Increased tax complexity for cross-border activities by Medtech companies
Medtech services and products are increasingly provided across different borders. In a guest column published in Clinica (Medtech Insight) on 13 July 2016, our Amsterdam tax colleagues explain what it means when it comes to paying tax and VAT.
The full article is published on Medtech Insight found here.
Europe and North America have emerged as major destinations for Chinese investors
From 2000 to 2015, total Chinese outward foreign direct investment ("OFDI") in Europe and North America amounted to USD4.2 billion, with particularly fast growth in the past two years. While one large transaction skews the European growth towards the healthcare sector (Fosun's purchase of Portuguese healthcare provider Espirito Santo Saude in 2014 for USD610 million), in North America the pharmaceutical sector has been the preferred destination for Chinese investment, attracting more than 80 percent of total investment over the 15-year period. M&A activity accounts for more than 90 percent of that investment. An aging population, inefficient healthcare system, and strong interest in advanced technology should continue to draw Chinese investors to North American and European health and biotech assets.
See here for full report on Chinese investment patterns and drivers.
Entry into force of the provisions on health class actions
Article 184 of the law for "the Modernisation of our Health System" dated 26 January 2016 has introduced into French law the possibility for people who suffer from bodily injury due to health products to file class action lawsuits. These provisions entered into force on 1 July 2016.
A class action is a lawsuit that allows a large number of people with a common interest in a matter to sue as a group.
This class action is aimed at indemnifying individual damages resulting from bodily injuries suffered by users of a health product and having as a common cause the shortcomings of the manufacturer or supplier of the health product or of the service provider that used such health product (including but not limited to medicinal products, medical devices and cosmetic products).
The class action must be based on "individual cases" assumed to represent the alleged victims of the group (with no minimum number required). A duly authorised user association ("Association") must be appointed to file the action on behalf of those victims against the producer or supplier of the health product and/or the service provider using it.
The class action can be brought before any French court (i.e. criminal, administrative or judicial court).
The procedure is divided into two stages:
- A judgment on the liability: during that stage, the judge first examines whether the required conditions are met and then establishes whether the defendant is liable based on the individual cases submitted by the Association. After, he/she will determine the heads of damages that could be remedied for users represented by the Association. All property and pecuniary loss resulting from bodily injuries can be remedied.
- The individual compensation for damages is specified in the judgment: the defendant that has been held liable in the judgment indemnifies each of the victims for the damages they suffered as a result of the shortcoming recognised in the judgment.
Online sales of medicines remain the monopoly of the pharmacies
On 31 May 2016, a French court condemned a company that was running a website for online sales of over-the-counter ("OTC") medicines, without being an effective physical retail pharmacy.
The French regulation on online sales of medicines only authorises pharmacies holding a pharmaceutical licence and having a physical place of business to run a website dedicated to the sale of OTC medicines. So-called "pure player pharmacies" are prohibited under French law.
The company has filed an appeal against the decision.
Judicial investigations opened in relation to BIA 10-2474 Trial
On 14 June 2016, judicial investigations were initiated into the BIA 10-2474 Trial for manslaughter and unintentional injuries. They are aimed at determining the reasons for the death of, and personal injuries incurred by, patients who participated in the clinical trial with this experimental drug.
In parallel, the General Inspectorate of Social Affairs ("IGAS") and the French National Agency for Medicines and Health Products Safety ("ANSM") have issued their final reports on the accidents.
In its final report issued in May 2016, IGAS noted three acts of negligence in the conduct of the trial and in the resulting crisis management:
- Lack of follow-up with patients who were hospitalised due to ingestion of the tested molecule and failure to postpone the trial after this hospitalization;
- Failure to: (i) comply with the duty to inform the other volunteers about the accident; and (ii) obtain a new consent from those volunteers following the accident; and
- Failure to comply with the obligation to inform, without delay, the competent authorities about the accident.
However, IGAS considered, in light of the current state of the legislation, that there was no reason to question the lawfulness of the conditions in which the conduct of the trial was authorised by the ANSM and the Ethics Committee.
Finally, IGAS deemed that the relevant legislation was too incomplete on certain points. It stated that the health authorities (national and European) should clarify the regulations relating to the declaration of any new fact and adverse effect that could occur during a clinical trial.
In its final report of 19 April 2016, the ANSM concluded the following:
- The molecule tested during the trial clearly appears to be the cause of the accident.
- After rejecting various assumptions (e.g. infectious contamination, interaction with other products such as food or medicinal products, specific genetic or metabolic characteristics), the most likely hypothesis that could explain the accident is the toxicity of the molecule when it bonded with other brain cell structures.
- The fact that this type of toxicity was not observed in animals despite prior administration of high doses remains unexplained so far.
