EU reaches agreement on Medical Devices and In Vitro Diagnostics Regulations

It has been quiet since the trilogue discussions first started but on 25 May 2016 it was announced that the Commission, Council and Parliament reached a political agreement on the draft medical devices and in vitro diagnostics regulations, which once adopted and in force will replace Directives 90/385/EEC on Active Implantable Medical Devices, 93/42/EEC on Medical Devices and 98/79/EC on In Vitro Diagnostic Medical Devices.

Details on the agreed text have not yet been disclosed. However, it has been reported that important details are not included and have been left to be addressed by implementing and delegated acts.

Next, the agreed text will be submitted to the Council's Permanent Representative's committee and Parliament's ENVI committee for endorsement. Once endorsed, it will be confirmed by the Council and subsequently translated in all official languages of the EU. Subsequently, it will undergo a legal linguistic review before it can be formally adopted by the Parliament and the Council. Without any problems such process can be completed before the end of the year.

The council announced that the new rules will apply three years after publication for medical devices and five years after publication for in vitro diagnostics, thus allowing a longer transition period for IVDs.

Brexit: Why the healthcare industry should be at the centre of the debate 

On 23 June 2016, the United Kingdom will vote in a referendum to decide on whether it should remain a member of or leave the European Union.

The forthcoming referendum was promised by the Conservative government as part of its May 2015 UK election campaign, as the benefits and disadvantages of EU membership have long been a source of debate within the UK. The referendum follows David Cameron's renegotiations earlier in 2016 regarding various aspects of the UK's position in the EU.

Since the renegotiations concluded in February this year, the leave/remain debate has become highly vocalised among industry figures, politicians and the public alike. The pharmaceutical and medical devices industry is no exception. Notably, on 8 May 2016, 93 business leaders in the life sciences sector, including Sir Andrew Witty, CEO of GSK, signed a letter to the Observer supporting the UK's continued membership of the EU, citing benefits such as research funding and the advantages of continuing to operate within the EU's harmonised regulatory approval system. The UK BioIndustry Association ("BIA") and the Association of the British Pharmaceutical Industry ("ABPI") have also announced their support for the UK remaining in the EU. On the other hand, those in favour of the UK leaving the EU have quoted Switzerland's healthcare and life sciences industry as an example of an industry thriving outside of both the EU and the European Economic Area ("EEA").

What would the implications of a vote to leave the EU actually mean?

If the UK votes to leave the EU on 23 June, the next step would be for the UK government to present its application to withdraw from the EU, in accordance with Article 50 of the Lisbon Treaty. After a period of up to two years, unless extended by mutual agreement, the UK will withdraw from the EU. It is at this stage difficult to predict how the withdrawal will be managed, and whether the UK government will trigger the Article 50 process immediately following a vote to leave the EU.

The implications for the pharmaceutical and medical devices industry in the long run would only really become apparent when the final model governing the UK's new relationship with the EU is determined. The Norway approach is already embedded in the current regulatory system for medicines and medical devices in Europe and some voices keen to preserve the single market have called EEA membership the next best thing. However, what we are more likely to witness is lengthy negotiations between the UK and the EU on the shape of their future relationship. Below, we consider further some of the key areas looking at what we already know under the Norway model and other models with further reaching implications:

