brexit: laying out a path for uk...

Brexit: Laying out a path for UK healthcareAmy Brown & Elizabeth Cairns – November 2016

2 Copyright © 2016 Evaluate Ltd. All rights reserved.

Contents

Introduction 3

What Brexit means for life science funding and strategy 5

The UK by numbers 8

What Brexit means for drug regulation 11

What Brexit means for medtech regulation 15

What Brexit means for medtech patents 17

3 Copyright © 2016 Evaluate Ltd. All rights reserved.Brexit: Laying out a path for UK healthcare

Brexit: Laying out a path for UK healthcare

The dust has settled on the referendum ballot boxes but the air in the UK is still thick with haze.

More than four months on from the referendum no one – seemingly not even the politicians leading the process –

knows what Brexit will actually mean for the people, companies and organisations living, working and operating in

the UK. Even the recent decision by the UK High Court to allow MPs to vote when to trigger the Article 50 process

has not materially changed matters.

As such, the series of articles published by EP Vantage in early October looking at the implications of Brexit for the

life science industries remain relevant. Collated here, they sought to highlight the most important issues for the

sector, which include securing funding for universities and commercial ventures after the loss of EU money, the future

of drug and medical device regulation outside of European frameworks and implications for intellectual property and,

of course, freedom of movement.

These remain live issues to those seeking to protect this industry, as does a widely held belief that the UK has one

of the most important life science sectors on the global stage, particularly in terms of innovation. And to maintain

and build on this prowess, the sector needs to keep an outward-looking stance. British science has long been

strengthened by an ability to tap the best talent anywhere in the world.

“Life sciences is not merely a core British interest, it is a global endeavour. Insular life science is a contradiction in

terms. We are either part of the global mainstream, or we are out of it,” says Stephen Dorrell, chairman of the NHS

Confederation, and former Secretary of State for Health.

Mr Dorrell was speaking in early November at the launch of a report seeking to set out some key priorities for life

sciences in the Brexit negotiations. Public Policy Projects, a health and care policy think tank that he leads, believes

that these include:

• Securing maximum alignment between the UK and the EU on authorisation and licensing of new medicines

• Ensuring freedom of movement

• Negotiating a trade deal that mimics the current harmonisation of movement of pharmaceuticals and

active ingredients

• Attaining ‘associate member’ status to a new Framework 9 academic funding and continuing to

participate in the Innovative Medicines Initiative

• Agreeing UK participation in the new Unified Patent Court.

These largely echo themes raised by the industry-led UK EU Life Sciences Steering Group in September in a

presentation to government – both providing signs that the sector is mobilising to ensure that the government

considers all the implications for this segment of the economy.

Of course the wish list above can probably only be fulfilled – at least in the short term – if the UK follows a “soft

Brexit” route. The political climate at the moment makes this seem unlikely, hence the collapse in sterling. Freedom

of movement is likely to remain a sticking point and life sciences would unarguably be a major casualty should this

be curtailed to any great extent.


Indeed Luke Tryl, author of the PPP report, believes that few other industries have more to lose on this issue.

However, he also believes that this and all other concerns can be addressed in the negotiations, and that a strong

settlement can be reached to allow UK life sciences to flourish.

He points to Switzerland as an example of a country that has managed to foster a healthy life science sector with

strong links to other European countries, despite not being in the EU.

“We won’t get the same deal as the Swiss. But we have a real opportunity to build on life sciences and have a proper

industrial strategy, and maximise the advantages we have in terms of corporation tax, and the patent box,” he says.

His optimistic tone when speaking about the future and the chance to improve on weaknesses or faults with

the current EU-led system can be heard by industry leaders throughout the sector. Indeed many hope that the

Chancellor’s Autumn statement next week will signal that the government is listening, and contain tangible pledges

of support for life sciences.

Sweet spots for the sector include cuts to corporation tax, either temporary or permanent, a pledge to set up

an innovation fund or the backing of the Accelerated Access Review and a commitment to increase healthcare

spending as a proportion of GDP.

Some of these desires are clearly more achievable than others. Any big gestures regarding the future of funding

for the NHS seem unlikely, considering that this is as much an ideological issue as it is a financial consideration for

whichever government is in power. For the life science industry the future health of the NHS is hugely important, as

it is considered to be one of the UK’s key assets. The vast, integrated health care system is one of a kind; a valuable

market place and a deep mine of real world data, which remains largely untapped.