- The molecule could not theoretically be considered as an at-risk product according to the terms of applicable recommendations.
- The data provided, especially in the investigator's brochure, did not contain information suggesting any specific risk during the first in-human use (however the ANSM recalls that this brochure contained many mistakes, inaccuracies, figure inversions and incorrect translations of source documents, making its understanding difficult in several aspects).
Extension of the rules on pharmaceutical promotion to nutritional products
Pursuant to a recent amendment of the Act XCVIII of 2006 on the Safe
and Economic Supply and Distribution of Medicines and Therapeutic Medical Devices ("Medicine Economy Act"), stringent rules will apply to the promotion of (i) infant formulae, (ii) follow-on formulae and (iii) food for special medical purposes (hereinafter "nutritional products") targeted at healthcare professionals ("HCPs"). This amendment enters into force on 1 July 2016.
Prior to 1 July 2016, the strict rules on promotion to HCPs were only applicable to the promotion of medicinal products and therapeutic medical devices. No special rules were applicable to the promotion of nutritional products to HCPs.
The amendment of the Medicine Economy Act will significantly affect the promotional practice of companies engaged in the marketing of nutritional products in Hungary. The new provisions extend the rules on promotion of therapeutic medical devices to nutritional products as follows:
- Companies may only promote nutritional products subject to filing a prior notification at the National Institute of Pharmacy and Nutrition ("OGYÉI").
- Sales representatives performing promotional activities must be registered at the OGYÉI and must comply with the qualification requirements enshrined in Decree 3/2009 (II. 25.) of the Minister of Health on the Detailed Rules of the Promotion of Medicinal Products and Therapeutic Medical Devices ("Promotional Decree").
- Companies engaged in the promotion of nutritional products will have to pay a special tax of HUF83,000 per month for each sales representative employed by them.
- Restrictions on gift-giving, hospitality and sponsorship of HCPs and events will also be applicable to the promotion of nutritional products.*
- The OGYÉI must be notified of any direct or indirect sponsorship (including the sponsoring of HCPs to attend scientific events), or the organisation of professional events and training courses, no later than 15 days before the commencement of the event or training course.
- Rules on the content of promotional materials, as well as the restrictions set forth in the Promotional Decree regarding donations and product samples, will also be applicable to the promotion of nutritional products.
Following the entry into force of the amendments, identical consequences will be applicable to any non-compliance with the rules on the promotion of nutritional products as to the promotion of medicinal products and therapeutic medical devices. This includes the OGYÉI's right to: (i) initiate ethics proceedings at the competent ethics committee; (ii) call upon the person in breach (by indicating the deadline for correction) to correct the deficiencies and suspend the activities; (iii) issue a cease-and-desist order; and (iv) impose a fine for non-compliance in an amount ranging between HUF500,000 and HUF500 million. Repeated or serious breaches may result in even higher fines.
Further, the OGYEI has very extensive powers to investigate non-compliance with the rules on promotion, including the conducting of unannounced site inspections and the making of forensic copies of computer databases. However, when investigating the practices of gift-giving, promotional hospitality and the sponsorship of scientific events, the OGYÉI may not have access to, and may not use as evidence, attorney-client privileged information.
Restructuring in the healthcare sector in Hungary
Pursuant to Governmental Decision No. 1312/2016 (VI. 13.), the Hungarian government started a significant re-organisation of the country's central authorities and budgetary organisations, including the following entities in the healthcare sector:
- Effective as of 31 December 2016, the National Health Insurance Fund Administration ("OEP") will merge with the Ministry of Human Resources. Thereafter, the Ministry of Human Resources will become the legal successor of OEP.
- As of 1 January 2017, the name of the Central Administration of National Pension Insurance will change to the Office of National Family Care and Social Security Fund. Said office will take over the OEP's responsibilities regarding monetary benefits, sick leave benefits and reimbursement of travel expenses. However, on 31 March 2017, the National Family Care and Social Security Fund will be merged with the National Treasury.
- As of 1 January 2017, the Health Registration and Training Center ("ENKK") will merge with the National Healthcare Supply Center ("ÁEEK"). Thereafter, the ÁEEK will become the legal successor of ENKK. However ENKK's responsibilities for the licensing of medical devices and narcotics substances for therapeutic purposes will be transferred to the OGYÉI.
- Effective as of 31 March 2017, the Office of the Chief Medical Officer ("OTH") will merge with the Ministry of Human Resources. Thereafter, the Ministry of Human Resources will become the legal successor of OTH.
New rules on expenses in the health care sector introduced
Article 20 of the Law Decree No. 113 of 24 June 2016 ("Decree") provides for specific amendments to the general legislation governing Italy's healthcare budget allocation. Such amendments will enable the transfer from the State to the Regions of available resources and to consequently facilitate the timely performance of payments.