  • Marketing authorisations – The key question here is whether pharmaceutical companies would be able to continue to rely on the European Medicines Agency's ("EMA") "one-stop" centralised licensing procedure to obtain a centralised marketing authorisation valid in the UK. Centralised marketing authorisations, considered a significant achievement by many in the industry, would continue to cover UK sales if the UK followed the "Norway approach" and became a member of the EEA. The UK would, however, not have the right to vote on EMA scientific opinions and would be obliged to adopt EU decisions on marketing authorisations on which it will have no say: hardly an improvement considering that, with or without Brexit, the UK wishes to regain some powers from Brussels. If the UK opts not to follow the "Norway approach", it would presumably have to fall back on its own authorisation and inspection regime, make extra resources available for the Medicines & Healthcare Products Regulatory Agency ("MHRA") and consider a recognition and confidentiality agreement with the EU of the kind the EMA has in place with other regulatory authorities, such as the FDA and, more recently, Swissmedic. Based on its longstanding relationship and the needs on both sides, the UK would perhaps be able to secure a more privileged position than other countries, but this remains to be seen. As far as the existing centrally authorised products are concerned, questions arise about if, when and how they would be transferred into the UK system.  
  • Location of the EMA – The EMA, currently headquartered in London and employing over 600 full-time staff in the UK, would almost certainly have to relocate within the EU's new borders, possibly to Denmark or Sweden.  
  • Research and Development – The fact that UK researchers would no longer have the same access to EU funding for their research has been repeatedly brought up as an argument against Brexit. EU funding can, however, be accessed from outside the EU, provided certain EU principles are met. The case of Switzerland demonstrates how EU Horizon 2020 funding can be accessed by a third country, but also how quickly such access can be lost if certain EU rules (on free movement of persons) are not complied with. The pro-Brexit campaign has pointed at the flaws of the current EU Clinical Trials Directive which, through added costs and administrative burden, has slowed down research in the UK. Complaints have also been made about the long time it took the EU to introduce the necessary reforms. Those reforms are, however, now around the corner with the new Clinical Trials Regulation providing for a single application for EU-wide clinical trials and a coordinated procedure for their assessment. If the UK leaves the EU and does not enter the EEA, a separate application would, in principle, need to be filed for clinical trials conducted in the UK. Such extra procedural step may place UK trial sites at a disadvantage in international multi-centre clinical trials.  
  • Pharmacovigilance – Over the years, many pharmaceutical companies, including American, Japanese and Swiss multinationals, have based their main European pharmacovigilance operations, including the Qualified Person for Pharmacovigilance ("QPPV") in the UK, with the MHRA acting as supervisory authority. Good Vigilance Practices ("GVP") guidance allows a QPPV to reside and work in the EEA and permits the master file to be located in an EEA Member State. A "Norway approach", therefore, does not necessarily entail many changes. Any other approach, however, will presumably require pharmaceutical company executives to look at their pharmacovigilance operations and decide on what and where to relocate, taking into account the availability of talent and the choice of a new EU supervisory authority.  
  • Medical devices – Would UK manufacturers, like other non-EU manufacturers, have to appoint an EU-based authorised representative to be able to market their devices in the EU? And where UK-notified bodies are currently used to perform the conformity assessment, which enables the CE mark to be affixed, would EU-based notified bodies have to be appointed instead? Presumably not if UK becomes a member of the EEA. However, it is not clear what would happen in the event that the UK decides not to join the EEA and this issue would depend on its negotiations about access to the single market.  
  • European Unitary Patent ("UP") and Unified Patent Court ("UPC") – While Brexit would likely disrupt the implementation of the UP and UPC, delaying it past 2017 as the UK's mandatory ratification of the UPC agreement passes to another Member State (the UK is one of three countries that must ratify the UPC agreement for it to enter into force), the consensus seems to be that the long-awaited, EU-wide patent system would not be entirely derailed. The UK would, of course, be left on the outside of the UP system, as a non-EU state, meaning that pharmaceutical and medical device companies would need to pursue patent protection in the UK separately from any UP protection. This could continue to be obtained by making an application via the European Patent Office, seeing as membership of the European Patent Convention is not limited to EU countries, or alternatively by filing directly with the Intellectual Property Office in the UK. This may mean some additional expense in the UK in terms of patent prosecution, maintenance and enforcement. This may not be viewed as such a big disadvantage by larger companies with significant resources, especially initially when the introduction of the new UP and UPC system brings a time of significant uncertainty. While any potential increased costs may be a significant factor for SMEs, we expect most patentees to continue to seek and enforce patent rights in the UK, especially for important inventions, given the UK's status as a significant market. The UPC agreement currently states that the Life Sciences section of the UPC Central Division is to be located in London and an amendment to the text would be required to move this branch elsewhere. Rumours have begun to circulate suggesting that the Life Sciences UPC Division may move to Italy or the Netherlands if the UK leaves the EU. Life sciences companies will also be impacted by changes in other areas of IP, in particular for trademarks, if a UK exit means that EU-registered trademarks would no longer apply in the UK.