Many fear that these assets – the NHS, a rich academic scientific heritage, the strong history of innovation and

financing, and presence of many of the biggest drug developers in the world – have been threatened by the risks

that Brexit has injected into the system. Much of this could be lost without a clear strategic vision for the industry.

But this vision needs to place Britain in the midst of a wider life science endeavour. Not just as an inert beneficiary

of the €8.8bn in scientific support that flowed from the EU in 2015, for example, but a partner and collaborator, both

feeding and nourishing the ecosystem.

“Saying we may lose €8.8bn is missing the point. We need to be part of those European projects,” Mr Dorrell says.

The UK life science sector is gearing up to ensure that the government knows exactly what is at risk in these

negotiations.

“This doesn’t have to be a story of managed decline for life sciences, but we are in danger of wandering into that

unless life sciences are front and centre of the debate,” says Mr Tryl.

Of course until the shape of Britain’s exit from the European Union begins to appear, no one knows exactly where to

take the fight.

“Brexit remains an open debate,” says Mr Tryl. “In many ways, yes or no was the easy question.”

Brexit: Laying out a path for UK healthcare

In many ways, yes or no was the easy question.

https://www.gov.uk/government/publications/accelerated-access-review-final-report


What Brexit means for life science funding and strategy

It would be hard to overstate the importance of EU money to the UK life science sector. Support

for drug and medical device developers flows across the English Channel via many streams,

including grant money, academic collaborations and the European Investment Fund, which

among other activities backs commercial venture firms.

Many fear the loss of access to these huge pools of capital, as well as restrictions on the movement of highly trained

labour, and rightly so. If Britain becomes a less attractive place to do business the long-term implications are clear.

In the short term, many are calling on the government to signal its support with new tangible measures before Brexit

negotiations begin in earnest, to help companies make crucial plans for a future as non-EU citizens.

The government has already offered some reassurance. For example the Treasury has committed to underwriting bids to

the EU’s Horizon 2020 programme, an €80bn pot for science and innovation, even when projects continue beyond Brexit.

Brexit was looking likely to happen in 2019, given Prime Minister Theresa May’s pledge to trigger Article 50, allowing

two years of negotiations to begin, by March next year. However, the recent ruling from the UK High Court could

push triggering Article 50 out much further.

Still, some want the government to make much bigger gestures, such as commitments in cash terms to scientific

research in the longer term, and pledges to beef up existing mechanisms to make the UK an attractive place for life

science companies to locate to.

Steve Bates, chief executive of the Bioindustry Association (BIA), says more money for the biomedical catalyst would

be top of his hit list. This publicly funded programme backs fledgling commercial ventures arising from academia or

industry, and the BIA has long called for assurance of sizeable annual top-ups.

Other areas the government could address in the near term include the range and scope of R&D tax credits, the

patent box and entrepreneurs’ relief. The patent box cuts corporation taxes for income based on intellectual property,

while entrepreneurs’ relief cuts capital gains taxes for the owners of small companies that are sold.

“There are lots of things available for the government to do prior to Brexit. The autumn statement in November and

budget early next year will both precede anything substantial on the negotiations, and provide early opportunities to

show their support,” he says.

The government could also do more to bolster the NHS, the increased funding of which was one of the key promises

of the Brexit campaign. Already the largest buyer of medical technologies in the UK, the NHS could become a

more important customer for UK companies if, as seems likely, Brexit makes it tougher for them to sell into the rest

of the continent.

“It’s always been difficult for companies to get investment capital if their case is based largely on sales to the NHS,”

says Richard Devereaux-Phillips, of medtech industry group the Association of British Healthcare Industries. “If a large

part of their business plan is dependent on export and that becomes more difficult, and at the same time the local

market is not particularly receptive to innovation and new technology, that’s a problem.”

Matthew Godfrey-Faussett, of the law firm Pinsent Masons, agrees: “If the NHS has less cash to spend or is forced to

reorganise, that creates uncertainty in our home market and that will certainly have an impact on the medtech sector.”



Short-term pain

For some in the academic world the impact of Brexit is already being felt.

“We’re already seeing an impact on R&D at some of the universities,” says Ramesh Jassal, international head of

healthcare at corporate finance house Clearwater International. “There is a lack of funding coming through – will they

get any further grants and funds from the EU?”

Additionally, researchers are being asked not to be part of any framework arrangements, according to Raj Mehta,

business development executive at Cancer Research Technology.