Article 21 of the Decree regulates the payback procedure relating to the years 2013, 2014 and 2015, and provides for a reduction of the relevant amounts in favour of pharmaceutical companies. In particular, based on the data published by the Italian Medicines Agency ("AIFA") on its website, pharmaceutical companies must pay 90 percent of the amounts due to AIFA for 2013 and 2014, and 80 percent of the same amount for 2015 within 15 days starting from the publication of the relevant data. Furthermore, the regional authorities and the operators can request AIFA to correct any inaccurate data by providing adequate supporting documents. AIFA will adopt a final regulation on the amounts to be paid (on a balance basis) by 15 September 2016.
Prescription-free medicines can be advertised to the general public.
By its judgment No. 7539, dated 30 June 2016, the Administrative Court of the Lazio Region recognized the possibility for pharmaceutical companies to advertise to the general public prescription-free medicines (SOP), although not belonging to the over-the-counter (OTC) category.
SOP and OTC are both prescription-free medicines. However, while OTCs are self-medication medicines, which can be directly purchased by patients without the intermediation of the pharmacist, SOPs require the advice of the pharmacist who has the duty to verify that the relevant product suits the therapeutic need of the patient before dispensing it to the latter. For this reason, the Ministry of Health used to consider SOPs as prescription-only medicines for the purposes of the regulation on advertising of medicinal products and, therefore, prohibited their advertisement to the general public.
Now, with the aforementioned decision, the administrative judges: (i) noticed that no provision of the Italian legislation expressly prohibits the advertisement of SOP to the general public, and (ii) sanctioned the Ministry of Health's practice of prohibiting the advertisement of SOP on the basis of an implicit equality with prescription-only medicines, whose advertisement is not allowed.
Said decision seems to overcome the distinction between SOP and OTC in terms of advertising, and to guarantee a closer alignment of Italian law with the legislation adopted by the majority of the EU Member States prohibiting advertising to the general public with regard to prescription-only medicines of prescription-only medicines to the general public.
A registry of inspection staff for verification of the three-year anticorruption plan requirements has been established
On 19 July 2016, the Minister of Health and the President of the National Anti-Corruption Authority ("ANAC") signed the Agreement supplementing the Memorandum of Understanding dated 21 April 2016, that establishes a Registry of Inspection Staff ("Registry"). Those listed on the Registry will be tasked with verifying the three-year anticorruption plans adopted by the Italian healthcare authorities.
The Registry, which is held by the ANAC, will be composed of inspectors and staff of the Ministry of Health and of the National Agency for Regional Healthcare Services. Among the various provisions included in the Agreement, the most significant are those regulating: (i) the establishment of inspection teams; (ii) training programs for the staff; and (iii) cases of incompatibility, conflicts of interest and confidentiality obligations. The purpose of the Registry is to allow the performance of verification, control and evaluation activities regarding the implementation of transparency, integrity and anti-corruption measures by the entities of the National Healthcare Service in order to prevent unlawful or illegal actions and behaviour which may lead to corruption cases.
New draft paper of AIFA on biosimilar medicines
With the publication of the second draft paper on biosimilar medicines on 15 June 2016, AIFA launched a public consultation in order to gather opinions, comments and suggestions by stakeholders. Such document represents the preliminary position of AIFA with regard to biosimilar medicines resulting from the review of the "Position Paper on biosimilar medicines" dated 28 May 2013.
The main elements of the new draft paper are the following:
- The elimination of the reference to "naïve patients", i.e. subjects who have never exposed to biosimilar medicines, and who – under the previous edition – appeared as those to whom the use of biosimilar medicines should be avoided.
- Acknowledgment of the European Medicines Agency as the authority responsible for establishing: (i) the therapeutic equivalence between biological medicines and biosimilars, eliminating the need for any additional assessments to be performed on a regional and local level; and (ii) the extrapolation of therapeutic indications and thus the possibility to transfer to a biosimilar medicine one or more therapeutic indications approved for the originator.
- Confirmation of the prescribing doctor as the person responsible for choosing whether to treat the patient with either the biosimilar medicine or the originator. In this regard, AIFA nonetheless sets out that biosimilars shall be considered as a therapeutic option whose risk-benefit ratio is the same of that of the correspondent originators, as shown by the regulatory process of authorisation.
The deadline for sending eventual opinions, comments and suggestions is 15 September 2016.
