel trade, where companies in the EU can make a profit by moving products from low-priced member states to higher-priced ones. A departure from the EU would presumably mean traders were no longer able to include the UK in their strategies.

A version of this article has also been published in ScripScrip Regulatory Affairs brings selected complementary coverage from our sister publications to our subscribers.

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