“Most EU funds come as part of consortium funding. Essentially, what UK scientists will not be able to do is be part of

those big consortiums. So there’s the money itself, but also the issue of being part of large collaborations,” he says.

Collaborations between universities and the corporate world could also come under threat, as many receive EU

backing. For example a £50m partnership arranged in January between Albion Ventures and UCL obtained half of its

funding from the European Investment Fund (EIF).

Among its activities the EIF injects huge amounts of cash into European venture capital firms in return for a pledge

to invest a certain proportion of their funds in European start-ups. In a statement issued after the Brexit vote, the

EIF suggested that its activity in the UK might change, and while this is far from a definite decision to abandon UK

companies, it adds to the uncertainty.

According to figures provided by the EIF, in 2015 alone it invested €656m in the UK via equity participations – which

includes venture funds. Not all of this would have gone to life sciences but it is easy to imagine the crucial support

this provides to corporate investors. Indeed, one of the calls from the sector is for the government to set up an EIF

equivalent, post Brexit.

Financial adjustment

It is easy to imagine how a drop in funding for universities and the end of EU grants could have a long term impact on

start-ups – a good portion of medtech and biotech companies start as university spin-outs.

But start-ups also want to maximise their chances of obtaining qualified staff, limit the strain of regulation and ensure

straightforward, robust intellectual property protection.

“We will see business looking elsewhere for potential locations, because you’ve got a larger market guaranteed if

you are within the EU than if you are seeking to negotiate a trading position with the EU,” Mr Godfrey-Faussett says.

“There may have been a preference for the UK – that will now need to be reconsidered.”

This is a relevant consideration for established businesses as well.


If the NHS has less cash to spend or is forced to reorganise, that creates uncertainty in our home market.


“From our side, the UK will continue being an important country, but we will have to adjust financially how we do

business in the UK,” says Manuel Ortega, senior vice-president at the German cardiology device company Biotronik.

In geographic terms, one beneficiary of Brexit is likely to be Ireland. Already an attractive location thanks to its low

rate of corporate tax, as of early 2019 the country will be the only EU member state whose first language is English.

“It’s becoming a bit of a medical device cluster there,” says Mr Jassal. “[The UK] could be second to that if we do

go down the route of becoming completely independent.”

After the Brexit referendum in June IDA Ireland, the investment agency of the Irish Government, wasted no time in

noting that the situation could present an opportunity for the country to attract foreign investment.

The UK has generally been thought of as the first entry point to Europe from the US, Mr Devereaux-Phillips says.

This advantage could now be lost.

Pulling the levers

There are signs that some groups are already delaying strategic decisions until the effects of Brexit become clear.

However in terms of business activity many are surprised at how little impact the vote to leave has had.

After an initial pause on a collective sharp intake of breath, deal-making has continued apace, and stock markets

have largely recovered. “Commercially I haven’t seen any difference, either investment-wise or in deal-making,”

CRT’s Mr Mehta says.

As details of the negotiations emerge over the next two years few expect this to remain the case.

“Particularly if the UK heads for a “hard Brexit”, the UK will be a less attractive venue for investment by pharma.

It’s one of the sad side effects of all this,” says Grant Castle, a lawyer for Covington & Burling.

Although the government has levers within its reach to help maintain a favourable investment climate, having

apparently committed to leaving the single market it is hard to see how issues like freedom of movement of labour

can be addressed to the industry’s satisfaction. UK life sciences is a sector heavily reliant on talented immigrants.

Whatever Brexit route is taken, Britain will still have a life science sector worth £60bn that employs 220,000, which

is clearly in the government’s interest to protect and propagate. It is easy to see how the industry could form a key

plank of any new industrial strategy, particularly considering the UK’s strong scientific heritage and world reputation.

To make this possible the government needs to negotiate a future where life science companies find that the

drawbacks of being outside the EU are easily outweighed by the incentives on offer to locating within the UK.

Given the scope that Brexit presents to shape policy and make funding pledges, this is not impossible.

But it will take bold steps and big pledges, in cash terms at the very least.


From our side, the UK will continue being an important country, but we will have to adjust financially how we do business in the UK.


The UK by numbers

Even a brief look at a couple of investment metrics shows just how dominant a role the UK plays

in raising money within Europe. Over the last five years the UK has outpaced any other country

in terms of both IPOs and venture financing.

Given the UK’s strong academic base and the fact that London is the financial centre of Europe, this is perhaps not

surprising. However, it also serves to underline just what is at risk, should barriers be thrown up to the movement of

capital and people, or the UK become a less attractive place to do business.