Dutch government can save hundreds of millions on expensive medicines through pricing arrangements with pharmaceutical companies
This follows from a letter from the Dutch Ministry of Health of June 14, 2016 to the Lower House of the States-General. The government started with a pilot in 2014 to achieve cost savings on healthcare expenses through price / volume arrangements with drug manufacturers in relation to 8 selected (orphan) drugs. These arrangements are predominantly focused on expense reductions if prescriptions turn out higher than anticipated. Realized cost savings for 2014 were EUR 13.9 million on a total expense of EUR 95.9 million. Recent financial arrangements (16 in 2015 and 14 in 2016 thus far) were concluded on Nivolumab (treatment of lung cancer) and several hepatitis-C drugs; annual cost savings are expected of EUR 122 million in 2015 up to EUR 203 million in 2018. More specific information on the particular drugs were not disclosed, due to strict confidentiality stipulated by manufactures in the arrangements.
Higher penalties for pharmaceutical companies for culpable drug deficiencies
This was announced in a letter of the Dutch Minister of Health to the Lower House of the States-General of June 23, 2016, in response to deficiencies of the thyroid drug levothyroxine in January 2016, causing 350.000 patients temporarily having to change to another drug. The national healthcare authority currently investigates whether the rules were violated by the manufacturer. According to the Dutch medicines act (geneesmiddelenwet), manufacturers are obliged to keep sufficient inventory of drugs and to announce expected deficiencies timely. The Ministry of Health is working on a change to the Medicines Act to increase the maximum penalty to EUR 820,000. Until the law has changed, the standard penalty for violations of the rules discussed above would be increased from EUR 45,000 to EUR 150,000 (the maximum penalty under the current act). Penalties for culpable drug deficiencies were never imposed thus far to a drug manufacturer.
Draft law envisages new punishments for healthcare violations
A draft law either establishing or strengthening administrative liability for certain violations in the field of healthcare is currently under review.
The draft federal law "On Amendments to the Code of Administrative Offences of the Russian Federation to Improve Regulation of Administrative Liability in the Field of Healthcare"* (the "Draft Law") was introduced to the State Duma by the Russian Government. The Draft Law was passed by the State Duma in the first reading on 21 June 2016.
This alert only covers provisions that may be especially relevant for pharmaceutical companies, but it should be noted that the Draft Law also establishes liability for medical organizations and medical and pharmaceutical professionals for other violations of applicable rules and regulations in the field of healthcare (e.g., violation of the rules on rendering medical treatment, violation of the rules on performance of medical examinations, violation of civil rights in the field of healthcare, violation of the rules on administration and prescription of medicinal preparations, etc.).
In accordance with the Draft Law administrative sanctions will be introduced for pharmaceutical companies for the following violations:
- Non-compliance with the restrictions imposed by Russian legislation on interactions with medical and pharmaceutical professionals (i.e., Article 67.1. of Federal Law No. 61-FZ “On the Circulation of Medicines”, dated 12 April 2010):
Penalty: an administrative fine of from RUB300,000 (approx. EUR 4,350) to RUB500,000 (approx. EUR7,250) for medicines’ manufacturers, developers, distributors, wholesale organizations, pharmacies and organizations authorized to use the medicines' trade name.
In its current version the Draft Law does not establish any specific punishment for violations of the rules on interactions with healthcare professionals envisaged by Federal Law No. 323-FZ “On the Fundamentals of Citizens’ Health Protection in the Russian Federation” for medical devices companies.
- Violation of the procedure for conduct of clinical trials and pre-clinical trials of medicines:
- violation of the rules of good clinical practice (GCP) during performance of clinical trials of medicines;
- violation of the rules of good laboratory practice (GLP) during performance of pre-clinical trials of medicines.
Penalty: warning or an administrative fine for officers - from RUB 5,000 (approx. EUR72) to RUB10,000 (approx. EUR144); for legal entities - from RUB 20,000 (approx. EUR290) to RUB30,000 (approx. EUR435).
- Violation of the licensing requirements:
- violation of the requirements of the license for the performance of medical and/or pharmaceutical activity.
Penalty: Warning or an administrative fine for officers - from RUB20,000 (approx. EUR290) to RUB30,000 (approx. EUR435); for legal entities - from RUB50,000 (approx. EUR724) to RUB200,000 (approx. EUR2,900).
- serious violation of the requirements of the license for the performance of medical and/or pharmaceutical activity.
Penalty: an administrative fine for officers - from RUB25,000 (approx. EUR360) to RUB35,000 (approx. EUR500); for legal entities - an administrative fine of from RUB 200,000 (approx. EUR2,900) to RUB300,000 (approx. EUR4,350) or an administrative suspension of activity for up to 90 days.