Too many unknowns make it hard to predict what route the UK will take after 23 June and, therefore, to know how it will impact the pharmaceutical and medical devices industry. It is important, however, to keep the industry at the forefront of the debate: Not only is it a key sector for the UK economy and an important job provider, but ensuring high-quality healthcare and access to treatments is also a key issue for any government and any society.

Time to get ready for the new pan-European data protection rules

On 25 May 2016, the General Data Protection Regulation ("GDPR") entered into force and introduces a new pan-European set of data protection rules, while providing a series of opening clauses for national law.  These rules will be directly applicable in all EU Member States and - based on the GDPR's geographical scope of applicability - also apply to organisations outside of the EU that target EU data subjects.  The new rules will replace the existing Data Protection Directive 95/46/EC and start to apply as of 25 May 2018 giving businesses and regulators two years to come into compliance.  Companies should get started with their GDPR compliance programs sooner rather than later, especially for activities with a bearing beyond May 2018 (e.g., as regards consent-based data collection - see below).

The healthcare industry will be one sector heavily affected by the new rules and organisations processing health data will most likely need to adapt various processes, policies and practices to not fall foul of the new requirements.  In light of the significant fines that may be imposed for non-compliance with the GDPR (up to 4% of the worldwide annual turnover of the preceding financial year or €20.000.000 per infringement, whichever is higher), GDPR compliance activities should be taken seriously.  

Here is a very brief snapshot of some key GDPR characteristics and requirements of relevance to the healthcare industry.  For a more detailed overview of the key changes introduced by the GDPR and tips for addressing the new requirements, please see the Baker & McKenzie GDPR Game Plan.

  1. Processing health data.  "Data concerning health" (defined broadly to capture any personal data related to the physical or mental health of an individual) continues to be categorised as a special category of personal data and will be subject to a higher standard of protection than personal data in general.  Essentially, the processing of health data is prohibited unless one of several narrow processing grounds applies, including that:
  • the data subject has explicitly consented to the processing; or
  • the processing is necessary for certain medical care reasons (e.g., the provision of medical treatment), for public health reasons (e.g., protection against serious cross-border threats to health), or for scientific research.  In these cases, suitable safeguards specified by the GDPR or by EU or Member State law must be implemented to protect the rights and freedoms of data subjects.  Organisations will need to assess their data processing operations and ensure that they can rely on one or more of the above processing grounds to the extent they process health data.
  1. Consents.  The GDPR introduces more prescriptive requirements for consents.  To the extent, data subjects' consents are relied on to justify processing of health data, existing consent forms will need to be reviewed and likely revised in order to be GDPR compliant.  This process can be started now as consents obtained prior to 25 May 2018 continue to be valid after that date provided they conform to the GDPR requirements for consent (Recital 171).  
  2. Data protection officer ("DPO").  The GDPR introduces a new requirement to appoint a DPO.  While this requirement is limited in scope, it will apply to many players in the healthcare sector as any organisation that processes special categories of data (e.g., health data) on a large scale and as part of their core activities (whether as controller or processor) will be required to appoint a DPO.  Moreover, Art. 37 (4) of the GDPR allows Member States to require businesses to designate DPOs in cases other than prescribed by the GDPR. 
  3. Data protection impact assessments ("DPIAs"). Any organisation that processes health data on a large scale will be required to carry out and document DPIAs.  A DPIA is a risk assessment assessing the impact of envisaged data processing operations on the protection of personal data.  Many healthcare organisations will need to establish policies, processes and templates for carrying out and documenting DPIAs and consider how DPIAs can be embedded within their operational strategy (e.g., regarding product development).Importantly, despite the GDPR applying directly, Member States may maintain or introduce further conditions, including limitations, with regard to the processing of data concerning health.  Organisations need to be aware of, and comply with, those national rules.