The UK by numbers

Source: EvaluatePharma® 2 November 2016IPOs: Total raised ($m) by drug developers on European Stock Exchanges (2012 - 9M 2016)

London Stock Exchange / AIM

Euronext / Alternext

SIX Swiss Exchange (Switzerland)

NASDAQ Nordic / First North

Oslo Stock Exchange (Norway)

AktieTorget (Sweden)

44

1,124

970

286

19174

Source: EvaluatePharma® 2 November 2016VC funds ($bn) raised by European drug developers (2012 - 9M 2016)

United Kingdom

Switzerland

Germany

The Netherlands

France

Other

1.4

2.1

1.00.8

0.5

0.7

Source: EvaluatePharma® 2 November 2016IPOs: Total raised ($m) by European drug developers by country of headquarters (2012 - 9M 2016)

United Kingdom

France

Belgium

Sweden

Italy

Other

488

994

562

190

169

172

As the graphs above show, in the last five years the London Stock Exchange has seen almost as much money raised

as Nasdaq and Euronext’s various European exchanges combined, for drug developers seeking a public listing.

These exchanges cover most European financial centres from Stockholm to Paris or Lisbon.


Looking at this data another way, UK-based companies have raised almost double the amount of IPO cash as French

companies, the second most dominant European region for this type of financing.

Venture capital tells a similar story, with UK drug developers netting double that of the second biggest country,

Switzerland, in the last five years.

The UK by numbers

Source: EvaluatePharma® 2 November 2016IPOs: Total raised ($m) by drug developers on European Stock Exchanges (2012 - 9M 2016)

London Stock Exchange / AIM

Euronext / Alternext

SIX Swiss Exchange (Switzerland)

NASDAQ Nordic / First North

Oslo Stock Exchange (Norway)

AktieTorget (Sweden)

44

1,124

970

286

19174

Source: EvaluatePharma® 2 November 2016VC funds ($bn) raised by European drug developers (2012 - 9M 2016)

United Kingdom

Switzerland

Germany

The Netherlands

France

Other

1.4

2.1

1.00.8

0.5

0.7

Source: EvaluatePharma® 2 November 2016IPOs: Total raised ($m) by European drug developers by country of headquarters (2012 - 9M 2016)

United Kingdom

France

Belgium

Sweden

Italy

Other

488

994

562

190

169

172

The UK’s exit of the European Union throws doubt on many of the networks and structures in place that helped

Britain to lead these markets. Not least, the passporting rights of financial institutions, that allows them to do business

freely throughout the EU, no matter where they are located.

For British companies to keep appearing in the top of the league tables, below, the government needs to negotiate a

future in which the flow of capital and people can continue unheeded.

IPO Date Company Amount Raised by IPO ($m)

Headquarters Stock Exchange

2014 Circassia 332 United Kingdom London Stock Exchange (LSE)

2015 Cassiopea 169 Italy SIX Swiss Exchange

2014 Quantum Pharma 167 United Kingdom LSE AIM

2014 Molecular Partners 117 Switzerland SIX Swiss Exchange

2014 Horizon Discovery 114 United Kingdom LSE AIM

2015 Verseon 102 USA LSE

2015 Mithra Pharmaceuticals 97 Belgium Euronext

2015 Camurus 75 Sweden Nasdaq Stockholm

2015 Nordic Nanovector 73 Norway Oslo stock exchange

2014 argenx 60 The Netherlands Euronext

Biggest IPOs by drug developers on European stock exchanges(2012 - 9M 2016) Source: EvaluatePharma® 2 November 2016

10 Copyright © 2016 Evaluate Ltd. All rights reserved.The UK by numbers

Financing Date Financing Round Company Investment ($m) Country

2015 Series Undisclosed Acerta Pharma 375.0 The Netherlands

2015 Series Undisclosed Immunocore 320.0 United Kingdom

2015 Series B Nabriva Therapeutics 120.0 Austria

2015 Series A Mereo BioPharma 119.0 United Kingdom

2015 Series F CureVac 110.0 Germany

2014 Series A Adaptimmune 104.0 United Kingdom

2012 Series D CureVac 99.2 Germany

2013 Series E Symphogen 97.7 Denmark

2016 Series Undisclosed MISSION Therapeutics 86.4 United Kingdom

2015 Series C Merus 80.5 The Netherlands

Biggest venture financings by European drug developers(2012 - 9M 2016) Source: EvaluatePharma® 2 November 2016

Another metric that illustrates the weight of the UK is drug sales. It represents the fourth largest market in the region,

according to EvaluatePharma data, and is projected to be the second-fastest growing in the coming few years.