- Violation of the legislation on the circulation of medicines:
- violation of the requirements on wholesale and retail trade:
Penalty (increased): an administrative fine for officers - from RUB 20,000 (approx. EUR290) to RUB30,000 (approx. EUR435); for legal entities - an administrative fine of from RUB100,000 (approx. EUR1,450) to RUB150,000 (approx. EUR2,170) or an administrative suspension of activity for up to 90 days.
- sales of medicines on the list of essential and most important medicinal preparations ("EDL") in violation of the maximum retail mark-ups:
Penalty: an administrative fine for officers - from RUB100,000 (approx. EUR 1,450) to RUB150,000 (approx. EUR2,170); for legal entities - an administrative fine of from RUB 250,000 (approx. EUR3,620) to RUB500,000 (approx. EUR7,250) or an administrative suspension of activity for up to 90 days.
- sales of medicines on the EDL in violation of the maximum wholesale mark-ups:
Penalty: an administrative fine for officers - from RUB150,000 (approx. EUR2,170) to RUB200,000 (approx. EUR2,900); for legal entities - an administrative fine of from RUB 500,000 (approx. EUR7,250) to RUB1 million (approx. EUR14,500) or an administrative suspension of activity for up to 90 days.
According to the general rules the penalties are applied for each violation.
The Spanish National Commission on Markets and Competition imposes one of its highest fines ever for price-fixing of adult diaper products
The Spanish National Commission on Markets and Competition ("CNMC") has imposed fines amounting to EUR128.8 million on seven manufacturers of adult incontinence diapers, as well as on the Spanish Federation of Healthcare Technology Companies ("FENIN"). Each entity was found to be in breach of Article 1 of Law 15/2007 of 3 July, on the Defence of Competition, and Article 101 of the Treaty on the Functioning of the European Union.
According to the decision of the CNMC, between the period of at least December 1996 until January 2014, eight manufacturers of adult incontinence diapers, in collaboration with FENIN, reached agreements and fixed selling prices to wholesale distributors of adult incontinence diapers sold through pharmacies.
In Spain, adult diaper products can typically be acquired through two means (in both cases, funded by the Spanish Social Security System): (i) directly from pharmacies by patients who have the appropriate prescription; or (ii) through the Spanish healthcare services provided by health professionals (where the public healthcare organisations purchase these products through public tenders).
Bearing in mind these two main systems of acquiring such products, the convicted companies were associated in a working group set up by FENIN (the Working Group of Absorbent Products) to establish a fixed selling price for such products distributed through the pharmacy channel (they fixed the resale price of wholesalers). Furthermore, they reached a strategy to persistently file administrative appeals against public tenders launched by various healthcare authorities to directly acquire and deliver these products to outpatients, with the purpose of avoiding, or at least delaying, the delivery of such products to outpatients through the "institutional channel". While doing so, they continued to deliver the products through the pharmacy channel. Through their actions, the companies were trying to maintain the competitive income obtained from their sales through the pharmacy channel.
The fine is the second largest fine ever imposed by the CNMC, behind only the EUR171 million fine imposed on an automotive cartel in July 2015. Arbora & Ausonia (which is an affiliate of Procter & Gamble Co.) was exempted from paying the fine because it blew the whistle in June 2013. Moreover, for the first time since its creation in 2013, the CNMC sanctioned four individuals (two representatives of the manufacturing companies and two directors of FENIN). The individual fines amounted to EUR15,000, EUR4,000, EUR6,000 and EUR4,000.
FENIN, as well as some of the fined companies, have expressed their absolute disagreement with the decision of the CNMC and have announced that they will appeal the decision before the National Court.
New Council of Ministers announced
Upon the change of the Prime Minister in May 2016, the new Council of Ministers has also been announced. The previous Minister of Health, Mehmet Muezzinoglu, has been succeeded by Recep Akdag. Recep Akdag was previously Minister of Health between 2012 and 2013 – the longest-ever term of service for a Minister of Health.
Ministry of Health authorises new logo for herbal products
The Medicines and Medical Devices Agency ("TITCK") introduced a new logo for herbal products in the Turkish market which have been authorised by the Ministry of Health. Combining the marks of TITCK and the Ministry of Health, the logo certifies that a product has been duly tested in terms of security and health, and has been approved by the Ministry of Health. These products will only be sold in pharmacies.
More than TRY200,000 fined for unsafe cosmetic products
TITCK announced the 2016 first quarter results of the audits carried out on cosmetics products sold in the Turkish market. The audits have revealed that, out of 366 audited products, 170 are in violation of the technical requirements and 138 are unsafe. A total fine of TRY279,663 has been issued as a result of the audits.