The following diagram illustrates the limited scope of the GDPR in light of the various opening clauses which will lead to national data protection laws remaining very relevant under the GDPR:  

Click here to view image

Research Tax Credit: The amortisation of patents is eligible even if the company is not the owner

(Administrative Court of Appeal of Bordeaux Ch.3, 15 March 2016, n° 14BX01502, Société Terranere)

By a decision rendered on March 15, 2016, the Administrative Court of Appeal of Bordeaux usefully clarified that the amortization of licensed patents is eligible for the research tax credit, provided that those rights are regarded as assets accordingly to the caselaw SA Sife (French Supreme Administrative Court, 8th and 9th subsections, August 21, 1996, N° 154488, SA Sife).

In this case, the company Saga Bike was the owner of three patents, the exclusive licenses of which it conceded to the Terranere company (the applicant), the latter having entered in its accounts as an asset its business of the design and production of innovative bicycle accessories.

As a consequence, the applicant deducted the amortization of this licence from its taxable income, which did not give rise to challenge. However, it considered that the amortization fell within the scope of the research tax credit, which the French tax authorities and the Administrative Court had refused.

The applicant's position As a consequence, the applicant deducted the amortisation of this licence from its taxable income, which did not give rise to any challenge. However, it considered that the amortisation fell within the scope of the research tax credit, which the French tax authorities and the Administrative Court had refused.

The applicant's position stemmed from a broad interpretation of the restrictive list enumerating the expenses eligible for the research tax credit, which includes in particular:

  • the amortisation of assets, created or newly acquired and directly assigned to scientific and technical research operations, including prototype production or pilot plants operations (Art. 244 quater B, II, a of the French Tax Code); and
  • the amortisation of patents and plant variety certificates acquired in order to perform operations of research and experimental development (Art. 244 quater B, II, f of the French Tax Code).

The Court of Bordeaux examined the intention of the legislator in the light of the preparatory work of the provisions of paragraph (f), determining that it did not appear that the legislator had intended to exclude the amortisation of licences for the exploitation of patents.

The judges therefore agreed with the interpretation of the applicant on two conditions:

  • First, that the use of this licence by the licensee meets the criteria of paragraph (a), meaning that it must be directly assigned to operations of scientific and technical research; and
  • Secondly, that a licence for exploitation is regarded as an asset pursuant to the case law Sife. This decision put an end to a certain legal instability by listing three criteria to determine intangible asset rights, being that which: (i) constitutes a regular source of profits, (ii) has sufficient stability, and (iii) may be transferred.

The Administrative Court of Appeal first verified that the licences in question met the three above conditions, then granted the applicable rights to the applicant, without verifying if the other conditions of the research tax credit were met because this latter subject was not challenged by the French tax authorities.

This very interesting solution should fully benefit companies that do not own the patents they exploit. However, it will need to be confirmed by the French Supreme Administrative Court, otherwise, in the interim, it is subject to appeal.

New Legislation - Bribery in the Healthcare Sector

A new anti-corruption legislation passed the last parliamentary hurdles in May and is expected to enter into force in June 2016.

The new legislation is a legislative reaction to a judgment of the Great Senate of the German Federal Criminal Court, which held that bribes granted to or accepted by physicians in private practice were not punishable under the then-current anti-corruption legislation. The new sections 299a and 299b of the German Criminal Code (Strafgesetzbuch, "StGB") are intended to close this gap in the Criminal Code. However, the scope of the new law goes beyond physicians in private practice.