Still, while dominant in the region the UK will logically decline in importance to drug firms once it is carved out of the

larger European market. And barriers to trade or even drug approvals compared to the continent could have a big

influence on their investment decisions.

Few want to see this happen – hence the calls for close alignment to European regulatory structures and measures

to encourage inward investment.

Size of the market in EU set to grow by 27% between 2015-2022

EU-5 accounts for 69% of European pharma market in 2022

Germany is forecast to have thehighest increase in market value at€11.4bn, while the UK is in secondplace at €7.9bn

EU-5 Forecast Sales 2022 (€bn)

€27.5bn €43.4bn

€29.8bn€17.4bn €28.7bn

Source: EvaluatePharma European Drug Forecasts

11 Copyright © 2016 Evaluate Ltd. All rights reserved.What Brexit means for drug regulation

What Brexit means for drug regulation

The pharmaceutical sector is one of the most tightly regulated industries, and most of the

rules that govern the daily lives of UK drug companies are enshrined in EU law. With the

shape of the UK’s exit from the EU still unknown it is hard to predict what the future holds

for medicine regulation.

But it seems certain that keeping the cogs of drug development and regulation turning for the UK’s many life science

companies will be a huge legislative task. Under some circumstances EU frameworks could largely remain in place;

however, in October the government gave the clearest signals yet that that the UK will abandon these frameworks.

“A hard Brexit is very much the mood music of the moment. Which means no EEA and no EFTA – and no EU law,”

says Paul England, a partner at law firm Taylor Wessing.

At her Conservative Party conference speech in October the UK prime minister, Theresa May, explicitly ruled out

following the Norway and Switzerland models. This would seem to imply that the UK is set to plough its own unique

furrow in the world.

In terms of pharmaceutical regulation, EU laws and guidelines govern everything in the drug development process

from authorising clinical trials to the procedures for securing new drug approvals and the movement of goods

through supply chains. The 10 years of marketing exclusivity for orphan drugs and the six-month supplementary

protection certificates (SPCs) are also part of EU legislation.

After a hard Brexit the UK would be left with no laws in place to govern any of these activities. According to Mr

England, mirroring these legislations would be an immediate fix.

“The Government has announced that there will be a Great Repeal Act, which is expected to enact much EU law into

domestic law upon Brexit. This will be important for the immediate continuity of those rights that are important to the

life sciences sector.

“So the status quo could be maintained at least for the time being. They could be tweaked later on – the SPC

regulation has been heavily criticised, for example – one judge said it risked being not fit for purpose – so this could

provide an opportunity for the UK to improve on legislation,” he says.

A hard Brexit is very much the mood music of the moment.


The route for seeking regulatory approval of new medicines is one of the biggest legislative quagmires the sector

will have to navigate. Ultimately the UK needs to consider whether it wants to force companies to make a completely

separate marketing application from the European process.

While the country has size on its side – representing the second-biggest European economy the UK is likely to

remain an important target market for new drugs and devices – adding to a company’s administrative and cost

burden could be harmful in the long term.

And, on the other side of the fence, the Medicines and Healthcare products Regulatory Agency (MHRA) will have to

be beefed up if it is to be tasked with repeating every assessment already done elsewhere in Europe.

Currently the MHRA is one of Europe’s dominant drugs regulators, and is used more often than any other as

reference member state when the decentralised procedure is followed. As a result it is widely respected, and there

could be far-reaching implications if the institution’s key role in European drug regulation disappears.

“Even if we enter into a close free-trade agreement, the UK will lose influence in the development of pharmaceutical

legislation and policy, and will also lose influence in the pharmaceutical regulatory procedures,” says Grant Castle,

a regulatory lawyer for Covington & Burling. “And that must inevitably mean that companies shift their focus to more

influential jurisdictions.”

What Brexit means for drug regulation

Features Implications

Bilateral free trade relations can be negotiated with the EU and EEA on a case-by-base basis.

Some flexibility to restrict free labour movement.

EU pharma rules no longer apply, unless bilateral treaty negotiated.

Companies would need a legal presence in the EU to hold marketing authorisations, orphan designations etc.