Health Authority Abu Dhabi makes changes to the insurance coverage in Abu Dhabi
On 30 June 2016, Health Authority Abu Dhabi ("HAAD") announced changes to the health insurance coverage in Abu Dhabi effective 1 July 2016. The changes affect Emirati nationals with a Thiqa insurance coverage and those expats benefiting from the Abu Dhabi basic plan who seek treatment in private healthcare facilities. The main changes are the following:
- Thiqa plan: 80 percent of the costs of private healthcare will continue to be covered. Treatments at public health facilities will continue to be covered for 100 percent. Going forward Thiqa will cover 50 percent of treatment services outside the emirate of Abu Dhabi unless specialised care is not available in Abu Dhabi in which case 100 percent will be covered.
- Abu Dhabi Basic Plan: Changes to this plan include optional co-payment for employees above 40 years of up to 50 percent of their own insurance premium. The percentage is to be agreed between employer and employee. In addition, all employees will have to pay 50 percent of the insurance policy premium for their dependents (e.g. wife and 3 children). All other dependents including fourth child need to be covered by the individual.
Furthermore, all prescriptions from private healthcare facilities will only be dispensed at private pharmacies.
The announcement can be found on the website of HAAD.
New Deadline of 30 June 2017 for a one-year extension for compliance with the new Commercial Companies Law
With the impending deadline of 30 June 2016 approaching, the press reported on 18 June 2016 that the Council of Ministers has approved an extension of the deadline for companies to adjust their existing legal positions (including amending their articles of associations) to bring them in line with the 2015 UAE Commercial Companies Law ("CCL").
The Council of Ministers has exercised its power to grant an extension, an option originally contemplated in the text of the CCL.
This extension has been enthusiastically welcomed, especially in light of the recent ministerial resolution clarifying certain legal ambiguities, namely: (i) the provision of Article 104 applicable to limited liability companies; and (ii) the new corporate governance resolution applicable to public joint stock companies.
A copy of the actual Council of Ministers resolution is not yet available and publication in the Federal Official Gazette is awaited.
More details on this development are available on Emirates News Agency- Extension of CCL deadline.
Important changes in medical device regulation
Important changes in medical device regulation were recently implemented in Ukraine. The changes are aimed at removing legislative barriers and ensuring a smooth transition from the medical device registration procedure to the conformity assessment procedure. The changes relate to the technical regulations on medical devices and the State Register of Medical Equipment and Medical Devices.
Amendments of the Technical Regulations
On 22 March 2016, the Cabinet of Ministers of Ukraine adopted Resolution No. 240 On Amending Certain Resolutions of the Cabinet of Ministers of Ukraine ("Resolution No. 240"), which became effective on 15 April 2016. Resolution No. 240 amended the following technical regulations regarding medical devices: (i) Technical Regulation for Medical Devices, approved by Resolution of the Cabinet of Ministers of Ukraine No. 753, dated 2 October 2013; (ii) Technical Regulation for in vitro Diagnostic Medical Devices, approved by Resolution of the Cabinet of Ministers of Ukraine No. 754, dated 2 October 2013; and (iii)Technical Regulation for Active Implantable Medical Devices, approved by Resolution of the Cabinet of Ministers of Ukraine No. 755, dated 2 October 2013 (the "Technical Regulations").
Amendments introduced by Resolution No. 240 have improved the regulation of medical devices. The following changes have been made:
- As of April 2016, the Technical Regulations establishing the conformity assessment procedure of medical devices are applicable to medical devices that were registered and permitted for use on Ukrainian territory pursuant to the procedure of medical device registration, which was abolished in June 2015. This change should allow for a smooth transition between the two procedures and ensure that it is possible to conduct conformity assessments of medical devices before their state registration expires.
- The period during which medical devices already introduced to the Ukrainian market may remain in circulation without undergoing a conformity assessment was extended from 1 July 2016 to 1 July 2017. Circulation of such medical devices is limited to up to five years from the date of their introduction into circulation in the territory of Ukraine. Prior to the relevant amendments, the circulation of medical devices was limited by their expiration date.
- The provisions of the Technical Regulations concerning maintenance of the Register of persons responsible for introducing medical devices into circulation and appointment of such person by manufacturers, which are non-residents of Ukraine, have been unified. However, the procedure on maintenance of such register, as well as the specific form and timeframe for manufacturers to submit notifications to state authorities has not yet been approved by the regulator.
Maintaining the State Register of Medical Equipment and Medical Devices
On 13 April 2016, the Ministry of Health of Ukraine adopted Order No. 361 On Amending the Order of the Ministry of Health of Ukraine dated 16 July 2012 No. 533, which became effective on 3 June 2016. This order amended the procedure for maintaining the State Register of Medical Equipment and Medical Devices. The State Administration of Ukraine on Medical Products was specifically appointed to maintain the State Register of Medical Equipment and Medical Devices. Medical devices which were registered as of 30 June 2015 should remain in the relevant register until 30 June 2020. Thus, potential obstacles in confirmation of medical device registration during the transition period and the subsequent circulation of medical devices for a limited period (up to five years from the date of their introduction into circulation on the territory of Ukraine) were eliminated.
