Drug makers to prepare for pharmacovigilance reforms in Russia and other EAEU countries
**A copy of this article originally appeared in Scrip Regulatory Affairs by Neena Brizmohun on 18 March 2016 **
Drug companies operating in Russia and other Eurasian Economic Union ("EAEU") countries are being advised to prepare for the new obligations and liabilities that an impending new regulation on pharmacovigilance in the EAEU might introduce for them.
The new regulation, which will bring the EAEU more in line with the EU rules on pharmacovigilance, is currently awaiting approval by the EAEU Council, according to the law firm Baker & McKenzie. Once it is in force, it will reform how the EAEU member states regulate drug safety monitoring, the firm said.
The regulation will, for example, require drug companies to appoint a qualified person for pharmacovigilance ("QPPV") in one of the countries in which they operate within the EAEU to be responsible for all the other relevant EAEU countries, Baker & McKenzie explained. It will also make certain products subject to additional safety monitoring and will expect manufacturers to take a more active role in the area of pharmacovigilance, Evgeniya Shagarina and Julia Gillert, associates at Baker & McKenzie's Moscow and London offices respectively, told Scrip Regulatory Affairs ("SRA").
In Russia, for example, marketing authorisation ("MA") holders currently have "a relatively 'passive' role in terms of pharmacovigilance," Shagarina and Gillert said. "Their pharmacovigilance obligations are limited to reporting on certain events that have become known to the MA holder and submitting regular reports to the regulatory authorities." "Once the new Regulation comes into effect, MA holders will assume an 'active' role in the pharmacovigilance area and thus will incur additional liabilities," Shagarina and Gillert told SRA. "For example, they will have to proactively identify, validate and action product safety signals, submit additional safety information (obtained from international and national sources) to the regulatory authorities, [and] audit [pharmacovigilance] systems on a regular basis," they explained.
"Further, once the regulatory authorities publish a list of pharmaceutical products subject to additional safety monitoring, the MA holders of such products would need to make amendments to the respective products' directions for use in order to add a special mark and a note on additional monitoring."
The new rules are not, however, expected to pose too much of a problem for multinational firms, and they might even alleviate a certain amount of regulatory burden for such companies.
"According to the comments of developers of the EAEU Regulation, the new Regulation is generally harmonised with the EU Guideline on Good Pharmacovigilance Practices, save for a few changes," Shagarina and Gillert said.
"Since the new Regulation appears to be generally harmonised with the EU regulations, multinational companies should be able to apply their pharmacovigilance standards and procedures used in the EU to the EAEU market, subject to making only minor amendments to reflect the distinct local requirements," they explained. "Previously Russian national legislation provided for different standards of reportable events, thus creating an additional burden for multinational companies."
Appointing a QPPV
As for appointing a QPPV, Baker & McKenzie said that the QPPV should reside and work in one of the EAEU states. "The QPPV can provide services to more than one MA holder if he/she is capable of performing all pharmacovigilance obligations in this respect." The QPPV would have to possess the necessary theoretical and practical knowledge to perform their pharmacovigilance duties and "be trained to use the pharmacovigilance system of the MA holder by the MA holder prior to his/her appointment to this role," the firm noted. The QPPV should also have experience in the pharmacovigilance system management, performance of examinations or have access to such examinations in the fields of medicines, pharmaceutical sciences, epidemiology and biostatics.
To the best of Shagarina and Gillert's knowledge, "the vast majority of multinational pharmaceutical companies operating in Russia already have an employee responsible for the pharmacovigilance reporting." They believe, therefore, that once the new regulation comes into effect, "it is likely that such employees would already have the necessary knowledge and experience to be appointed as QPPVs for the EAEU market."
They added that there is no specific deadline or transition period in the new regulation for the appointment of a QPPV. "Presumably a QPPV should be appointed immediately once the new Regulation comes into effect."
"The new regulation does not establish any sanctions for the failure to appoint a QPPV," the lawyers noted. "However, the respective sanctions may be established (if not established already) by the national legislation of the EAEU members. For example, in Russia at this stage only the failure to provide the necessary pharmacovigilance information to the regulatory authorities is subject to administrative and criminal liability, and there is no specific liability for non-appointment of a QPPV."
It is still not clear exactly when the new pharmacovigilance regulation will come into force. It had originally been expected to kick in on 1 January 20161. "We are still waiting for the approval of the draft EAEU Pharmacovigilance Regulation by the EAEU Council, and the exact date of entry of the Regulation into force is not yet known," Shagarina and Gillert told SRA.
The member states of the EAEU are Armenia, Belarus, Kazakhstan, Kyrgyzstan and Russia.
PRIME scheme The PRIME initiative was launched by European Medicines Agency ("EMA") in early March 2016 in line with the European Commission's priorities and the common strategy to 2020 for the European medicines regulatory network. The PRIME scheme aims to assist with the development of medicines for "untreatable" diseases or medicines that would improve the quality of life of patients suffering from such diseases such as rare cancers or Alzheimer’s. The EMA, through the PRIME scheme, will proactively offer support to medicine developers to enhance the generation of solid data on a new medicine’s benefits and risks and facilitate their access to the market as early as possible so that patients can benefit from innovative treatment that would have a positive impact on their quality of life. For medicines to be eligible for PRIME they must address an unmet medical need. Medicines that do not cure untreated diseases or bring major therapeutic benefits to patients or that are already licensed, do not fall under PRIME's scope. Once a candidate medicine has been selected for PRIME:
- a rapporteur is appointed to support the generation of knowledge on the medicine ahead of a marketing authorisation application;
- a kick-off meeting is scheduled with the CHMP/CAT rapporteur and a multidisciplinary group of experts from relevant EMA scientific committees and working parties, to develop the overall development plan and discuss the regulatory strategy;
- a specific EMA contact point is appointed;
- scientific advice is provided, involving additional stakeholders such as health technology assessment bodies to facilitate patients’ quicker access to the new medicine; and
- the possibility for accelerated assessment at the time of an application for marketing authorisation is confirmed.
All companies with preliminary clinical evidence will be able to have access to PRIME. In addition, micro, small and medium-sized enterprises ("SMEs") and academic applicants are even eligible for an early application "on the basis of compelling non-clinical data and tolerability data from initial clinical trials". The latter may also request fee waivers for scientific advice. SMEs and academic applicants often have little experience with the regulatory framework, and through PRIME, they can benefit from early and valuable advice on the scientific and regulatory fronts.
Guidance documents on PRIME, as well as a comprehensive overview of the EU early access support, i.e., accelerated assessment,conditional marketing authorisation and compassionate use along with other useful documents, can be found on the EMA website.
External guidance on the implementation of the EMA policy on the publication of clinical data for medicinal products for human use
The EMA on 2 March 2016 published external guidance on the implementation of the EMA policy on the publication of clinical data for medicinal products for human use ("Policy 0070") in order to ensure that the objectives listed in Policy 0070 are accomplished. Policy 0070 was adopted by the EMA on 2 October 2014 and comprises two phases: Phase 1 is in respect of the publication of clinical reports which came into force on 1 January 2016, whereas Phase 2 relates to the publication of individual patients data and it will be implemented at a later date.
Clinical reports will be published as part of the process of the regulatory decision making of the centralised marketing authorisation application. In particular, clinical reports will be published if they were filed with the EMA as part of a marketing authorisation application from 1 January 2015 or as part of an extension of indication and line extension applications from 1 July 2015 for centrally authorised products. Clinical reports included in applications where the marketing authorisation holder ("MAH") has notified EMA of the withdrawal of the marketing authorisation application ("MAA") will also be published under Policy 0070.
The Guidance is available here and primarily considers:
- the process for the submission of clinical reports for publication (Chapter 2);
- the anonymisation of clinical reports for the purposes of publication (Chapter 3); and
- the identification and redaction of commercially confidential information ("CCI") in clinical reports (Chapter 4).