The UK would need to negotiate a multilateral trade relationship with the WTO AND separate bilateral trade

agreements with the EU and EEA.

Even greater separation from EU pharma regulation.

The EFTA Model (European Free Trade Association, eg Switzerland)

The WTO Model (World Trade Organisation)


Allows full participation in the EU internal market, with free movement of goods, services, capital and persons.

However a country has very little influence with no MEPs, no vote in the EU Council and only observer status in

EU procedures.

Full implementation of all EU pharma laws, supply chains unaffected.

Companies able to apply for and hold marketing authorisations, orphan drug designations etc.

BUT MHRA demoted to observer status.

The EEA model (European Economic Area, eg Norway) Source: Covington & Burling presentation

The possible Brexit options


Many regulatory experts believe that patients, payers and applicants would benefit if a way can be found for the

MHRA to remain a cog in the European drug approval process, not only for the future but for products already on the

market in Europe and on which UK regulators have passed judgement.

Tim Worden, a lawyer with Taylor Wessing, says: “We believe that there is reason to be optimistic that a negotiated

solution will be reached in which the efficiencies of the current systems are maintained, not only because such a

scenario would benefit the EU and the users of the system as well as the UK, but also because the UK life sciences

sector enjoys an excellent reputation globally. So it is hoped that its continued pre-eminence, and easy accessibility,

will be a priority for the UK government.”

No doubt many companies, regulatory experts and indeed regulators are hoping that this comes to pass.

Location location

One of the first repercussions to be raised after the result of the referendum was announced was the location of the

European Medicines Agency. This is currently in London, and, while there are no legal reasons why it must move,

logic states that it will have to, particularly if a hard Brexit renders all EU law void.

“If you have a body dealing with marketing applications that are governed by EU law, what argument could we make

to keep it?” says Mr England.

Ultimately its location is likely to be decided around the negotiating table, he believes, as politicians hammer out the

finer details of the UK’s exit. Countries including Denmark, Spain and Sweden have already offered to host the agency.

However, also located in London is the life sciences division of the Unified Patent Court (UPC). It is equally

unthinkable that this could remain where it is, according to Mr England.

40 years in the genesis, the Unified Patent Court was on the eve of being ratified when the Brexit vote threw up

yet another roadblock in its long journey. Its formation was intended to enable a single patent to be enforced –

or revoked – throughout the region of its jurisdiction, with obvious cost implications for the applicant.

Centralised authorisation procedure

A single marketing application is submitted to the EMA; approval allows a drug to be sold throughout the EU and EEA. The great majority of novel molecules pass through this route.

Mutual-recognition procedure

A marketing application is submitted to regulators in one member state, and once approved it can then be recognised in other EU countries.

Decentralised procedure

Marketing applications are submitted simultaneously to relevant member states.

Routes to the European market

All require at least a legal entity to be present in an EU member state.


Given that the UK is in no position to ratify its formation – an essential step before it can go ahead – the process is

essentially in limbo. This has not stopped Milan pitching a bid to host the life science courts instead of London.

“My gut feeling is this will go ahead as so much been invested in it. But they can’t do anything until they know the UK’s

situation. Estimates are, with or without us, this court probably won’t start in the next five years,” Mr England says.

As it stands he believes that it is unlikely that the UK will ever be a part of it. “If we are in a situation where we are

cutting ties with any kind of European law and judgement then it’s not possible to see how we could participate,”

Mr England says.

Which means that if in the long term the UPC does go ahead and comes to represent a large, patent-efficient region,

the UK faces a future as a smaller, single-patent market with its unique administrative burdens.

Feeling the impact

Despite predictions that the UK would grind to a halt in the wake of a Brexit vote, the country continues to generate

encouraging signs of economic activity.

“People are still doing deals, recognising that there has been no big economic shock and there is a need to press

on. It is interesting how little impact it has had,” Mr England says.

This could easily shift once negotiations begin in earnest, and the shape of the UK’s relationship with Europe and

the rest of the world begins to emerge. Companies in the business of developing new drugs will want to see the UK

remain closely allied to the well-established systems of Europe, giving them easy access to a huge drugs market and

the regulatory systems that they know so well.


What Brexit means for medtech regulation

The UK’s vote in June to leave the EU will have profound effects on the medtech sector, and

with the CE marking process dependent on mutual recognition among member states, the

future of regulation of medical devices is already of great concern to companies. When the UK

leaves the EU it will be vital for it to set up a near-identical unilateral agreement – or access to

new devices will be delayed.