Amendments to the Technical Regulations should ensure a smooth transition from the procedure of the state registration of medical devices to the procedure of their conformity assessment. Conducting conformity assessment of medical devices before expiration of their state registration is now specifically allowed. Additionally, the transition period during which medical devices already introduced to the Ukrainian market may remain in circulation without undergoing a conformity assessment was extended to 1 July 2017. Thus, importers of medical devices can undergo a conformity assessment and mark devices with the national conformity sign before the expiration of the registration of the medical devices.
Additionally, changes to the procedure for maintaining the State Register of Medical Equipment and Medical Devices should enable confirmation of medical devices registration to be obtained during the transition period and allow for the subsequent circulation of medical devices for a limited period (up to five years from the date of their introduction into circulation in the territory of Ukraine).
Pharma industry's payments to HCPs are publicly disclosed for the first time
Back in 2013, the European Federation of Pharmaceutical Industries and Associations launched its Disclosure Code, which introduced requirements for pharmaceutical companies to disclose certain payments made by them to individual HCPs and HCOs from 2016 (for payments made in 2015). These requirements have been implemented in the UK by the Association of the British Pharmaceutical Industry ("ABPI") in its Code of Practice.
The database was introduced in an effort to increase transparency in the pharmaceutical industry and address criticisms that unpublicised payments by drug companies, including what has been occasionally perceived in the press as "lavish" hospitality, may be influencing doctors' prescribing habits.
The ABPI's disclosure database (Disclosure UK) went live on 30 June 2016. Payments from 109 pharmaceutical companies in the UK (54 ABPI member companies and 55 non-member companies) are shown.
The data shows that in 2015, the industry spent a total of GBP340.3 million on working with HCPs and HCOs, including GBP229.3 million for activities related to the R&D of new medicines. The remaining GBP111 million was spent on non-R&D activities. The largest sum paid to an individual HCP was GBP98,702.92.
So far, an estimated 70 percent of HCPs identified by pharmaceuticals and biotech companies as recipients of non-research funding have agreed to disclosure, but they represent only 48 percent of payments by value. This suggests that HCPs receiving the largest share of the money are opting out.
In an unusual intervention, the NHS has warned that all firms should decline to pay those HCPs who refuse to be included in the ABPI database. An NHS England spokesman has said: "The ABPI publication is an important step forward in terms of transparency, but is not yet the complete solution. Voluntary disclosure does not go far enough, and all companies should follow industry leaders in refusing to fund individuals who decline to be transparent about their payments". GSK had already taken this step, and is now refusing to work with those who decline to be included in the database (meaning almost all of its payments were declared).
The spokesman added that a panel led by Sir Malcolm Grant, the NHS England chairman, was in the process of drawing up recommendations on what information about payments from drugs firms should be routinely published by NHS bodies.
The ABPI research and medical director, Dr Virginia Acha, has encouraged patients to look up doctors' engagement with the pharmaceuticals industry and interpret their presence on the database as a positive sign and reassurance as to that individual's expertise.
While the new disclosure database represents a significant and pioneering step towards transparency in the pharmaceutical industry, it is acknowledged that as the register allows HCPs to opt out of disclosure, it does not support HCPs who wish to declare that they have not received any funding from the pharmaceutical industry. There is therefore still work to be done before the regime can be said to paint a true and fully transparent picture of the relationship between pharmaceutical companies and HCPs. However, while the mainstream press continues to view interactions between industry and HCPs in an almost consistently negative light, the ABPI's wish that the public will see the benefits of such collaboration may be optimistic. Responding to NHS England's intervention, Dr Acha said: "We will continue to promote transparency around payments made to health professionals and welcome the work of others, like NHS England, to achieve this. We all need to work together to support health professionals so that they are confident about talking about the valuable work they do with pharmaceutical companies, but we must also respect their rights under UK law".
Court of Appeal decision on the classification of "nutraceuticals"
The UK Court of Appeal has held in R (Blue Bio Pharmaceuticals Ltd) v the Secretary of State for Health (acting for the Medicines and Healthcare Regulatory Authority ("MHRA")) that, in the absence of any medicinal claims made by the manufacturer, whether a product is a medicine or a food depends on its use, rather than how it is sold, and that in some instances, regulators will be required to investigate how particular products are generally used by the public to make a correct classification.