Process of Submission
The process for the submission of clinical reports consists of three sub-processes. Applicants / MAHs will receive a notification depending on the application type to submit a "Redaction proposal Document" package. The girst stage will consist of the submission of the "Redaction proposal Version" process and the timeline will vary upon the relevant application procedure (e.g. initial MAA, line extension etc.). The second stage consists of the redaction consultation process which itself comprises three further stages.
- Internal receipt and distribution
- Assessment of CCI
The third and final stage consists of the submission of a "Final Redacted Version," according to which applicants must provide their written consent to the redaction conclusion within seven calendar days after the EMA has issued the same.
The redacted / anonymised version of the clinical report will be published on EMA's website after each page of the clinical report has been watermarked in the "Final Redacted Version" with the text "www.ema.europa.eu This document cannot be used to support any marketing authorisation application and any extensions or variations thereof".
In the event that the applicant and the EMA have not reached an agreement for the redacted text the applicant may request interim relief from the General Court of the European Union. The applicant will still have to submit a partial “Final Redacted Version” which would only include the agreed redactions until a decision is made on the merits of the interim relief.
According to Policy 0070 the burden of adequate data protection and compliance with all applicable EU legislation lies with the applicant / MAH.
The guideline illustrates a non exhaustive list of anonymisation techniques and general considerations which should be taken into account in order to avoid the risk of re-identification. Applicants / MAHs, as data controllers of the personal information are required to submit clinical reports after such personal information have been rendered anonymous and the data it contains must be processed in such a way that a natural person can no longer be identifiable by using "all the means likely reasonably to be used" by either the controller or a third party, as described in Directive 95 / 46 / EC. Applicants / MAHs should demonstrate which anonymisation technique has been used and demonstrate how the risk of re-identification has been measured and mitigated.
Identification and redaction of CCI
Generally, the majority of the information falling within the scope of Policy 0070 and contained in the clinical reports should not be considered as CCI. However, the EMA recognises the possibility that certain CCI may be contained and could therefore be subject to redaction prior to publication. Certain exceptions that potentially may be considered CCI are identified in Annex 3 to Policy 0070 The list of elements and pieces of information which the EMA would consider as CCI is not exhaustive and each proposal for redaction will be judged on an ad hoc basis. If applicants / MAHs wish some information to be redacted, they will have to ensure that "a specific, pertinent, relevant, not overstated and appropriate justification" supports their proposal. In addition, the applicants / MAHs are encouraged to identify as CCI words, figures or pieces of text and not large amounts of information contained onthe same page, or in the same subsection, etc.
EMA has grouped the types of information which the EMA does not consider CCI under five Rejection Codes, which will be used at the end of each consultation process to justify the EMA's conclusion. The Rejection Codes are as follows:
- Rejection Code 01 – Information already in the public domain or publicly available;
- Rejection Code 02 – Information already revealed or possible to be inferred from scientific literature and guidance and which does not bear any innovative features;
- Rejection Code 03 – Additional information which would be in the public interest to be disclosed (general or administrative information, quality related information, clinical / non-clinical related information);
- Rejection Code 04 – Information lacking sufficient justification;
- Rejection Code 05 – Information lacking relevant justification.
New European Union safety measures to fight against falsified medicines
Falsified medicines are fake medicines that pass themselves off as real authorised medicines that may contain: (i) ingredients of low quality or in the wrong dosage; (ii) be deliberately and fraudulently mislabelled with respect to their identity or source; (iii) have fake packaging; (iv) list the wrong ingredients; or (v) contain low levels of the active ingredients.
Past experience shows that such falsified medicinal products do not reach patients only through illegal means, but via the legal supply chain as well. This poses a particular threat to human health and may lead to a lack of trust of the patient also in the legal supply chain. Moreover, given that falsifications become more sophisticated, the risk that falsified medicines reach patients in the European Union increases every year. This is the reason why in July 2011, the Falsified Medicines Directive (Directive 2011/62/EU of the European Parliament and of the Council, of 8 June 2011, on the Community code relating to medicinal products for human use, as regards the prevention of the entry into the legal supply chain of falsified medicinal products) was published, which has been applicable since 2 January 2013.
Directive 2011/62/EU introduced tougher rules to improve the protection of public health with new harmonised, pan-European measures to ensure that medicinal products are safe and that the trade in medicines is rigorously controlled. In general terms, Directive 2011/62/EU introduced obligatory safety features on the outer packaging of the medicines, to be detailed via a delegated act; a common EU-wide logo to identify legal online pharmacies; tougher rules on the controls and inspections of producers of active pharmaceutical ingredients; and strengthened record-keeping requirements for the wholesale distributors.
For this reason, on 9 February 2016, the Commission published Commission Delegated Regulation (EU) 2016/161, of 2 October 2015, supplementing Directive 2001/83/EC of the European Parliament and of the Council by laying down detailed rules for the safety features appearing on the packaging of medicinal products for human use.
The Commission Delegated Regulation (EU) 2016/161 has introduced a new pack of measures to fight against falsified medicines, including: (i) a unique identifier that enables the verification of the authenticity and identification of an individual pack of a medicinal product (encoded in a two-dimensional barcode that can be read by common scanners); and (ii) an anti-tampering device that signifies whether the packaging of a medicinal product has been tampered with.
These measures apply to medicinal products subject to prescription that are required to bear safety features on their packaging (unless included in the list of medicinal products subject to prescription that shall not bear safety measures), certain medicinal products not subject to prescription, and medicinal products to which member states have extended the scope of application of the unique identifier or of the anti-tampering device.
According to Commission Delegated Regulation (EU) 2016/161, the manufacturer shall place on the packaging of a medicinal product a unique identifier, which shall be a sequence of numeric or alphanumeric characters that is unique to a given pack of a medicinal product. The unique identifier shall consist of the following data elements: (i) a code allowing the identification of at least the name, common name, pharmaceutical form, strength, pack size and pack type of the medicinal product bearing the unique identifier ("product code"); (ii) a numeric or alphanumeric sequence of a maximum of 20 characters ("serial number"); (iii) a national reimbursement number or other national number identifying the medicinal product, if required by the member state where the product is intended to be placed on the market; (iv) the batch number; and (v) the expiry date.
As a direct result of the Regulation, applicable as of 9 February 2019 (with the exception of Belgium, Italy and Greece, where it will be applicable at the latest as of 9 February 2025), the authenticity of the unique identifier and the integrity of the anti-tampering device affixed to medicinal products will be verified prior to the medicinal product being supplied to the public, preventing not only the dispensing of falsified medicines, but also other common errors such as the accidental supply of expired or recalled medicines.
Advocate General weighs in on patent licences and competition law
On 17 March 2016, Advocate General Wathelet (the “AG”) delivered an opinion in Case C-567/14 (Genentech), concerning the interface of patent licences, competition law and international arbitration.
This reference originated from a disputed arbitration award regarding non-payment of royalties under a patent licence for the use of human cytomegalovirus (HMCV) enhancer. The arbitrator determined that the licensee (Genentech) should pay the running royalties on sales of RITUXAN (which was manufactured using the enhancer) and other finished products with the same properties, as stipulated in the licence. These payments were due to the licensors (Hoechst and Sanofi-Aventis), despite the fact that certain of the underlying patents had been revoked after the licence agreement had been entered into and that infringement proceedings against Genentech in respect of the remaining patents had failed. Genentech contested the arbitral award in the French Courts. As part of this appeal, the cour d’appel de Paris referred questions to the CJEU, inquiring whether the licence agreement is compatible with Article 101 of the Treaty on the Functioning of the European Union (“TFEU”) or whether paying royalties on a revoked patent places a company at a “competitive disadvantage”.
Applying the reasoning in Case C-320/87 (Ottung), the AG determined that there was no infringement of Article 101 TFEU. As long as: (i) the commercial purpose of the licence agreement is to enable the licensee to use the technology while averting patent litigation; (ii) the licensee is able to terminate the licence agreement by giving reasonable notice; (iii) the licensee is able to challenge the validity or infringement of the patents at issue; and (iv) the licensee retains freedom of action after termination, the AG held that royalties should be paid as stipulated in the patent licence, even in circumstances of patent revocation or non-infringement.