As an overview of the new anti-corruption articles, Sec. 299b StGB covers the so-called active corruption. Under Sec. 299b StGB, anyone who, in relation to the prescription of (inter alia) medicinal products or medical devices, or the procurement of (inter alia) medicinal products or medical devices that are each intended to be immediately utilised by a healthcare professional or his assistants for the benefit of patients or as specimens for laboratory tests, offers, promises or grants a healthcare professional or a third person a benefit in consideration of affording him or a third person an unfair preference in (domestic or foreign) competition may be sanctioned with up to three years' imprisonment and/or a fine. In serious cases, up to five years' imprisonment may be imposed.

Inversely to Sec. 299b StGB, Sec. 299a StGB covers so-called passive corruption, i.e. healthcare professionals' accepting of benefits.

Scope of the new anti-corruption legislation

The new anti-corruption legislation does not only cover benefits granted to, or accepted by, physicians or pharmacists. Rather, benefits to any member of a healthcare profession whose education is state-regulated (including, for example, nurses, midwives and speech therapists) are covered by the new law. In addition, although the law is intended to close legal loopholes regarding corruptive behaviour of and vis-à-visprivate practice physicians, it will also apply to employed healthcare professionals.

Like the existing anti-corruption legislation, the new sections 299a and 299b StGB will broadly apply to any benefits, whether tangible or intangible. Thus, relevant benefits may include invitations to training events and conferences, hospitality, donations or even the offer to enter into service or consulting agreements. However, such benefits would only be subject to criminal investigations if they were granted in consideration of the healthcare professional according the giver or third person an unfair preference in competition.

Risk of criminal investigations due to public pressure

Criminal investigations regarding the above offences are not subject to the submission of a criminal complaint. Rather, prosecutors may start criminal investigations ex officio. Since corruption in the healthcare sector has been subject to growing public attention in the past years, it can be expected that under the new legislation, criminal investigations regarding corruption in the healthcare sector may increase. In this context, it should be noted that the threshold for criminal investigations is rather low in Germany; an initial suspicion is sufficient.

In view of the above, pharma and medtech companies should ensure that their internal compliance systems and SOPs are adapted to the new legislation.

Pharmaceutical companies fined for infringement of laws on pharmaceutical promotion

The National Institute of Pharmacy and Nutrition ("NIPN") has recently published new decisions on its website in which it imposed high fines on pharmaceutical companies for infringing laws on the promotion of medicinal products. (In case No 18374/2015, the NIPN imposed a fine of HUF21 million (approximately EUR68,000 ), while in case No 19438/2015, the fine imposed was HUF10 million (approximately EUR33,000).

The major findings of the decisions are the following:

Sponsorship of events: Pursuant to the NIPN's interpretation, sponsorship of scientific events includes the payment for booth rentals or advertising spaces as well as the purchase of sponsorship packages from conference organizers. The NIPN's new interpretation is relevant because Hungarian laws provide for a threshold for the sponsorship of professional events which is very low (5 percent of the statutory minimum income, which is currently HUF5,550, approximately EUR18, inclusive of VAT per participant). If the interpretation of the NIPN will be followed, it will be very difficult for pharmaceutical companies to pay booth rental fees or buy sponsorship packages at scientific conferences because they will be at risk of infringing the laws by exceeding the statutory sponsorship threshold.

Monitoring of contractual partners: The NIPN found a pharmaceutical company to be liable for not appropriately auditing and monitoring its contractual partners providing detailing / promotional services. According to the NIPN's findings, the company entered into a contract with a registered medical sales representative company to provide detailing services relative to its products. This company, however, engaged a third party subcontractor service provider who was not registered as a medical sales representative. On that basis, the detailing activities conducted by that third party were considered as unlawful. The pharma company's liability was established because the third-party performed the services for the company's benefit and in connection with the company's products.