“Medtech companies will want to look at Europe as a market as a whole,” says Matthew Godfrey-Faussett, a partner

at the law firm Pinsent Masons. “If they can’t include the UK in that then they will say ‘We’ll come back to you later on.’

That’s the exact situation Britain’s got to be very careful to avoid.”

Quick cash

While the regulation of drugs will also be adversely affected by Brexit, leaving the EU is a particularly pressing

problem for UK-based medical devices companies. Obtaining EU approval for devices is generally quicker – usually

by around three years – than getting the green light from the FDA, so companies seek CE mark first and use the cash

from European sales to fund the US approval process.

If it becomes harder for UK groups to get their products CE marked these vital early revenues will be cut off.

Certainly other European countries outside the EU recognise the CE mark: Norway, Iceland and Liechtenstein are

covered as EEC signatories, whereas Switzerland has simply transposed the Medical Device Directives – the EU laws

covering device regulation – into its national laws.

However, Ms May has rejected adopting a Norway or Switzerland-style relationship with the EU. To be sure, she

was speaking in general terms and this does not definitively rule out CE mark recognition, but the direction the UK

government intends to take now seems clearer.

A more distant regulatory relationship is that between the EU and Australia. Australia recognises the CE mark to a

limited degree: CE marked products must still be registered with the Australian Therapeutic Goods Administration,

and there is a mandatory audit for certain classes of device, but the process is much easier than for non-CE

marked products.

An agreement along those lines would still be better than the UK being forced to trade with Europe under the

general World Trade Organisation terms – the fallback option if nothing better can be cobbled together. But many

industry watchers feel that the current system is not broken, and does not need fixing.


We’ve been regulated under the EU Medical Device Directives since the early 90s, and our view is that has worked well.


Gold standard

“We’ve been regulated under the EU Medical Device Directives since the early 90s, and our view is that has worked

well. It’s allowed patients timely access to appropriate new tech,” says Richard Devereaux-Phillips, director of

healthcare policy at the Association of British Healthcare Industries (ABHI), the industry association for the medical

technology sector in the UK.

The ABHI conducted a survey of its members in the run-up to the referendum, and found that one of their major concerns

was over “regulatory divergence between what’s happening in the UK and our next-door neighbours in Europe – that’s

going to be damaging for everybody.” Mr Devereaux-Phillips says that the CE mark system is regarded by medtech

players in many other parts of the world as the gold standard, so the ABHI is anxious that the UK stays within it.

Whether this will happen is another question. Mr Devereaux-Phillips believes it is too early to say, pointing out that

negotiations even of this relatively small corner of the vast and lengthy Brexit process will take years.

Changes to regulations will affect companies within the UK, but they will also affect UK patients in need of new

technologies. If the UK ends up regulating devices outside the CE mark system it will be a vastly lower priority for

device companies as a small market compared with the rest of the EU.

“Nobody is purely targeting the UK,” says Mr Godfrey-Faussett. “Compliance with the existing and projected Europe

regimes … would be the way to go. Otherwise you’re just creating your own trade barriers, effectively.”

Even if an ex-EU UK remained compliant with the harmonised system, it would forfeit any chance of helping to shape

the regulations to which it would still be subject.

Status quo?

One of the claims the Leave campaign made in the run up to the referendum was that the regulations governing

clinical trials would be relaxed, making the development of new drugs and technologies quicker and cheaper.

Mr Devereaux-Phillips feels this is unlikely, and points out that some of what the ABHI’s members regard as the most

burdensome regulation originated in the UK anyway.

“The Eurosceptics have always complained that we gold-plated Europe directives as we transposed them into UK

law anyway, so I don’t see how regulation is likely to be any less stringent – particularly in an area where you’re

talking about research into human health,” he says.

He also points out that if the regulation of UK clinical trials was perceived as less stringent than in

other countries it would be harder to gain approval for devices developed in the country.

In short, the best thing for companies both in and outside the UK would be for the new regulatory

system to hew as closely as possible to the situation as it is now.

“It would be foolish to rip a lot of stuff up from a regulatory perspective until we have something

that is well thought out to go in its place,” says Mr Godfrey-Faussett. “Bearing in mind we are

coming from a standing start and have a relatively short time, I don’t think we’re going to be in

that position very quickly, and therefore keeping going as we are must be a sensible approach.”