The AG followed the arbitrator’s finding that “the commercial purpose of the [Genentech] licence agreement was to avert patent litigation and, in consequence, the calculation of royalties was wholly independent of the existence or otherwise of a valid patent over the finished product”. According to the AG, the Genentech licence satisfied the four criteria outlined above and thus, Genentech should pay the running royalty set out in the licence agreement.
The AG observed that Article 101 TFEU is not a general tool for the regulation of commercial arrangements. Rather, it only comes into play in respect of agreements between undertakings which affect trade between member states and have the object or effect of restricting, distorting or preventing competition within the single market.
Watch this space
While this opinion is not binding, it will be persuasive in the context of the final decision to be handed down by the CJEU. That decision will be eagerly awaited by licensees and patent owners alike. For now, the AG opinion suggests that a patent licence that requires payment of royalties for products that do not infringe (due to invalidity, simple non-infringement and perhaps even expiry) is not automatically in breach of competition law, particularly when settlement is involved, and the licensee can terminate and maintains its rights to sue.
VAT will now be imposed on purely cosmetic surgeries and treatments
In the past, the activities performed by doctors and medical facilities were, in principle, exempt from VAT in Belgium.
As from 1 January 2016, this exemption will no longer apply for surgeries and treatments for purely cosmetic purposes, provided said surgeries and treatments are either: (i) not mentioned in the nomenclature for medical interventions of the compulsory insurance for illness and disabilities; or (ii) mentioned in the nomenclature for medical interventions of the compulsory insurance for illness and disabilities but do not comply with the conditions set to benefit from compensation in accordance with the compulsory insurance for medical care and benefits.
Consequently, as from 1 January 2016, purely cosmetic surgery and related hospital treatments and medical care, as well as the supply of goods and services closely linked thereto, will become subject to VAT (at the standard rate of 21 percent). Surgery for therapeutic or reconstructive purposes, on the other hand, would remain exempt from VAT. Please note that the administrative guideline that should provide more clarity as to the scope of the exemption going forward is yet to be published.
A specific transitional measure has been provided which enables surgeries performed prior to 1 July 2016, the contracts of which were concluded prior to 1 March 2016, to still benefit from the VAT exemption.
While, on the one hand, cosmetic sugary will thus become 21 percent more expensive for private patients, on the other hand, doctors and hospitals will be entitled to deduct the VAT paid on the purchase of goods and services that are used for the purpose of their VAT taxable activities. Many doctors and hospitals will thus become mixed VAT taxpayers (i.e., with both a VAT exempt and taxable activity), entitled to a partial input VAT deduction right.
This new development also has an impact on pharmaceutical companies, since VAT charged on their products will become deductible by the customer (doctor/hospital), to the extent that said products are used for the VAT-taxable activities of the customer.
IGAS and ANSM reports publish initial findings on a tragic clinical trial in France
Following the tragic events that occurred in the context of a phase 1 clinical trial conducted in France, which led to the death of one volunteer, two investigations have been ordered by the French Minister for Health: one has beenassigned to the French National Agency for Medicines and Health Products Safety ("ANSM") and the other to General Inspectorate of Social Affairs ("IGAS").
In February 2016, IGAS has published its initial findings as part of its investigation. The main conclusions are as follows:
- There is no reason to question the regularity of the conditions under which the trial was authorised by the ANSM and the Ethics Committee.
- Strengthening the security measures governing this type of first-in-man clinical trial is recommended as the regulations and international recommendations remain unclear.
- The conduct of the phase 1 trial took place in compliance with applicable regulations and customary practices.
Three major shortcomings have been pointed out regarding the clinical service provider of the trial:
- breach of its duty to obtain information on the medical condition of the hospitalised volunteer,
- breach of its duty to inform the other volunteers on the accident and to seek their consent to remain included in the trial; and
- breach of its duty to immediately inform ANSM of the accident.
On 7 March 2016, ANSM published the report of the Temporary Specialist Scientific Committee ("TSSC") (i.e., the committee appointed by the General Director of the ANSM in charge of analysing all existing data on the pharmacological class of the product used in the trial). The major points of this report are as follows:
- Toxicology studies were carried out properly in accordance with current standards and no toxicity, especially neurologicalcomparable to that observed in this incident, appears to have been demonstrated in animals.
- The protocol followed a conventional phase 1 first-in-man clinical trial.
- Three theories are given as reasons for the tragedy (but only the last two will be seriously considered by the TSSC):
- an administration error or procedure specific to this cohort;
- a common feature among the six subjects having presented signs of toxicity; or
- an effect relating to the total dose that the subjects received.
The TSSC also made five recommendations:
- Demonstration of pharmacological activity, comparative whenever possible, should be a requirement before in-human administration or even before continuing toxicology studies can be envisaged.
- A neuropsychological assessment comprising aclinical interview and cognitive tests should be a compulsory part of assessment during volunteer screening and should be included in all Phase 1 trials for drugs with "central nervous system" tropism.
- Detailed and well-supported arguments for the choice of maximum dose to be tested in volunteers with respect to the presumed effective dose should be provided.
- A large-scale consensus process should cover phase 1 dose- escalation strategies to establish recommendations for more reasonable and careful practices than those applied.
- Pharmacokinetic parameter variabilities and extremes, and not only the mean, should be taken into account when setting the next dose level.
Both reports are pre-reports in which IGAS and ANSM also express some reserves (e.g., on the vagueness of certain provisions of the protocol) and state that they require additional information (e.g., on the toxicology studies as regards the circumstances of death of certain animals and the reasons for using four different species).
“At this stage, these agencies still continue their investigations. In this respect, the TSSC met again on March 24, 2016. A full report detailing the conclusions and recommendations of the TSSC shall be available soon. The IGAS final report was expected by the end of March but has not been published yet. We will continue to monitor developments as the final outcome of these investigations become known”.
Research tax credit and approved subcontractors
The research tax credit, provided by Article 244 quater B of the French tax code, is based, in principle, on the own expenses of a company incurred for research operations. However, the II-bis of this article enables research expenditures entrusted to approved private research organisations (within the limit of between EUR 2 million and EUR10 million, which varies on a case-by-case basis) to be taken into account in the calculation base of the tax credit. In order to prevent the same research operations from qualifying twice for the tax credit, it is stated in the III of the same Article that the approved agency must then deduct from the calculating basis of its own research tax credit the amounts invoiced to the client.
The administrative guidelines and the case law have strictly interpreted this legal rule, adopting a disadvantageous position to companies: in 2014 , the tax authorities have specified that this statutory requirement was applied, even though the client has waived the benefit of the research tax credit, for the transactions concerned. The Administrative Court of Appeal of Versailles confirmed this position in a judgment of 14 October 2015 ( CAA Versailles 15-10-2015 No. 14VE02410 ).
On 2 March 2015, it seemed that the tax authorities had granted a slight easing in their unfavourable position. Indeed, they indicated, through an example, that approved organisations should not deduct from their own research tax credit, from the margin they make on such operations, or from the share of invoiced services that did not relate to eligible works for research tax credit.
However, this tolerance was only for a very short period, because on 15 March, under the guise of correcting "clerical errors", the tax authorities amended that tolerance (BOI-BIC-RICI-10-10-20-30 No. 190).
We should note that on the same day, the tax authorities also amended a similar tolerance adopted on 1 July 2015 for the application of the innovation tax credit (tax credit for SMEs concerning innovation expenditures, which is less restrictive than the research tax credit), specifying however that companies that had implemented these provisions can rely on the fiscal years ending between 1 July 2015 and 15 March 2016.