Referral meetings: This is not the first time that the NIPN had concerns relative to pharmaceutical companies' practice to engage HCPs to hold presentations at so-called referral meetings in healthcare institutions (i.e. referral meetings are internal professional meetings held in the healthcare institutions for HCPs employed by the institution). In this case the NIPN found that the payment to the HCP for holding presentation at a referral meeting was unlawful because the HCP was already obliged to hold internal presentations to his/her colleagues under his/her job description.

Medical samples: The NIPN stated that the number of free of charge medical samples to be provided to pharmacies must be calculated per pharmacy (being authorised to distribute medicinal products) and not per pharmacists employed by a pharmacy. This interpretation seems to be a limitation on the number of free medical samples that can be provided to pharmacies.

Donation practices: The NIPN found that the company's medical sales representatives supplied medicinal product donation directly to healthcare professionals employed by hospitals, instead of supplying the medicine donations through the head pharmacists of the institution. Declarations and documents submitted in the proceeding proved that the donated medicinal products were used in the course of patient care, however, the mere fact that the donated medicines were supplied in an unlawful manner established the infringement. NIPN also had concerns relative to protocols on medicinal product donation, as many of the protocols had similar identification number that made more difficult for NIPN to review and determine the type and number of medicines supplied as a donation.

Failure to submit proof of payment of sales rep tax: Similarly to prior cases, the NIPN considered as an infringement if a company fails to submit to NIPN the required documents certifying the payment of rep tax in respect of each registered medicinal sales representative employed or engaged by the company.

Failure to notify sponsorship: Similarly to prior cases, the NIPN imposed fine for failure to comply with the statutory disclosure obligations. According to the relevant law, pharmaceutical companies must notify the NIPN of any direct or indirect sponsorship (including the sponsoring of HCPs to attend scientific events) or the organisation of professional events and training courses, 15 days before the commencement date of the event or training course. It is a typical error that pharmaceutical companies fail to make the notification or the notifications are submitted late.

Medicines to be evaluated according to therapeutic equivalence

By Resolution No. 458/2016, the Italian Medicine Agency ("AIFA") redefined the procedure for the implementation of Section 15, paragraph 11-ter, of Law No. 135/2012 according to which the Regions, before launching any tender providing for the therapeutic equivalence among medicines with different active ingredients, must submit a formal application with the AIFA aimed at ascertaining such therapeutic equivalence.

In particular, the AIFA clarified that in order to be evaluated according to the therapeutic equivalence method, said medicines must meet the following criteria: (i) their active ingredients must be trialled – intended as a reimbursement period at the expenses of the National Healthcare Service – for at least 12 months; (ii) they must provide efficacy testing (without showing the superiority of one medicine over another); (iii) they must belong to the same classification, i.e. ATC 4th level; (iv) their primary therapeutic indications must be similar; (v) they must provide for the same means of administration; and (vi) they must provide similar dosage instructions, allowing for a substantially similar therapeutic effect in terms of intensity and duration.

Furthermore, in the application procedure, the Regions must indicate the share of the supply need, which is the subject of the tender in equivalence that, in order to protect possible subpopulation of patients needing a specific active ingredients among those under competition, cannot exceed 80 percent of the total.

Anti-corruption measures agreed for the Italian Healthcare System

On 21 April 2016, the Minister of Health and the National Anti-Corruption Authority ("ANAC") entered into a memorandum of understanding aimed at verifying, controlling and evaluating the implementation and consistency of the transparency and anti-corruption measures adopted by the healthcare organisations and other entities belonging to the National Healthcare System.

The memorandum of understanding establishes that in order to carry out its verification activities, the ANAC may also use, in addition to its own resources, inspectors and staff of the Ministry of Health and of the National Agency for Regional Healthcare Services ("Agenas"). The memorandum also provides for the creation of an Operational Coordinating Committee, which consists of representatives of the Ministry of Health, the ANAC and the Agenas, who have consulting and supporting functions, and the responsibility for the design of a special audit program for the healthcare sector and the identification of issues to be addressed.

