Brexit’s Bitter Pill – How Significant Was the Government’s Defeat on the Trade Bill Amendment?

With the European Union (Withdrawal) Act 2018 gaining Royal Assent on 26 June 2018, the focus in the UK Parliament has turned to the scrutiny and amendment of the Government’s Taxation (Cross-Border Trade) Bill (aka the ‘Customs Bill’) and its Trade Bill. In votes on amendments to the Trade Bill in the House of Commons on 17 July, the Government managed to block attempts to amend the Bill to require the Government to negotiate participation in a customs union with the EU. The Government’s position has remained unchanged since the Prime Minister’s Lancaster House speech in January 2017 that the UK is leaving the EU customs union. Following Cabinet agreement at a meeting at Chequers, the Government’s White Paper on the framework of the future partnership with the EU identifies that the UK will only seek a free trade agreement with the EU, meaning that the UK and EU will form distinct customs territories.

But in a surprise result, the Government failed to block an amendment which requires it to be ‘an objective of an appropriate authority to take all necessary steps to implement an international trade agreement, which enables the UK to fully participate after exit day in the European medicines regulatory network partnership between the European Union,  European Economic Area and the European Medicines Agency’ (new clause 6 of the Bill). The amendment was backed by prominent Conservative Brexit rebels including Ken Clarke, Dominic Grieve, Nicky Morgan and Anna Soubry. But what is the real significance of this?

Since the 2016 referendum there has been anxiety about what Brexit will mean for the approval and marketing of medicines, with the UK pulling out of the Single Market and withdrawing from EU institutions and agencies including the European Medicines Agency (EMA). As the Commons’ Health Select Committee Report on Brexit made clear, almost all the evidence it received suggested that after Brexit,  ‘the UK should continue to align with the EU regulatory regime on medicines …’.

The Government’s desire for a future economic partnership with the EU includes a willingness by the UK to continue to abide by a ‘common rulebook’ for goods, including medicines. But in order for a rulebook to work and for there to be alignment with the regulatory regime on medicines, the UK will also need to participate in an institutional, administrative and regulatory infrastructure that make that rulebook work in practice.

The EMA – set to move from its UK base in London to Amsterdam following Brexit – plays an important role in the risk assessment of new drugs and in the system of ‘centralised’ authorisation of certain new drugs – including those to fight cancer and neurodegenerative diseases like Alzheimer’s. The Government has made clear its desire to continue to participate in the work of the EMA following the UK’s withdrawal; a position it reiterates in its July 2018 White Paper on the framework of the future partnership with the EU.

But what is significant about the amendment to the Trade Bill is that it looks beyond the EMA to the system for ‘decentralised’ authorisation of medicines coordinated by a network of national regulators and by which the majority of medicines are placed on the European market.

Nonetheless, the first thing to be clear about is that domestic legislation does not an international agreement make. Whatever the appropriateness or not of Parliament instructing Government on its objectives for international negotiations, in the end it is for the EU and the UK Government to agree any arrangements for participation in the medicines network and work of the EMA.

From the EU’s side, the balance of rights and responsibilities which will be achieved in any future relationship depends on the wider context of the overall relationship and here the EU has, to date, had a rather fixed view of the kinds of models it is prepared to work with. The European Commission Task Force 50slides on ‘Regulatory Issues’ from February 2018 offers a contrast between a free movement/Single Market model of cooperation, and a free trade model. According to the Commission,  the regulatory tools and structures of the EU’s Single Market are not available under a free trade agreement. The idea of a sectoral approach to market access and regulatory issues is also rejected by the European Commission. Accordingly, whether or not the UK does get to participate in the European medicines regulatory network and the work of the EMA is not an issue that can be negotiated separately from that of the future relationship, and any future participation is dependent on whether the EU can accept that the UK may benefit from regulatory aspects of the Single Market without being in the EU or a party to the European Economic Area (EEA) Agreement like other non-EU states, Norway, Iceland and Liechtenstein who do participate in the medicines network and aspects of the work of EMA.

There is also an important issue of time.

The future relationship will follow a period of transition during which time the UK will continue to be bound by, and apply EU law, in terms of the Withdrawal Agreement that the UK hopes to finalise with the EU by October 2018. Nonetheless, the draft Withdrawal Agreement makes clear that although the UK will continue to have obligations as if it still were a Member State, in terms of appointment of members of EU agencies and participation in the decision-making and the governance of EU agencies the UK will not be considered to be a Member State after 29 March 2019. Now, it should be recalled that even for those non-EU states that participate in the EEA Agreement there is no direct participation in the management boards of EU agencies but there is participation in working and expert groups. Importantly, the three non-EU states that participate in the EEA are represented in the Coordination Group for Mutual Recognition and Decentralised Procedures that manages this system for mutual recognition that is at the heart of the medicines regulatory network.

However, the draft Withdrawal Agreement states in Article 6 that during the transitional period, attendance at meetings of committees, expert groups or similar entities of EU agencies is in principle excluded unless the Agreement provides otherwise. Indeed, Article 123(5) of the draft Agreement only envisages the representation of UK experts in the work of EU agencies where an act is to be addressed to a company established in the UK. More significantly, Article 123(6) states that the UK will not act as a lead authority or ‘reference Member State’ in the risk assessment, examination, approval or authorisation of certain products including medicines (Annex ‘y+6’). The implications of this are set out in a Q&A document of June 2018 produced by the Heads of Medicines Agencies. After 29 March 2019 – the beginning of transition – pharmaceutical companies that use the UK as a Reference Member State for obtaining authorisations for their medicines will not be able to make any new regulatory submissions until they appoint a new Reference Member State. All of which is on top of the problem that any market authorisation holder must be established in an EU/EEA state and that in order to hold a valid medicines authorisation, the holder must also be established in an EU/EEA state.

The limitations of the amendment to the Trade Bill now become clear. Even assuming that the UK Government could persuade the EU to conclude a future international trade agreement that will allow UK medicines’ regulators to participate in the EU regulatory regime – and the White Paper is clear that the Government does want UK regulators to be able to act as a ‘leading authority’ for medicines assessment (paragraph 30 c.) – there is an evident gap during the transitional period where – according to current texts – the existing system for decentralised medicines authorisation will not work as it has worked during the UK’s EU membership. The UK will not be a Reference Member State and authorization applicants and holders will not be based in an EU/EEA state.

It seems inconceivable that the UK will arrive at a future relationship with the EU that allows full participation in the European medicines regulatory regime after a transitional arrangement which would essentially exclude the UK from core aspects of the system of decentralised authorisation of medicines and mutual recognition of such authorizations.

There is clearly some way for negotiations between the UK and the EU to go and the amendment to the Trade Bill on medicines certainly reminds Government of the importance politicians and the public attach to this issue. However, UK parliamentarians cannot make this system for the regulation of medicines work by legislative fiat and in focusing on the future trade relationship with the EU it misses the target in terms of the need to protect this system during the transitional period. That may be a bitter pill to swallow.







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