Medical sales representatives can be self-employed persons
By its order dated 30 December 2015, the Court of Milan stated that a medical sales representative can be a self-employed person. Such a decision refers to a complaint filed by two sales agents, charged with the promotion of sales to pharmacies and provision of scientific information in relation to medicinal products manufactured by the principal pharmaceutical company, requesting the recognition of the employment relationship.
The Court, after having excluded that an employment relationship can be automatically inferred from the performance of the scientific information activity, concluded that such an activity can be carried out both within the framework of an employment and a self-employment relationship, depending on the characteristics according to which the relevant service - which is essentially identical in both cases - is performed.
Such a decision has indeed a twofold value. On one hand, it clarifies the provision of Article 122 of the Italian Pharma Code which, while regulating the activity of the sales representative, simply states that it must be carried out "on the basis of work relationship with only one pharmaceutical company," without specifying the nature of such a relationship. On the other hand, it rejects the theory that considers the scientific information and marketing activities as incompatible due to the fact that the formershould only be intended to encourage the rational use of medicinal products.
Obligations of wholesale distributors of medicinal products
By its Note No. 63097 of 30 December 2015, the Ministry of Health provided clarifications on the correct interpretation of the obligations of wholesale distributors of medicinal products to have suitable premises and equipment, and to appoint a qualified person, and to hold at least 90 percent of the medicinal products having a marketing authorisation, as provided for by the Italian Pharma Code (Articles 101 and 105 of Legislative Decree 219/2006).
The Ministry of Health, confirming its previous position, stated that the abovementioned obligations apply to each wholesale distributor on an exclusive basis, therefore excluding the possibility for two distributors holding two separate distribution licences to share the same premises, personnel and equipment.
Accession clause in the context of tenders for healthcare services
With judgment No. 34/2016, the Administrative Court of Brescia provided clarifications on the legitimate application, within tender procedures for the award of healthcare services, of the so-called "accession clause," which allows entities other than the awarding entity to directly enter into a similar contract with the successful tenderer according to the same economic conditions.
According to the Court, the application of such a clause is legitimate provided that: (i) the clause is included in the procurement documents from the outset; (ii) the other administrations which may invoke the clause are identified, or at least identifiable, on the basis of the same procurement documents; (iii) a reasonable ceiling for the total value of the services is established; (iv) a time limit for the application of the clause is set; (v) the final term of the accession agreement is identified; and (vi) the successful tenderer is allowed to refuse the accession.
In its judgment, the Court stated that compliance with the abovementioned conditions is essential, not only to ensure competition and equal treatment among economic operators, which must be aware of the possibility that the subject of the performance could be extended, but also to allow the same operators to evaluate their capacity to perform additional services or provide additional supplies.
The Administrative Court of the Lazio Region rejects the complaint against the off-label use of Avastin
In the context of the well-known dispute concerning the inclusion of Avastin, authorised for the treatment of certain forms of tumours, among the medicinal products for the treatment of age-related macular degeneration, the Administrative Court of the Lazio Region upheld the legitimacy of the off-label use of such medicine. This allows savings for the National Healthcare Service, considering that it complies both with applicable Italian rules on the matter and the EU legislation on the production and distribution of medicines aimed at ensuring the protection of public health.
In case of transfer of a registered office, pharmaceutical companies must pay the fees for the update of each Marketing Authorisation
By its judgment No. 187 of 20 January 2016, the Council of State ruled that when a Marketing Authorization ("MA") has to be updated due to a pharmaceutical company transferring its registered office, the company must pay as many fees as the number of MAs held by the same company.
According to the Council of State, the provision of paragraph 12 of section 5 of Law No. 407/1990, on the matter of fees due to the Italian Medicine Agency for services provided upon request and for the benefit of stakeholders requires the payment of a contribution for each MA registration, even in case of identical variation, unless the interested company proves that the number of MAs to which the variation relates does not lead to additional costs for the administration.
Such a conclusion is based on the fact that the abovementioned provision takes into consideration, in addition to the real cost of the performed services, the "economic value of the underlying transactions"; and this expression, according to the Council of State, gives relevance not only to the cost of the organisational investments borne by the administration but also to the economic utility connected with the update of the MAs, each of which autonomously generates benefits for the MA holder.
Implementing measures for the purchase of goods and services in the healthcare sector
On 19 February 2016, the Ministry of Economy and Finance and the Ministry of Health issued Circular No. 20518/2016, which provides measures for the implementation of the rule requiring the entities of the National Healthcare Service ("NHS") to involve Group Purchasing Organisations for the purchase of certain goods and services, with a value higher that the so-called "mandatory thresholds."
Among the various provisions included in the Circular are those requiring entities of the NHS that need to purchase goods and services but have not yet issued an invitation to tender, to involve the relevant Group Purchasing Organisations (CONSIP), after having verified the existence of operational conventions, which may be adhered to. In the absence of any such initiatives, the Circular allows such entities of the NHS to enter into "temporary contracts" for the time strictly necessary for the relevant Group Purchasing Organisations to implement conventions.
Temporary contracts may also be entered into in case of expiring contracts providing for such a possibility, for the provision of similar services and for the time strictly necessary for the relevant Group Purchasing Organisations to implement the conventions. In the absence of operational initiatives, the Circular lastly allows the terms of existing contracts to be extended, provided that such extensions are permitted according to the tender offer and the conditions provided therein are complied with.
The new Anti-Corruption Action Plan of the Lombardy Region
The president of the Lombardy Region has recently presented a bill (the "Anti-Corruption Action Plan") providingfor the establishment of a Regional Anti-Corruption Authority ("RACA").
The task assigned to the RACA is that of preventing and combating the corruption and illegality within all activities carried out by regional entities, including entities wholly or partially owed by the region, with a particular focus on public tenders. For the achievement of these objectives, the bill provides that the RACA will be entrusted with supervisory and control powers, to be exercised also through the request of news, information, data and documents to Public Administrations.
Among the other provisions of the bill, we mention those providing for the turnover of the managers of the Healthcare System, with a stay of five years but not in the same office; the audit of regional public tender procedures, to be assigned to external consultants; the separation between tenders and tender dossiers, aimed at ensuring a higher effectiveness within anti-corruption procedures and the application of the rules on whistleblowing to the entirety of the Regional Healthcare System.
The new report of the Italian Medicine Agency on pharmaceutical expenditure
On 19 February 2016, the Italian Medicine Agency published a new report on the trend of the regional pharmaceutical expenditure for the period of January 2015 to November 2015.
The data provided in the report show that the territorial pharmaceutical expenditure exceeds, even if slightly, the ceiling set at 11.35 percent of the National Health Fund ("NHF"). During the first 11 months of 2015, the expenditure reached 11.64 percent (amounting to approximately EUR11.641 billion ), though the resources of the NHF, on the basis of which the 2015 ceiling has been calculated, have been reduced with respect to the expenditure of 2014.
The hospital pharmaceutical expenditure also exceeded the ceiling, set at 3.5 percent of the NHF, reaching 5.06 percent amounting to approximately EUR5.195 billion, with an overrun equal to 30.8 percent with respect to the expenditure limit provided for by the ceiling.
Also in this case, it must be taken into account the reduction of the resources made available for 2015 compared to previous years.
The report shows that, given the reduction of the funds used to calculate the ceilings, the pharmaceutical expenditure has increased, thus causing an overrun even higher than that of the preceding years.
Executive boards of Dutch healthcare institutions put on the spot in open letter of the Dutch DPA
Following a four-year investigation of healthcare providers, the Data Protection Authority (“Dutch DPA”) has requested that the executive boards of all healthcare institutions in the Netherlands make data protection compliance a strategic priority and assess their current situation. When putting this "request" in context of the spectacular increase of the maximum fines for violations of the Personal Data Protection Act ("PDPA") and the introduction of data reach notification duties, it is apparent that healthcare institutions are more exposed than ever.
For several years, the processing of medical data has been one of the key priorities of the Dutch DPA. In this context, the Dutch DPA has run an ambitious investigation project to assess the legitimacy of processing medical records in the healthcare sector. The investigation started in 2012 and has involved no less than nine healthcare providers in the Netherlands. The institutions that were investigated include hospitals, general practitioners' centres and mental healthcare institutions.