The judicial review was brought by the manufacturers of the glucosamine-containing product ("GCP"), Dolenio, used in the treatment of osteoarthritis in the knee, and for which the claimants held a marketing authorisation. The claimants complained that the MHRA had failed to classify other glucosamine-containing products on the market as medicines, despite them being identical to Dolenio in their pharmacological composition, manner of ingestion, effects on the body and the risks associated with their use. As a result, the claimants' competitors could market their products under a far lighter regulatory regime than that to which Dolenio was subjected.
Under Article 1.2 of the Medicinal Products Directive, a medicinal product is defined by either how it is presented (i.e. whether a manufacturer markets the product as having properties for treating or preventing disease), or how it is used or administered (i.e. whether it is intended to affect physiological functions through pharmacological, immunological or metabolic action). As the MHRA had regularly acted to prevent manufacturers of GCPs without a marketing authorisation from making medicinal claims, the case centred on how unlicensed GCPs were in fact used by consumers.
The claim succeeded on three grounds. Firstly, the Court found that there was substantial evidence that the public purchased unlicensed GCPs in order to self-medicate osteoarthritis of the knee. Nonetheless, the MHRA had concluded that such products were not medicines, since many GCPs had been sold as food supplements. The Court held that this amounted to an error of law, as it failed to address how GCPs were actually used by the public, which was at the core of whether they were medicines or food supplements. Secondly, the MHRA had given evidence that where a product is less potent pharmacologically, the greater the importance is of other factors, including manner of use, in determining whether the product is a medicine. In this case, the MHRA had concluded that GCPs were of a relatively low potency, and yet had failed to investigate their manner of use. The Court concluded that this was unreasonable, and that in such circumstances the MHRA had a duty to inquire as to whether the public used GCPs as medicines. Finally, the MHRA had treated the question of whether GCPs were medicines or food supplements generically. The Court held that this was also an error of law, and that the MHRA was required to investigate the manner of use of the groups of GCPs that were taken orally, and had the same active ingredient and daily dosage as Dolenio.
The upshot is that the MHRA will have to conduct such an investigation to decide if these types of GCPs are used as medicines. The case does not necessarily mean that those products will in fact be classified as medicines.
This case reiterates that, where no medical claims are made, whether a product is a medicine or a food supplement depends on its manner of use by the public, not how it is sold. Further, in a situation where a class of products with the same active ingredient, daily dosage and mode of administration has a low pharmacological potency, it is likely to be incumbent on the MHRA to investigate how those products are used in general by the public.
From a practical perspective, the case is an example of how public law arguments can be used to level the commercial playing field between manufacturers marketing a product as a licensed medicine, and those selling the exact same product as a food supplement. The verdict could have significant commercial implications for companies that market unlicensed GCPs as food supplements.
Electronic cigarette regulations
The perceived safety of e-cigarettes – nicotine administration devices which do not involve combustion – has led to their increased use and, unsurprisingly, regulatory scrutiny.
At the EU level, the revised Tobacco Products Directive 2014/40/EU ("TPD") introduces new rules to restrict the supply, manufacture and promotion of e-cigarettes. Member States had to transpose the TPD into national legislation by 20 May 2016. The UK has implemented the TPD through the Tobacco and Related Products Regulations ("TPPR").
The TPD aims to provide consumers with information to enable them to make informed choices and seeks to create an environment that protects children from the use of these products.
The TPD will affect businesses which produce and manufacture e-cigarettes, along with their retailers. Such businesses must:
- fulfil new size limits for e-liquids and their refill containers as well as use child-proof packaging;
- include a health warning on the unit packet and any outside packaging;
- provide information on addictiveness and toxicity on the packaging and accompanying information leaflet, ensuring such information is not misleading or promotional;
- register with the competent authority of an applicable Member State (in the UK, the MHRA) if engaged in cross-border distance sales of electronic cigarette products in such Member State;
- not advertise or promote, directly or indirectly, e-cigarettes and refill containers on certain media platforms, including television, radio, newspapers and magazines; and
- inform Member States before placing new or modified products on the market and notify the competent authority of a range of product information concerning composition, emissions and sales marketing data. Other changes which will apply to all tobacco products include requirements that graphic warnings cover over 65 percent of package surface area, package standardisation (including a ban on 10-packs), and banning certain flavours like menthol, vanilla and candy (for products with a market share greater than 3 percent, such as menthol, this ban will take effect in 2020).
Advertising agencies across the EU will also need to update their guidance. We note that Ofcom in the UK has already amended the Broadcasting Code in line with the TPPR to reflect advertising restrictions, while the Committee of Advertising Practice is expected to release updated guidance shortly.
All products sold to consumers must comply with the TPD from 20 May 2017, subject to certain transitional measures. Retailers have a year to sell stocks of products which do not comply with the labelling and composition requirements of the TPD.