Out-Law Analysis | 10 Jan 2022 | 12:45 pm | 9 min. read
Efforts to strengthen the UK’s reputation as an attractive location for investing in life sciences will take a significant step forward in 2022.
The year ahead is likely to see major developments in UK policy and regulation – including in areas such as tax, use of data, clinical trial testing of medicines, and the use of artificial intelligence tools and medical devices – that will shape the sector for years to come.
It is vital that the underlying UK policy and regulatory landscape continues to incentivise investment at a time when industry is dealing with the challenges presented by the Covid-19 pandemic and Brexit. One initiative that the UK government is pursuing in this regard is its review into the research and development (R&D) tax relief system, which it opened in spring 2021.
Broadly, the review is considering whether to expand the definition of R&D to bring more activities within the scope of R&D tax relief; continue to maintain two separate relief systems for larger and smaller businesses; introduce changes to how the system is administered; and introduce territoriality requirements to make the reliefs more targeted.
In a report published in November 2021, the Treasury made some important clarifications in relation to the prospective new territoriality restrictions, which could have major implications for the vital elements of UK life sciences R&D that are often undertaken outside of the UK. The Treasury said that whilst territoriality restrictions will be introduced to refocus the ability to claim R&D tax reliefs towards R&D investment and innovation undertaken in the UK, companies will still be able to claim tax relief on the costs of software, data and cloud computing sourced overseas as well as payments for clinical trial volunteers overseas.
While the review remains ongoing, the government has confirmed that new rules will be introduced from April 2023. The government is to consult further on how the restrictions should be designed, with draft legislation expected to be published in the summer of 2022. The reforms will be pivotal in ensuring the life sciences sector remains the biggest investor in R&D in the UK.
There are aspects of law and regulation that were drafted and put in place before the capabilities and risks of AI were envisaged, raising issues of compliance and broader ethical questions
There is growing recognition of the role artificial intelligence (AI) tools can play in enabling better healthcare.
Life sciences and healthcare companies are increasingly looking to AI to streamline clinical and non-clinical processes, improve the diagnosis of diseases, and speed up the development of new medicinesand other treatments.
However, heightened awareness and increased use of AI brings its own challenges. There are aspects of law and regulation that were drafted and put in place before the capabilities and risks of AI were envisaged, raising issues of compliance and broader ethical questions. This challenge is recognised by policymakers and regulators around the world.
In Europe, for example, the European Commission has set out plans to regulate AI systems based on the level of risk they are considered to pose to people. It is likely that 2022 will bring further developments with the draft AI Act as EU law makers continue to scrutinise, adapt and ultimately finalise the legislation’s wording.
In the UK, a new regulatory approach to AI is likely to emerge in 2022 too. In its national AI strategy published in September 2021, the government said it was reviewing its policy approach to the regulation of AI. In 2018 it said “blanket AI-specific regulation” was “inappropriate”, favouring a sector-specific approach to regulating use of the technology. However, in its strategy it said that “now is the time to decide whether our existing approach remains the right one”.
“Additional cross-sector principles or rules, specific to AI, to supplement the role of individual regulators to enable more consistency across existing regimes” is one of the options under consideration. The government confirmed that the Office for AI will develop a “pro-innovation national position” on governing and regulating AI and that this will be articulated in a white paper “in early 2022”.
The government has also promised to outline a new draft national strategy for AI in health and social care specifically in early 2022. This strategy, it said, “will set the direction for AI in health and social care up to 2030”.
Life sciences companies can also expect to get clarity from the government on potential changes to UK intellectual property (IP) laws, which are being considered on account of the growing use of AI.
The Intellectual Property Office (IPO) has been consulting on various options for reform, including possibly writing a new form of IP right into UK lawto provide protection to “AI-devised inventions”, though experts have queried whether AI systems are currently sophisticated enough to merit an update in the law to protect any innovation that may be generated autonomously by a machine. The IPO’s consultation closes to feedback on 7 January 2022.
The UK government wants the UK to become “the leading global hub for life sciences”. In the summer it published a life sciences vision that it developed in consultation with health bodies such as NHS England as well as regulators, industry, academia and medical research charities. At the heart of this shared 10-year strategy for UK life sciences is data.
According to the vision, greater use of genomics and health data can provide “much deeper, real world evidence” about the safety of new medicines and health technologies.
The government said it and the sector’s top priorities include to “provide innovators with smoother and quicker access to reliable, high quality ‘real world’ data alongside clinical and genomic data”, and “seize opportunities to support the NHS and patients through innovative NHS data partnerships”.
It further stressed the need to simplify governance and oversight of NHS health data so as to “drive research and innovation”, while also highlighting the need for “ongoing public engagement, transparent use and the highest standards in data protection maintained to build public trust”.
On data protection, 2022 is likely to be an important year for developments in UK law. The government set out significant plans to reform existing data protection law in the UK in September 2021.
Among the proposals that will be of most interest to life sciences companies are the government’s plans to simplify the “complex, dispersed and layered” provisions currently relating to the use of personal data for research purposes, including making it clearer how the data can be used for scientific research.
The government is considering establishing “a new, separate lawful ground for research, subject to suitable safeguards” and wants to update the law to enable researchers to use individuals’ personal data on the basis of their consent even if “it is not possible to fully identify the purpose of personal data processing at the time of data collection”. Further reforms proposed would enable “the further use of data for research purposes” when it was collected for a separate purpose.