In February 2016, the DPA sent an open letter to the executive boards of all healthcare institutions informing the sector of its findings and urging the sector's top management to stay focused and alert when decisions have to be made regarding IT systems and their use. More specifically, the boards were requested to review whether the data protection programs in their institutions are up to standard, and to remedy any shortcomings.
Electronic Patient Records System
The investigation focused on the central patient records system and how itis being used and accessed. The Dutch DPA holds that both policies and day-to-day practice in the investigated institutions were not compliant with the data security requirements set out in the PDPA. In particular, the authorisations were set too broadly and there was no proper monitoring and auditing of the authorisations. Those shortcomings have now been remedied, but the DPA has reasons to believe that many more healthcare providers still need to ensure that authorisation to patient data, access logging, monitoring and auditing comply with statutory requirements.
Access to medical data on "need to know" basis should be a management priority
Access to medical data is a balancing act that must be conducted with care: patient data must be accessible to caregivers if and when required, but the same data should not be accessible to healthcare professionals that are not involved in the individual patient's care.
The Dutch DPA sends out a clear message that this is not just an operational challenge but that it should be a strategic/management priority. Providers of healthcare technology should be prepared that Dutch healthcare providers are under increased pressure to make sure that the 'need to know' access principle is part of the system's design and configuration, and that they can actually demonstrate the effectiveness of the access restrictions put in place.
Amendment to the Act on Medical Devices (2016)
The Act Amending the Act on Medical Devices and Certain Other Acts of 11 September 2015 (Journal of Laws of 2015 item 1918).
Entry into force
The Amendment entered into force on 20 February 2016. However, certain provisions concerning notification subsequently came into force on 20 March 2016.
Products for providers
In the case of medical devices supplied to providers (e.g., hospitals, HCPs), their marking and manuals will be in English only if a given provider agrees in writing to the English version. Information for the patient still has to be drafted in Polish.
If the marking of collective package is in Polish, then the marking of the unit package will also have to be written in Polish or in the form of harmonised symbols or recognisable codes.
- Abolition of the obligation to attach agreements on the clinical trial to the application.
- Enabling inclusion of several medical devices in a single application (under certain conditions).
- Enabling the filing of attachments to the application on the electronic data carrier.
- Abolition of the restriction on the sponsor to be called upon once by the President of the Office to provide additional information necessary for the decision to be issued
- Enabling complete omission of clinical evaluation of the medical device, as long as the demonstration of compliance with the basic requirements without performing clinical evaluation, based on performance evaluation, efficacy testing and pre-clinical evaluation, is duly justified in the documentation of the conformity assessment.
- Changing the scope of exclusions of trials from the clinical trial regime: "Clinical trial will not be a designed and systematically planned test of the product marked with the CE mark on human subjects, undertaken to verify the safety or operation of this medical device if the medical device is used in the testing for its intended purpose".
- Enabling the preparation in English and sending by email, of both information about serious adverse events, and information about events that may affect the safety of the study subjects (hereinafter referred to as "events").
- Allowing the inclusion of necessary medicinal products for a clinical trial of the medical device, for which marketing authorisation has not yet been issued, and medical devices not marked with the CE mark.
- Limiting the term "sponsor" to the manufacturer or its authorised representative
- The need to attach to the application: (a) the draft marking and (b) the manuals of the medical device
- The need for the sponsor to take measures to ensure that it will be informed by the investigator of "events" within three days of their occurrence
- Reducing the deadline to two days for providing information about "events" indicating an imminent risk of death, serious injury or serious illness, unless immediate remedial actions should be taken.
Notifications and notices
- Exempting notifications of charges
- Clarifying precisely what is considered to be a change in the data included in the notice or in the notification
- Abolition of the obligation to attach a copy from the National Court Register to notifications
- Abolition of the obligation to notify about custom-made medical devices
- Clarifying the rules for issuing the certificate of free sale (export)
- The need for the manufacturer or its authorized representative to make a notification (including the current version of the document) regarding changes in the documents attached to the first notice about marketing within seven days from the date of the change (including revised formula of marking, a document appointing a new authorized representative, and as far as they would be provided with medical devices, changes in the manuals or promotional materials);
- Setting deadlines to complete or correct the notification (30 days) or notice (14 days).
- Allowing the entity which reports a medical incident to obtain information on the results of the investigation from the President of the Office.
- Enabling correspondence with the President of the Office for the supervision of medical devices, medical incidents and safety of products in English and via e-mail.
- Determining the cases in which the manufacturer or its authorised representative must send the President of the Office a report on usage errors, as well as outlining the contentof the report and enabling its drawing up on a manufacturer's report form concerning a medical incident
- Determining the cases where the following ,must be sent: "periodic summary reports" of recurring similar medical incidents and "reports of trends" describing a significant increase in the number or frequency of complaints, events or medical incidents occurred, and outlining the contentof such reports.
- Depriving entrepreneurs of the possibility to object to stop control actions with respect to the documentation concerning the medical device
- Enabling the President of the Office to obtain a sample of the medical device from the entity that reports a medical incident
- Extending the requirements associated with the note on safety and the report on Field Safety Corrective Action ("FSCA"): (a) impose the obligations on manufacturers and authorised representatives who have not their registered offices in Poland, and (b) impose an absolute obligation to send out the note on safety in the absence of objections of the President of the Office to the wording of this note.
Classification of the product (fee)
The time limit for payment of fees in connection with the opinion of the President of the Office has been changed. The fee is now collected at the beginning, upon the request for an opinion alone, and no longer at the time of its issue.
Reclassification of the product (measuring function)
The President of the Office will be able to change the classification of a medical device by an administrative decision if it is incorrectly indicated that the product has a measuring function or does not have it.
Reclassification of the product (borderline products)
The decisions of the President of the Office on the classification of a product as a medical device or a medicinal product have the so-called "enhanced efficacy." This means that a negative decision issued in relation to a medical device also applies to a similar medical device. The President of the Office is not required to carry out separate administrative proceedings or to list in the decision, the medical devices the President of the Office considers similar.
A "similar medical device" is considered as a medical device the intended purpose of which is the same or almost the same and which originates from the same manufacturer, even if it was marketed under a completely different name. Moreover, in relation to the procedure for the classification of the product, the term "manufacturer" is widely recognised and also comprises the related company (within the meaning of the Commercial Companies Code) of the real manufacturer. The definition of manufacturer has not changed in the remaining part of the Act.
Numerous amendments to the Act have involved the need to prepare seven new regulations or amendments to the regulations that have already come into force with the introduction of the Act.
New version of the "Guide for Advertising Medicines for Human Use"
At the beginning of 2016, the fourth edition of the "Guide for Advertising Medicines for Human Use" (the "Guide" was published by the Department of Health of the Catalan Autonomous Government, addressed to the pharmaceutical industry and the publishers of medical texts and journals located in Catalonia.
The main new points in the new Guide are the following:
- In line with what is established in Farmaindustria's Code of Good Practices for the Pharmaceutical Industry, the Guide indicates that quotations, charts, and illustrations taken from scientific journals or scientific works for use in promotional materials must be a faithful reproduction.
- Faithful reproduction is to be understood as the exact copy of the content from the original source, with no exclusions, additions, or highlighting which might induce error in the receiver or exaggerate the properties of the medicine. That is, the new version establishes a stricter criterion than the preceding Guide.
- On the other hand, the Guide clarifies a controversial aspect. It expressly allows scientific texts to be converted into images or any other graphic, provided that this does not lead to error or exaggerate the arguments selected.
- The concept "data on file" disappears, but the door is left open for the use of studies and works pending publication as verification, provided that publication has been accepted and the letter of acceptance is in hand.
