MedTech Europe's Brexit Challenge: Don't Forget The Kid In The EU Divorce

 The UK continues to press for favorable trading and regulatory conditions with the EU in its Brexit planning. But EU negotiators seem likely to play it by the book, with no favors shown. The medtech industry watched as the EU withdrawal agreement was approved by the EU27 at the March 2018 Euro Summit. Some weeks prior to that, MedTech Europe chief executive Serge Bernasconi told In Vivo of his fears for EU medtech if the industry was too slow in preparing for UK withdrawal. 

The UK has made a meal – and seemingly few friends along the way – of the process of leaving the EU. Its negotiating team has been gently mocked throughout, and its predilection for cherry-picking frowned upon – and worse. It has been, for many, an unedifying spectacle. But fully 21 months after its ill-judged referendum, the UK government finally secured a bit of breathing space, when the EU27 agreed to a withdrawal transition until the end of 2020 – coincidentally 21 months after the official UK leave date of March 29, 2019.       

In the aftermath of the Euro Summit, March 22–23, European Council President Donald Tusk spoke of positive momentum and referred optimistically to the forthcoming "phase two" negotiations, where medtech and the wider life sciences industries should get much-needed attention. On the contrary, speaking to In Vivo some weeks earlier, MedTech Europe chief executive Serge Bernasconi was rather more concerned than optimistic, in terms of Brexit's potentially negative effects on the EU medtech industry and patients (in the EU27 and the UK).

"Overall, our industry has been slow to react, and slow to understand the seriousness of the Brexit issue," he stated during a break in the proceedings of the annual MedTech Forum (MTF), in Brussels, Belgium.  "I hear companies saying, 'We will find a deal in the end, because we are integral to human health, and we are talking about people's lives.'" But Bernasconi, MTE chief executive since July 2012, knows it won't be that simple.

"It's quite critical that industry says to itself, 'Wake up and don't be naïve.' It must see what this is: a divorce, and not likely to be a smooth one," he said. The EU has a legal framework to manage the situation, and for Bernasconi, the only way the EU will go is by the book. "The UK says it wants a post-divorce life afterwards to work out nicely. But we, the industry, are like the kid in the divorce, and will feel the consequences of it and are yet only a spectator in the proceedings."

Controversy At The MTF – Or Wake-Up Call?

This was the tone of the message that Bernasconi delivered at the start of the MTF. Addressing the industry assembled from across the EU and beyond, his recommendation was that companies with operations in the UK should think seriously about moving them elsewhere. For some UK industry people present, this was the height of controversy.  His reasoning? The EU institutions (Council, Parliament and Commission) can rightly point out that they did not seek Brexit, so why should they have to make concessions? And the Brexit negotiators are lawyers, who will view the UK as a third country, and treat it as such.

Barring an extraordinary turn of events (implausible but not impossible), the single market scope is gone for the UK. So hard business planning is called for. "My interpretation of that is, if you have manufacturing plant in the UK, you cannot continue to produce there [if frictionless EU-wide business is your aim]. The EU institutions say there is no reason to make special conditions for the UK," said the MedTech Europe chief. Inflammatory and incendiary? Or just telling it like it is? 

 

"Only the politics have changed; the products themselves have not" – MedTech Europe chief executive Serge Bernasconi.

Bernasconi elucidated: "What I was trying to do at the MTF, maybe in a provocative way, was to say, 'Don't play Russian roulette – the day of Brexit, you could be faced with a major issue.'" Some companies have 100% of their product portfolios registered via a UK notified body (NB). "I have no vision of how things will play out, except that, until we are in the transition period [as decided at the Euro Summit (Also see "UK Medtechs Get A Touch More Certainty With Brexit Transition Agreement" - Medtech Insight, 29 Mar, 2018.), the CE marking will be respected and accepted, and it will be business as usual. But the day after that, it's the unknown." Don't look at it as if it won't happen, is his view, as adjustments cannot be made overnight. "My point is, while the Commission says clearly, 'Get out of the UK,' it is not our position, as MedTech Europe." Bernasconi has European medtech industry interests at heart. "I recommend you get working on this very seriously – get into action mode," was his message to industry behind the bald statement.

What The EU Industry Wants From Brexit

The medtech industry – the kid in the middle of two divorcing parents – wants to keep the relationship going. In the context of Brexit, Medtech Europe ideally seeks:

• Mutual recognition of the CE marking, and above all, on all work done until Brexit. All previously approved products that went through a UK notified body could be recognized as such and EU-approved. That might require them to be attached to an NB somewhere else in the EU, but that would be a formality. "Only the politics have changed; the products themselves have not";
• Some form of acceptance that the UK would tie into the regulatory approach of the EU27. Some people forget that the industry does not always serve millions of patients with its technologies: they often apply to very small patient groups; the more information and data one has, the easier it is to and the earlier one can detect an issue;
• Enough time for industry to do what it needs to during the transition period.  The extension to December 2020 was the minimum, in Bernasconi's eyes, especially given the fact of the Medical Device Regulation (MDR) and the uncertainty over just how many EU notified bodies still will be around to do the job. NBs are the heart of the system, and the new system is not working yet – no NBs have yet been reconfirmed under the MDR or the sister diagnostics regulation, the IVDR. Fewer NBs will naturally mean greater work volumes for whomever is left; and
• Care on the part of EU institutions to avoid where possible any decisions (on taxes, import/export conditions and general administration) that could make dealing with the UK more complicated. In many countries of Europe, medtech is a price-regulated industry, with commitments to tenders made over long periods. The industry's capacity to absorb tax increases, say, is minimal, but it would still have to absorb any uplift, not pass it on, so that's potentially an extra hurdle and moreover definitely something that would not encourage investment in innovation.