17 Copyright © 2016 Evaluate Ltd. All rights reserved.What Brexit means for medtech patents

What Brexit means for medtech patents

As with the medical device regulatory system, intellectual property laws are harmonised to a

large extent across Europe. The UK leaving the EU in 2019 will throw a complex area currently

in a state of flux into even greater confusion.

“Regardless of Brexit we’ve got major changes coming to the patent landscape in Europe, and these are particularly

interesting for tech and medtech companies,” says Victoria Bentley, legal director at Pinsent Masons. Medtech

companies have been gearing up for the establishment of a Europe-wide unitary patent and a single patent court.

These initiatives are the result of prolonged and intricate negotiation – but the result of the Brexit referendum

throws them into doubt.

Court out

Currently companies have a choice of ways to protect their inventions in Europe. They can have national patents,

valid for a single country, but these are generally only worth getting if a company does a great deal of its business in

a single state. Alternatively they can obtain a single European patent, which effectively is a bundle of national rights

all gathered together, Ms Bentley explains.

“Even though it’s a European patent you still have to treat it as a separate national patent for the purposes of

enforcement and litigation.”

This will change with the planned unitary patent, along with a new Unified Patent Court (UPC) to harmonise patent

registration and litigation across the EU. The patent would be enforceable in all the member states in a single action –

if it is upheld in Sweden it is upheld in France. The downside is it is vulnerable to revocation in a single action as well.

The unitary patent may have been of particular benefit for smaller medtechs, Ms Bentley says, for whom the costs

of patent renewals, and of litigation in separate countries necessary under the old system, would be a major

consideration.

Negotiations towards this new patent and the establishment of the UPC have taken decades. The new system was

expected to come into effect at the start of next year, January 2017, but following the UK’s decision to leave the EU

it is under threat.

“Negotiations were in their final stages, but it still needed ratification by several member states to trigger the

implementation of the system,” Ms Bentley says. “That had to include the three largest – Germany, France and

the UK. But only member states of the EU are able to participate.”

Until the UK is no longer an EU member state, or unless the agreement

on these provisions is amended, the UK’s ratification is mandatory.

“So we’re in a situation where the system can’t go ahead with the UK

and it can’t go ahead without it,” Ms Bentley says.

18 Copyright © 2016 Evaluate Ltd. All rights reserved.What Brexit means for medtech patents

Worse for medtech

In actuality the new system probably will go ahead, but launch will be delayed. Once the UK has left the EU Italy

will replace it as the third country whose ratification is mandatory. But in this case the consideration, particularly for

smaller medtechs, shifts: is it worth getting a unitary patent when it no longer includes the UK, the third largest device

market in Europe? At the very least these companies will face the additional cost of obtaining a national UK patent in

addition to an EU-wide one.

And that calculation will be different for medtechs than it will be for biotech companies, Ms Bentley says, adding

that device companies are perceived as being more willing than biopharma groups to have their patents within the

unitary system.

“Pharmaceutical and life science companies will see it as more of a risk to have a ‘crown jewel’ patent for a

blockbuster drug within this system, because the risk of revocation in all 27 states through a single action is quite

high,” she says.

Medtech companies, however, often have thousands of patents that cover different aspects of the technology

involved in the device. A surgical robot or a pacemaker or even a relatively simple diagnostic test incorporates

many different patentable inventions.

Musical chairs

And Brexit’s effects on the Unified Patent Court will be more meaningful for the life science sector than other

businesses.

The new UPC is to have three seats, in Paris, Munich and London. London will oversee life science patents, Ms

Bentley explains, so the pre-Brexit plan was that cases referring to life science patents would be heard in London.

In theory the UK could keep the seat; the new rules specify that the seats will be in Paris, Munich and London, rather

than – as with ratification – the three largest participating states.

“There could be an argument that London should keep this seat due to its history of expertise in life sciences,” Ms

Bentley says. “But that creates problems, because the UPC won’t have UK judges if the UK’s not participating. It’s hard

to see that the other member states would support London in keeping that seat if the UK’s not part of that system.”

As far as intellectual property protection is concerned, the UK government’s now challenged decision to trigger the

formal exit process by the end of March could barely have happened at a worse time. Just as far-reaching, long-

planned changes were about to take force Brexit has swept everything away. And it appears that compared with

many other sectors, medtech groups, particularly the smaller ones, will be unusually badly affected.

Report authors: Amy Brown and Elizabeth Cairns

Additional complimentary copies of this report can be downloaded at www.evaluategroup.com/vantagebrexit

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