- For medicines subject to additional follow-up under applicable regulations, the Guide introduces the obligation to include the inverted black triangle next to the legend:
- "This medicine is subject to additional follow-up"
- The Guide continues to allow use of the disclaimer as a sufficient means of control to restrict the access of healthcare professionals to the web site. When a web site is aimed at healthcare professionals, the content which they wish to access cannot be seen while the disclaimer is on-screen. They must accept the disclaimer to access the content.
- Applications for cell phones and tablets (APPs) are introduced as valid supports. For applications aimed solely at healthcare professionals, the laboratories and publishers responsible for these applications must include the procedures necessary so that only healthcare professionals can use them. This is accomplished by restricting access through access keys and/or passwords.
- Furthermore, the Guide establishes that QR Codes are considered valid supports, provided that their content is basically scientific and is aimed at and distributed exclusively to persons with the power to prescribe medicines. These systems must be printed in places or on access materials exclusively for these professionals.
- When the content of the QR Code is a link to a website, the site where the information is included must be considered a valid support.
- The Guide clarifies that printed matter may not convey the minimum content through the QR Code or through a URL address printed on such matter.
- The Guide reminds the user that promotional materials that delegates visiting physicians have in their interactive tablets must be presented just like any other promotional material.
- Finally, the different types of advertising must be handled digitally through the website www.gent.cat.
Recent developments on dual pricing in Spain
The Spanish Supreme Court recently upheld (judgment dated 4 March 2016) a previous National Court judgment that annulled the 2009 Spanish Competition Authority ("SCA") decision to shelve the complaint lodged by the European Association of Euro-Pharmaceutical Companies ("EAEPC") against several pharmaceutical companies because of the implementation of a dual pricing system.
Background of the case
On 14 September 2009, the SCA decided to shelve the complaint lodged by the EAEPC against Novartis Farmacéutica, S.A., Janssen Cilag, S.A., Lilly S.A., Pfizer S.L.U. and Sanofi Aventis, S.A.
The SCA argued that the distribution agreements between these companies and Spanish wholesalers did not establish a double price for their drugs depending on their destination. According to the SCA, they established a single price that would change once the wholesalers proved that the drug had been sold in Spanish territory and was covered by the Spanish Social Security System. Then, the SCA concluded that this conduct was not contrary to Article 101 TFEU or its equivalent, Article 1 of the Spanish Competition Act.
In 2012, the Spanish National Court, after undertaking an in-depth analysis (i) of the GSK case (which the Court considered raised the same questions as this case); (ii) the Spanish regulations on drug prices, which could have forced the companies to apply a policy of dual pricing; and (iii) Article 101 TFEU and its Spanish equivalent, indicated that the argument used by the SCA to shelve the complaint was not right.
The 4 March 2016 Spanish Supreme Court Judgement
The Spanish Supreme Court fully upheld the previous National Court Judgement. The main arguments provided are:
- The pharmaceutical companies were not forced by Spanish pharmaceutical regulations to apply a dual pricing scheme; the companies were free to voluntarily apply a dual price scheme. In consequence, competition law would be applicable to their behaviour.
- Even if the dual price system was considered to be in accordance with Spanish pharmaceutical regulations, the agreements between these companies and the wholesalers could be considered contrary to competition law. According to European Court of Justice case law, Article 101.1 TFEU is applicable to any agreement between companies, even when it is accordance with the requirements of that national regulation, except when the national regulation obliges companies to adopt anticompetitive conduct.
- The Court is of the opinion that the agreements between the pharmaceutical companies and the wholesalers that contained the dual pricing system could be contrary to Article 101 TFEU (or its Spanish equivalent) because they would have been aimed at restricting parallel trade.
- However, because of the specificities of the pharmaceutical sector, the Court does not close the door to these agreements being exempted in application of Article 101.3 TFEU (or its Spanish equivalent). The SCA will have to analyse this.
The SCA will now be forced to open a new investigation concerning this double price system. This will happen in the near future. Once the new probe is opened, the SCA should make a new decision on the case within 18 months.
Note that in March 2015 the SCA opened a probe against Pfizer concerning this same issue (after a very similar judgment of the Spanish Supreme Court). However, there have no been public updates of this probe since then.
Finally, recent statements by the SCA Director of Competition indicated that investigations of the pharmaceutical sector were not among the SCA's top priorities in 2016.
A national programme for protein research, method development and production of biopharmaceuticals in Sweden
The Swedish government has commissioned the Swedish Agency for Innovation Systems and the Swedish Research Council to jointly develop a national programme for protein research, method development and production of biopharmaceuticals. The research program will stretch over the period 2016-2023 and be state financed with SEK320 million. Furthermore, a private co-financing equivalent to 25 percent will form part of the program.
The programme is a part of the coordinated measures included in the government's strategic focus on life science. The aim of the government's strategic focus on life science is to contribute to better health, meet social challenges, strengthen Sweden's position as a leading country in research and development and increase Sweden's competitiveness from an international perspective. To this end, the government has appointed a national coordinator for life science and has also made life science a priority for the National Innovation Council.
The national programme for protein research, method development and production of biopharmaceuticals will cover both research on proteins for future bio-pharmaceuticals and the development of efficient methods for next generation pharmaceutical production. According to the government, the core of the program will be two-fold: exploitation of prominent research on the one hand, and collaboration and open dialogue with different actors in the industry on the other, with the latter ensuring the relevance of the research and its commercial use.
In addition, the government has pointed out that the implementation of the research programme will also benefit from a well-developed dialogue and cooperation, with the healthcare sector and may strengthen the healthcare's ability to admit new biopharmaceuticals, increase the linkage between research and treatment, and monitor treatment options, and developing new diagnostics and personalised treatment strategies.
Turkey restricts use of widely used cosmetics ingredient
Effective from 18 February 2016, Turkey now prohibits the use of 3-Benzylidene Camphor in cosmetics products. Widely used in sunscreens, hand and body creams, as well as anti-aging products, 3-Benzylidene Camphor is a type of UV filter that has been found to pose a threat to human health.
On 28 July 2015, the European Commission amended the Cosmetics Regulation (No. 1223/2009) to ban the use of 3-Benzylidene Camphor in cosmetic products.
Following this change, and to further harmonise Turkish cosmetics regulations with those of the European Union, the Turkish Drug and Medical Device Institution ("TITCK") amended Turkey's Cosmetics Regulation to bring it into conformity with EU law. Accordingly, the use of 3‑Benzylidene Camphor is now prohibited in cosmetic products in Turkey.
Manufacturers, importers, retailers and wholesalers of sunscreens, creams and anti-aging products may be affected by this new prohibition.
For years, TITCK has demonstrated its commitment to harmonising the cosmetic and pharmaceuticals market in Turkey with EU standards. With this change, TITCK has signalled that it intends to continue its harmonisation efforts.
Turkey restricts animal testing for cosmetics
Effective 15 January, the use of animals to test cosmetic products in Turkey will be restricted.
Globally, there is a continuing trend of introducing policies to limit animal testing of cosmetics by prohibiting the sale of products tested on animals. The EU has prohibited the sale of any cosmetic or personal care products tested on animals, as well as their imported equivalents, since 11 March 2013. This was followed by marketing and import prohibitions on products containing ingredients tested on animals.
Following this trend, and to further harmonise Turkish cosmetics regulations with those of the EU, on 7 July 2015, TITCK amended the Cosmetics Regulation to bring it into conformity with EU directives and decisions.
As of 15 January, Turkey prohibits:
- placing cosmetic products on the market where the final formula was developed through animal testing;
- placing cosmetic products on the market containing ingredients or a combination of ingredients that have been developed through animal testing;
- testing ingredients or a combination of ingredients that have been the subject of animal testing; and
- performing animal testing on finished products.
In exceptional circumstances, where serious concerns arise regarding the safety of an existing cosmetic ingredient, TITCK may still grant authorisation for animal testing if:
- an ingredient is in widespread use and cannot be replaced by another ingredient able to perform a similar function; and
- the specific human health concern is substantiated and the need to conduct animal testing is justified and supported by a detailed research protocol.