It is agreed that the Protocol will extend for a 36-month period and the beginning of the control activities is scheduled for September 2016.

Corruption report on the Italian healthcare sector published

On 6 April 2016, the report of Transparency International Italy on corruptive conducts in the Italian healthcare sector was published. The areas under survey referred to: (i) the perception of corruption among healthcare personnel holding executive positions; (ii) the level of corruption risk in the purchasing processes of healthcare establishments; and (iii) the identification of waste indicators in the financial statements of the health institutions.

As regards the first item, 82.7 percent of healthcare executives indicated that the activity most likely to be exposed to the risk of corruption is the purchase of goods and services; 66 percent indicated works and infrastructure; and 31.3 percent pointed out the possibility of unlawful practices in the recruitment of staff. As for the risk of corruption, the report shows that although almost all of public administrations have formally adopted (96.3 percent) or updated (62 percent) their three-year anti-corruption plans, substantially only 25 percent of the healthcare establishments identified the risks of corruption and the relevant preventive measures, while three out of four of them have adopted plans completely lacking in anti-corruption strategies.

Lastly, the report quantifies the amount of unjustified financial waste to be approximately EUR 1 billion, of which EUR 403 million is considered to be "highly unjustified". According to the report, it is estimated that such financial waste represents approximately 1.5 percent of the national expenditure in the healthcare sector.

New bill on whistleblowing

Following the Chamber of Deputies' approval on 21 January 2016, the bill on the protection of private employees reporting illegal conducts is now being discussed by the senate.

The bill provides that the organisation, management and control models adopted by companies pursuant to Legislative Decree No. 231/2001 ("Law 231") shall include an obligation for the employees and collaborators of private entities to report possible violations of the provisions of Law 231 and/or of the same organisation models that come to their knowledge in the performance of their duties.

Furthermore, the organisation models will have to be supplemented by introducing appropriate measures to safeguard the identity of the whistleblower and the prohibition of any retaliations and/or discriminatory actions against the latter. Lastly, the bill requires that the disciplinary system adopted by private entities shall include specific sanctions for the violation of the obligation of confidentiality and the prohibition of retaliations and/or discriminatory actions.

After the Senate's approval, private companies shall therefore be required to update their organisation model according to the above-mentioned provisions.

The National Anti-Corruption Authority establishes the reference prices of 39 medical devices

By its resolution dated 2 March 2016, the Council of the National Anti-Corruption Authority ("NACA") established the reference prices of 39 medical devices, which are the subject of calls for tender regularly issued by local health authorities and hospitals, in order to provide the Regions with operational tools for controlling and rationalising the public expenditure in the healthcare sector.

In case the contracts entered into by local health authorities provide for unit prices higher than the 20 percent of the reference prices established by the NACA, local health authorities shall propose to suppliers a renegotiation of the contracts aimed at aligning the supply prices with the reference prices, without entailing a modification of the contract's term. If no agreement is reached, local health authorities shall have the right to terminate the contract without incurring any liability. Reference prices shall also be used as a base for future calls for tenders.

The NACA estimated that in case all contracts that provide for prices higher that those indicated in the resolution align with the latter, it would be possible to expect a saving equal to the 15-20 percent of the annual expenditure for the same medical devices.

The table listing the reference prices is available at NACA's website. 

Lazio Court annuls reference price for pharmaceuticals

By its judgment No. 2821 of 3 March 2016, the Administrative Court of the Lazio Region upheld the appeal of Roche S.p.A. challenging the decision of the NACA to establish a single reference price for all medicinal products containing different active ingredients belonging to the "erythropoietin" categories.