The four key points above are all rooted in common sense, said Bernasconi. But above all industry must keep its eyes wide open, plan and adjust for new scenarios. This is nothing against the UK, which, via its Medicines and Healthcare Products Regulatory Agency (MHRA), has played a strong role in building the EU medtech regulations. But look, for example, at the British Standards Institution (BSI), a huge UK NB in terms of European medtech auditing volumes. To date, the EU authorities have shown no interest in whether: UK NBs can set up in mainland Europe and carry on with their historical client base; direct or indirect mutual recognition is an option; or UK-generated audits could be grandfathered and thus achieve continuity.

EU Medtech System Under Pressure

The EU system is under multiple pressures, not just from Brexit and the MDR and IVDR. The US FDA is being lauded for its device system improvements, while many see the EU as losing ground, comparatively. Bernasconi admitted that, right now, there is indeed more visibility coming from the FDA than is coming out of the EU system. The new EU regulations are very political and need a lot of interpretation to make them workable. "But in the end, the 'simpler' FDA approach will still be demanding a bit more than we're asking for in the EU," the MTE chief believes.

Nevertheless, only one of the two systems is clear. The other is "very fuzzy," which creates many issues. "Five years of fuzziness [the IVDR transition period] is an enormous amount of time potentially lost to planning. Clarity and predictability are needed by companies so they can gauge if they are able to adapt. If they don't have them, they don't know if they will be able to adapt. And in that case, they are just waiting – and nobody just waits in business," asserted Bernasconi.

A lot of innovation comes from smaller companies, which will find financing novel products particularly hard if they don't know what is going to happen. These smaller units have a role in "feeding" the larger companies. "That is the essence of our innovation cycle, and in this industry, if that stops, everything stops," Bernasconi warned. Venture capital would suffer too, as investors do not back candidates over multiple years in industries that lack visibility. Not being able to see the path ahead is a severe deterrent.

A Key Role For The Influential Patient At The Center?

MedTech Europe has set itself the task of continuing to raise concerns over the impact of Brexit on patients, particularly regarding access to treatments. But it has not had any direct hits with its patient-centric arguments so far, and Bernasconi feels that patient associations could make the difference, so he is asking them to come forward and join MTE's efforts. Loss of medtech therapy options would be felt at the national level. There is also the need to maintain the UK in multicenter EU trials, which is especially important for small patient groups.

NBs Pivotal In Industry's Adaptation To Changes Ahead

But above all else, the MTE's biggest concern is the whole issue of notifies bodies: if they are unable to function, the whole industry is blocked. If a medtech company cannot renew its product registrations, officially it is out of the running. "We made a mistake by not anticipating that problem," Bernasconi conceded. "We should have discussed it beforehand, so the MDR/IVDR transition periods started only once the system was ready," he said.

"But it's not ready, and we had no say in it, Bernasconi continued. "Industry was merely an onlooker, like the kid in the marital breakdown. At the end of the day, this is going to eat up 1.5 to two years of our transition period, leaving just one year in which a significant number of products must be moved from the old directives to the new regulations." In total, 300,000 products will need to be certified against the new regulations – a bottleneck in the making. Averaged out, that equates to some 1,200 products per working day – and 24 per notified body – and that's just the existing products.

To be fair, "people are working on this, and the Commission is doing its utmost to work things out." DG Grow (internal market, industry, entrepreneurship and SMEs) is trying to find a solution, but its problem is a lack of resources, made more acute by the joint auditing process (the unannounced audits of NBs), which also requires input from the Commission and two national competent authorities.

Industry Ponders Identity And Role

At the same time, the face of the industry is changing, with the advent of digital technologies in particular and the ramped-up investment in this area. But industry has changed before. The big question that has resulted from the plethora of new, digitally oriented players, is about the identity and role of the traditional industry. Is it becoming an industry that merely gathers data from sensors and other tools? Or one that provides and analyzes data? Or an industry that gathers, analyzes, interprets and correlates data? Industry must decide how far it wants to go on big data, given the future possibilities of combining health, environmental and life-style data, and coming out with health warnings for individuals. To date, Google's activities in this field have been financed through advertising. But the wider industry needs to know about future reimbursement models.

"We are a conservative industry, often slow to move," said Bernasconi. "But we are going into digital, because this kind of threat or opportunity forces us into action. And we have no choice." The same applies to the MDR/IVDR and Brexit. It’s a lot for the kid in the divorce to take in, but the medtech industry has a habit of finding the solution.