For years, TITCK has demonstrated its commitment to harmonising the cosmetic and pharmaceuticals market in Turkey with EU standards. With these changes for cosmetics, TITCK has signalled that it intends further harmonisation of the sectors within its jurisdiction.
New plans for Cancer Drugs Fund: What are they and what do they mean for drug companies?
On 25 February 2016, NHS England announced its decision to implement major changes to the Cancer Drugs Fund ("CDF") following a 12-week consultation. Under the new regime, the CDF will become a "managed access" fund with defined entry and exit criteria applied by the National Institute for Health and Care Excellence ("NICE"). Under the new CDF procedure, NICE will become the final decision maker with regard to availability and funding of cancer drugs.
The official start date of the new regime is 1 July 2016, but the new appraisal process will apply to all drugs manufactured from 1 April 2016 onwards.
Step-by-step guide to the proposed process
- New drug is manufactured and has not yet received marketing authorisation.
- Drug undergoes an initial appraisal by NICE, which will issue one of three draft recommendations. YES: Recommended for routine use NO: Not recommended for routine use MAYBE: Recommended for temporary use within the CDF
- Drug receives marketing authorisation. At this point, drugs that received a draft "yes" or "maybe" recommendation will be made available for prescription to NHS patients and receive interim funding from the CDF until final guidance by NICE is issued
- NICE conducts a final assessment within 90 days of the drug receiving its marketing authorisation, resulting in one of three decisions. YES: Drug is made available for routine use in the NHS (for drugs meeting NICE's cost-effectiveness thresholds). NO: Drug is not available on NHS (for drugs failing both limbs of the cost-effectiveness test). MAYBE: Drug is made temporarily available for use within the CDF whilst further evidence of the drug's efficacy is collected over a period of up to 24 months (for drugs with the potential to satisfy the cost-effectiveness test).
- After further evidence has been collated, "maybe" drugs will be re-evaluated by NICE in a process taking around 17-26 weeks. At the end of this evaluation process, one of two final recommendations will be made. YES: Drug is made available for routine use and exits the CDF to be funded by the NHS generally. NO: Drug is not recommended for routine use, meaning it no longer receives CDF funding and is no longer available to NHS patients.
What about existing drugs currently funded by the CDF?
Drugs currently funded by the CDF will be subject to re-assessment under the new process. Drugs receiving a "no" recommendation will be given a notice period after 1 July 2016 at the end of which CDF funding will no longer be available for them. It is not currently clear how long these notice periods will be. At this point drug companies will be asked to review their pricing levels with a view to the drug either continuing to receive CDF funding or being approved for use in the NHS generally.
How does this differ from the current process?
- NICE replaces the CDF as the key decision maker.
- New "maybe" classification allows for interim funding from the CDF, pending a final recommendation by NICE.
Impact on drug companies
These changes are likely to impact on drugs manufacturers as follows:
- There will be increased pressure on companies to price drugs at a level that allows them to be recommended for routine commissioning.
- Where "maybe" classified drugs go on to receive a "no" recommendation, and funding from the CDF is withdrawn as a result, drug companies will be expected to bear the cost of the drug for those patients already receiving it until their treatment is completed.
- Theoretically, drugs will be made available quicker due to the availability of interim funding by the CDF and speedier final assessment by NICE (previously, it has taken 6-18 months after receipt of marketing authorisation for NICE to make a recommendation).
Tender treatment: How to get the most out of the Public Contracts Regulations 2015
The Public Contract Regulations 2015 (the "2015 Regulations") came into force in England on 26 February 2015, implementing EU Directive 2014/24/EU on public procurement (prior to the required EU date for implementation of April 2016).
Much has been written about what has changed under the 2015 Regulations, and we do not plan to repeat that analysis here. Instead, this article looks at some questions that frequently come up for companies contracting with public bodies (particularly, in our experience, healthcare companies contracting with public hospitals and procurement groups), and seeks to answer them with reference to the new legislation and existing case law.
You may suspect that a public body is not running an entirely open or transparent tender process, but it can be hard to know whether there is a legitimate reason for this, or whether the public body is behaving unlawfully. This is particularly challenging when the public body in question is your number one customer. Our Q&As below aim to help.
Q. Can a public body require that the same contractor supply both services and goods?
A. Yes, but only if it can provide a non-discriminatory reason not to divide up the contract.
While the 2015 Regulations stop short of actually prohibiting public bodies from structuring a contract so as to effectively exclude smaller suppliers, or suppliers who can fulfil only one part of the contract, there is a new provision in the 2015 Regulations requiring public bodies to provide reasons for not sub-dividing larger contracts into smaller lots. Therefore, if a large contract is being offered to the market, which you suspect the public body knows only one (perhaps incumbent) company can perform, you should ask the public body why it has not divided the contract into lots. If there is a legitimate reason for having the same entity fulfil all parts of the contract (such as costs-saving, or risk-sharing), then there may be little you can do. However, if the reasoning seems to be hiding a desire to ensure a favoured supplier wins, then you could have grounds for challenge, as the public body is likely in breach of the general principles of procurement, which require public bodies to treat tenderers equally, and without discrimination.
Q. Can a public body make changes to the contract after it has been entered into?
A. Only if the change is insubstantial.
The 2015 Regulations codify and expand upon previous case law in this area - most notably Pressetext, which clarified when changes to a contract will be so significant that they trigger a requirement to open up the contract to tender again. Pressetext (Pressetext Nachrichtenagentur v Republik Oesterreich [Bund] [Case C-454/06]) established that a change to a contract will be deemed a new award, requiring a new public procurement process to be run, if the changes make the contractmaterially different to the contract originally awarded. For example, if a change, had it been incorporated into the original procurement documents, would have meant that other tenderers would have bid, then the change is likely to be material.
The wording in the 2015 Regulations is slightly different to the wording from case law, referring to "substantial modifications" as opposed to material difference. However, the effect is much the same, and the new rules are designed to codify and clarify the case law.
Under the new regime, a modification is "substantial", meaning a new procurement procedure should be run, if:
- it renders the contract or the framework agreement materially different in character from the one initially concluded;
- it introduces conditions which, had they been part of the initial procurement procedure, would have (i) allowed for the admission of other candidates than those initially selected, (ii) allowed for the acceptance of a tender other than that originally accepted, or (iii) attracted additional participants in the procurement procedure;
- it changes the economic balance of the contract or the framework agreement in favour of the contractor in a manner which was not provided for in the initial contract or framework agreement;
- it extends the scope of the contract or framework agreement considerably; or
- a new contractor replaces the original one, in a way that is not condoned by the 2015 Regulations (see below).
However, the 2015 Regulations clarify that a new procurement procedure does not need to be run for the following types of modification:
A modification provided for in the original procurement documents:
A modification provided for in the initial procurement documents in a clear, precise and unequivocal review clause that states the scope, nature and conditions for any change is acceptable, as long as this does not alter the overall nature of the contract.
A modification providing for additional works, services or supplies, where a change of contractor would be very difficult:
Additional necessary works, services or supplies, where a change of contractor for these cannot be made for economic or technical reasons, or where a change of contractor would cause significant inconvenience or substantial duplication of costs, is acceptable provided that any increase in price does not exceed 50 percent of the value of the original contract.
A modification brought about by unforeseeable circumstances:
A modification, the need for which has been brought about by circumstances a diligent public body could not have foreseen, is acceptable as long as the modification does not alter the overall nature of the contract and any increase in price does not exceed 50 percent of the value of the original contract.
A change of contractor provided for in the initial procurement documents, or because of a corporate restructuring:
A modification to replace the original contractor with a new contractor as a result of an unequivocal review clause (as set out in the first bullet point) or a corporate restructuring, is acceptable as long as the new contractor fulfils the original criteria for selection, there are no other substantial modifications to the contract and the arrangement is not aimed at circumventing the public procurement regime.