The government is also considering whether to change the law to allow some automated decision making involving the use of personal data to be carried out without human oversight.
The government’s consultation closed to responses on 19 November 2021. It is likely that businesses will get much clearer direction from the government on its plans for reform in 2022.
Head of Reputation, Crisis, and Client Operations
What links the proposals for reform of medical device regulation and point of care manufacturing, and the plans to overhaul the rules governing clinical trials, is the desire of UK policymakers and regulators to deliver a more flexible and streamlined regulatory environment for life sciences companies
The UK is known for its leading, dynamic and forward-looking regulatory body in life sciences, the Medicines and Healthcare products Regulatory Agency (MHRA). The MHRA’s move soon after Brexit to update its guidance in relation to comparative clinical efficacy testing as a means of enhancing the attractiveness of the UK market to biosimilar manufacturers is an example of a proactive approach many businesses welcome. Businesses are keen to see the MHRA continue to take the lead in driving policy which will support the life sciences sector.
In 2022, further important developments under the watch of the MHRA are anticipated. These include possible changes to the regulatory framework for medical devices, which the MHRA consulted on in autumn 2021, and the development of a bespoke regulatory framework for personalised treatments manufactured at the point of care in the UK, including cell and gene therapies, which the MHRA also consulted on in 2021.
The government has also signalled its intention to update UK clinical trials legislation, stating in the life sciences vision that there is an opportunity to “deliver genomics-enabled clinical trials” and pledging to “radically improve” clinical trials regulation so as to “create a more efficient and effective research environment”. A new regulatory regime for UK clinical trials was one of the recommendations made by The UK Taskforce for Innovation, Growth and Regulatory Reform, formed by Conservative MPs Sir Iain Duncan Smith, Theresa Villiers and George Freeman, which was set up to identify post-Brexit regulatory reforms. The MHRA told Out-Law that it plans to consult on new clinical trials legislation early this year.
What links the proposals for reform of medical device regulation and point of care manufacturing, and the plans to overhaul the rules governing clinical trials, is the desire of UK policymakers and regulators to deliver a more flexible and streamlined regulatory environment for life sciences companies. Businesses can expect to see more detail around how this will be delivered in 2022.
Businesses across sectors are under growing pressure to reduce waste, cut their greenhouse gas emissions and adopt more sustainable practices. Life sciences companies are not immune to this.
NHS England has set out its plans to achieve ‘net zero’ emissions in its control by 2040 and net zero for indirect emissions it can influence by 2045. Its targets in respect of indirect emissions includes an interim target of achieving an 80% emissions reduction by 2036 to 2039. Those targets will have a direct impact on pharmaceutical companies’ supply of medicines to the NHS in the years ahead, and companies should expect to find their own environmental commitments come under increasing scrutiny from NHS buyers and the government more broadly.
As we highlighted recently, however, life sciences companies have a great opportunity to champion sustainable, lower-carbon, and zero-waste innovation that will contribute to disease prevention and offer innovative solutions to help society achieve net zero targets, mitigate the other impacts of climate change and achieve resource efficiency.
The year ahead is likely to see a series of other drivers of change emerge in UK life sciences.
There will be a continued focus on the recovery from the Covid-19 pandemic, but life sciences companies can expect the emphasis to shift to the development of new vaccines and treatments and on how the industry can work more closely together and with governments, regulators and public health bodies to strengthen the response to future pandemics.
The Health and Care Bill and the Advanced Research and Innovation Agency Bill, both currently subject to parliamentary scrutiny, are also likely to be passed into UK law in 2022.
The reforms envisaged in the Health and Care Bill would better integrate different health and social care provision, and streamline NHS procurement processes, and could herald greater involvement of private healthcare businesses in NHS decision making and delivery of contracts.
The Advanced Research and Innovation Agency Bill is aimed at establishing a new Advanced Research and Invention Agency (ARIA), a body whose remit will be to fund “high-risk research that offers the chance of high rewards, supporting ground-breaking discoveries that could transform people’s lives for the better”. The government has committed to provide ARIA with £800 million to allocate to businesses over the course of the current parliament. ARIA could become an important source of funding for fledgling life sciences companies that can demonstrate truly innovative ideas.
We also expect to see more advanced therapies coming to market, raising lots of questions around pricing and access, as well as the continued emergence of biosimilars, with the loss of patent protection for some of the best-known biologic medicines, allied to the expected cost savings biosimilar medicines are likely to offer health services that are under increasing financial pressures, precipitating this change.
UK life sciences companies with operations in Europe will also be anticipating the potential launch of the new unitary patent and Unified Patent Court (UPC) system.
The existing system of European patents requires patents registered at the European Patent Office to be validated in each of the countries that businesses wish the patent rights to apply – this process entails the translation of those patents into the native language of each country. The option of registering unitary patents has been provided for in EU law to enable businesses to obtain patent protection for their inventions across multiple EU countries through a single, cost-effective application. The UPC will provide a dedicated judicial system for litigating unitary patents and existing European patents that are not specifically opted-out of the UPC’s jurisdiction.
It is possible that the UPC could become operational some time in 2022, following years of delay.
22 Dec 2021
02 Nov 2021