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May 2017

With Prime Minister Theresa May's Conservatives likely to be returned to office with an increased majority in the UK, there is no doubt that the UK is leaving the European Union ("EU"). Uncertainty nonetheless remains on one of the most frequently asked questions in the life sciences sector: what will happen to the European Medicines Agency ("EMA")? As we discuss below, there are a number of significant difficulties facing relocation, and the UK Government does not intend to let go easily.

The EMA is an EU body which evaluates and authorises medicinal products within the EU Member States, and those of the European Economic Area. As well as administering marketing authorisation applications for conventional pharmaceuticals, it is also the compulsory route for new active ingredients indicated for HIV, cancer, diabetes, neuro-degenerative diseases, autoimmune dysfunctions and viral diseases. Certain classes of products must also be authorised through the centralised procedure, including advanced therapy medicines, medicines derived from biotechnology processes and orphan drugs. The EMA also has responsibilities for developing paediatric medicines.

The EMA headquarters where this work is centrally coordinated is currently housed in London's Canary Wharf. This has raised the contentious question whether the EMA can stay where it currently is, after Brexit, or whether it must move its headquarters to an EU Member State. None of the Regulations governing the EMA require that is must be physically located in an EU Member State. However, it is a political issue and EU officials have stated that, as a consequence of Brexit, it would be unacceptable for the Agency to remain in the UK.

In the immediate aftermath of the British vote to leave the EU, the EMA commented in a press release that the "implications for the seat and operations of the EMA depend on the future relationship between the UK and the EU…the decision on the seat of the Agency will however not be taken by the EMA, but will be decided by common agreement among the representatives of the Member States". But, with competition for a new host city in the EU already underway, and at least Copenhagen, Amsterdam, Milan, Stockholm, Barcelona and Dublin already in contention, such an agreement is likely to be difficult to obtain; "Forget about solidarity, this will be messy, ugly, everyone for themselves" the FT reported a diplomat from one bidding Member State as saying.

A decision on the relocation of the EMA is expected in October 2017. There are, however, other potential problems facing any relocation. It is a concern within industry, as reflected in an open letter by the European Federation of Pharmaceutical Industries and Associations ("EFPIA"), that "It is a stark and alarming reality that such fundamental activities would undoubtedly be impeded were the operations of the agency to be disrupted as a result of the UK's exit from the European Union…In the event of obstruction or failure, Europe possesses no backup option". A large part of this concern is caused by the issue of relocating the EMA's secretariat of 890 staff. Approximately 50 percent of those staff recently surveyed by the Agency said that they would leave the organization rather than relocate to an undesirable city. This leaves any prospective host with the possibility that they need to compensate hundreds of people and also find highly skilled replacements. As the EFPIA also points out, such a location must have the connectivity and capacity to enable the 36,000 annual expert visits that are necessary to the EMA every year for it to conduct its business.

Failure to negotiate a break clause in the EMA's current lease means that relinquishing its premises in London leaves the EMA with a commitment to pay 20 years' worth of rent and associated charges, totalling an estimated €400m. Whilst EU officials have added this to the UK's notional 'exit bill', there is no indication of any binding commitment on the UK to actually pay it.

It may be that, as a result of the above hurdles, the 'Brexit secretary' the Rt. Hon. David Davis MP hopes there is an opportunity for pragmatism to overcome politics – the risks and costs of relocation outweigh the political cost to the EU of allowing the EMA to stay in London. Indeed, signaling that the UK Government thinks the point can be argued Davis has refused to accept the need to move the EMA, with a spokesman saying its location will be "subject to the exit negotiations". If he is correct, then any final decision on the future of the EMA is unlikely to be made before Brexit takes place in March 2019.

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