A low value modification:
A modification, the value of which is below: the public procurement regime threshold; and 10 percent of the initial contract value for service and supply contracts (15 percent of the initial contract value for works contracts), is acceptable provided that the modification does not alter the overall nature of the contract or framework agreement.
Therefore, if you are frustrated by changes made to a contract between a public body and a competitor, ask yourself:
- Is the change specifically permitted under the 2015 Regulations?
- If not, is the modification "substantial" according to the definition in the 2015 Regulations (see above)?
If the answer to the first question is no, and the answer to the second question is yes, then you probably have grounds to challenge the modification.
Q. Can a public body award a tender solely on the basis of price?
A. In theory, other criteria must also be taken into account, although the reality often is that the cheapest tender wins.
Under the old regime, a public body could award a contract on the basis of the most economically advantageous offer or simply the lowest price. Under the 2015 Regulations, a public body must award contracts on the basis of the "most economically advantageous tender" ("MEAT").
As part of the MEAT approach, a public body will give price and quality a particular weighting, which is then used to adjust a tenderer's result against the criteria in each area, to make up their overall score.
There is no prescribed minimum or maximum weighting to be given to price or quality, but in some circumstances a public authority may be required to justify the weighting it has given to one or the other, if, for example, the effect of its weighting system is significant, and there is evidence that it may have been chosen to favour a particular contractor, in breach of the procurement principles (Traffic Signs & Equipment Ltd v Department for Regional Development  NIQB 25).
It is worth remembering that all contract award criteria must be linked to the subject matter of the contract in question, so it is not acceptable for a public body to make arbitrary factors determinative of the award of the contract.
Therefore, whilst it may be acceptable for a public body to skew the price/quality scoring ratio heavily in order to keep cost down (or vice versa), if you suspect that either the criteria used to award the contract, or the weighting applied to those criteria, have been set to evade the public procurement principles of equal treatment and non-discrimination, then you could have grounds for challenge.
Q. Can a public body use a framework agreement to circumvent competition?
A. No, framework agreements should be entered into following fair competition, and individual contracts under framework agreements may also need to be awarded after a mini-competition.
A framework agreement is an agreement between one or more public bodies and one or more suppliers which establishes the terms of contracts to be awarded during a given period (usually this cannot be more than four years). The idea is that individual contracts awarded under framework agreements should stick closely to the terms of the latter, meaning that - in effect - a competition has already been run providing for the possibility of the individual contract, so it can be awarded without a full procurement procedure each time, saving the public body time and money.
It is generally the case that if a specific contract awarded ("called off") under a framework agreement goes substantially beyond the terms of that framework agreement, then its award without running a new procurement procedure for the market as a whole will be unlawful (for more detail on this, see our analysis on substantial modifications, above). However, non-material additional terms are permitted in specific contracts, provided a mini-competition is run if required.
Whether a mini-competition needs to be run for a contract depends on how many commercial entities are party to the framework agreement, and the terms of that agreement and the procurement documents:
- If there is just one supplier under a framework agreement, then it is acceptable for a public body just to ask that supplier to enter into a specific contract when required, without running a competition (the supplier can supplement its original tender with regard to non-material terms only).
- If there is more than one supplier, then a contract can only be called off without reopening competition if:
- the framework agreement sets out all the terms of that contract; and
- the objective conditions for determining which supplier to award the contract to were set out in the original procurement documents.
- Where the terms of the specific contract and/or the objective conditions for deciding which supplier to award the contract to are not set out in the framework agreement and procurement documents, a mini-competition between suppliers must be run. This means the public body must:
- consult all suppliers under the framework agreement capable of performing the contract;
- fix a time limit for tenders to be submitted in writing, which should be "sufficiently long", bearing in mind factors such as the complexity of the contract, for tenderers to make submissions;
- award the contract to the best tender, based on award criteria set out in the procurement documents for the framework agreement;
- have regard to the general treaty obligations of equality, transparency and non-discrimination.
Remember that the overriding terms of a framework agreement cannot be materially altered in a specific call off contract, so public bodies should only use mini-competitions to determine who is best placed to meet terms of contracts that cannot be specified in advance.
Based on the above, there are three elements to consider, if you think a public body may be using a framework agreement unfairly:
- Does the contract called off go substantially beyond the terms of the framework agreement, meaning that the contract should have been opened up to the market as a whole, via a full procurement procedure?
- If not, were all the terms of the specific contract set out in the framework agreement? In addition, were the objective conditions for deciding which supplier to award each contract to set out in the procurement documents?
- If not, has a mini-competition between suppliers taken place?
If the answer to question one is yes, or the answers to questions two or three are no, then you may have grounds for challenge.
- Public procurement legislation can seem impenetrable, but if you bear in mind the simple principles behind our Q&As above, then you should have a good idea of when a public body is acting unlawfully.
- If you do suspect unfair behaviour, remember that the time limit for bringing a procurement claim is short (usually 30 days), and the courts may draw adverse inferences if you do not act within any 'standstill' period. Therefore, you need to act quickly.
- Trust your instincts: if you think a public body is deliberately excluding you from its contracts, and there is not a legitimate reason for this, seek legal advice quickly so that you do not prejudice your chances of being properly considered.
ABPI Code transparency disclosure requirements: 30 June 2016 deadline approaches
In an effort to increase transparency between pharmaceutical companies and their relationships with healthcare professionals (HCPs) and healthcare organisations ("HCOs"), the European Federation of Pharmaceutical Industries and Associations ("EFPIA") launched the EFPIA Disclosure Code in June 2013.
As previously described in earlier editions of this newsletter, the EFPIA Disclosure Code 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 via the Association of the British Pharmaceutical Industry ("ABPI") Code.
Disclosure requirements in the UK now mean that pharmaceutical companies will need to record certain "transfers of value" paid to HCPs, or to their employers on their behalf, for certain services such as chairing and speaking at meetings, providing training services, participating in market research and in advisory boards, etc. The first disclosure information will be made available by 1 July 2016 and will include transfers of value made within 2015. Disclosures will continue to be made annually covering subsequent calendar years. All ABPI members along with those companies who have signed up to adherence with the ABPI Code must ensure that relevant data is uploaded on the central platform hosted by the ABPI.
Companies have been collecting details of relevant payments made to HCPs/HCOs and consolidating them into a standard template, modelled on the EFPIA template (the UK template is available on the PMCPA's website). Companies were due to upload their completed 2015 templates onto the ABPI portal by 31 March 2016 in order for the ABPI to process and consolidate the data before 1 July.
Any companies who are yet to submit their template may still negotiate with the ABPI but late submissions might jeopardise processing and subsequent publication of the data, which would mean that companies whose data are not available on the central platform would not be complying with the ABPI Code.
When a payment is recorded against an HCP, an automated email will be sent by the ABPI to inform the HCP of the proposed forthcoming disclosure, and companies may also wish to inform HCPs in advance of their intention to disclose the relevant data. HCPs and HCOs will be able to check the data allocated against their name, and there will be a period during which the HCPs and HCOs will be able to query any of the data before they are published. Detailed steps are available on the ABPI's website.
Freely given and unambiguous consent from HCPs is required before publishing their information and the HCPs retain the right to refuse the disclosure of their information or to withdraw their consent at a later date. In the event that consent is refused or withdrawn, companies will be considered not to be in breach of their obligations under the ABPI Code and will be permitted to disclose the aggregate figures involved.
Transparency of the collaboration between the pharmaceutical industry and HCPs is a priority on a global level and failure to comply with the disclosure obligations prescribed under the ABPI Code will lead to its breach and sanctions will apply. Moreover, companies and HCPs will have to consider the reputational impact that poor or non-compliance might entail given the attention this area has been receiving by the press. The Daily Telegraph, a national newspaper in the UK, has run an aggressive campaign over the past year, exposing companies, HCPs and HCOs it alleges have been involved in interactions that constitute conflicts of interest, with examples of this campaign to be found here, here and here.