According to the applicant, the NACA's decision was unlawful since it was taken in the absence of the prior determination of the AIFA on the therapeutic equivalence of biological medicinal products and their biosimilars, with respect to other biological medicines and their corresponding biosimilars containing different active ingredients.

The Court acknowledged that, in order to ensure uniform health levels throughout the national territory, the AIFA has the exclusive competence to ascertain the therapeutic equivalence of different medicinal products and, after having verified the absence of the relevant AIFA's determination, annulled the "Reading Guide of the prices in the healthcare sector" and the attached reference price list.

Amsterdam court denies PIP claim against healthcare providers

Medical devices have increasingly become the subject of global lawsuits over the past few years. In a recent example, the so-called "PIP-affair", the Amsterdam court recently denied the liability of 27 healthcare providers.

The PIP-affair concerns defective breast implants made by the French company Poly Implant Prothèse. PIP secretly used industrial-grade silicon for its implants and the implants' rupture rate was three times higher than other implants. Approximately 400,000 women worldwide received PIP-implants and were recommended to have them removed.

In the Netherlands, 1,000-1,400 women received defective PIP-implants. The Dutch healthcare insurers, which covered the costs of the women's reversal surgery, were unable to sue the manufacturer or the Dutch distributor because both had liquidated. Therefore the insurers initiated proceedings against the healthcare providers alleging that they breached their medical treatment contract because they used an unfit product in the performance of their obligation.

Under Dutch law, the failure of an unfit product used in the performance of the obligation is attributed to the obligor, unless this would be unreasonable in view of the terms and implication of the legal act from which the obligation arises, generally accepted principles and other circumstances of the case (Article 6:77 Dutch Civil Code). The parties had agreed on the fact that the PIP-implant was unfit for purpose and, according to the court, the unfit implant was used in the performance of an obligation. (Contrary to this decision, the Amsterdam court previously regarded the supply of a breast prosthesis implant as the core obligation, in which case article 6:77 DCC is not applicable [Amsterdam district court 11 July 2007, JA 2007/145]).

Therefore, the failure was attributable to the healthcare providers, unless the exception of unreasonableness would apply. (The burden of proof of the unreasonableness lies on the obligator.)

To determine whether or not attribution to the healthcare providers was reasonable, the court took the following circumstances into consideration:

  • Nature of the obligation. The medical treatment contract was an obligation of means, which offers less room for attribution than obligations of result.
  • CE certificate. Healthcare providers are allowed to rely on the knowledge of the regulator if there is no indication that the product is defective. (A CE marking signals that a product is in compliance with all relevant EU legislation.)
  • Risk distribution. It is a fair distribution of risks to attribute the damages to the healthcare insurers instead of to the liability insurers of the healthcare providers.
  • Liquidation of manufacturer and distributor. The inability to recover the damages from the manufacturer and distributor cannot be considered part of the healthcare providers' risk.
  • Limitation of healthcare innovation. Finding the healthcare providers liable would create the risk that they would act with restraint in the future, which would accordingly limit innovation in the healthcare industry. Based on the above-mentioned circumstances, the court decided that the failure was not attributable to the healthcare providers and denied the insurers' claim. (Amsterdam district court, 20 January 2016,ECLI:NL:RBAMS:2016:212; the insurers did not appeal against the decision).

Noteworthy is that the court of appeal in 's-Hertogenbosch recently decided that a healthcare provider was liable for the damages of a woman who received PIP-implants. This could be explained by the fact that, in that case, the patient herself was the claimant and, while it may be reasonable to attribute liability to healthcare insurers above healthcare providers, it may be more appropriate to attribute liability to healthcare providers above patients. (Court of appeal 's-Hertogenbosch, 25 November 2014, ECLI:NL:GHSHE:2014:4936.)

New Dutch Decree elaborates on VAT treatment for online medical consultations and digital diagnosis 

Modern-day medical devices come with increasing functionality and as a result of these functions, and due to the Internet of Things, the use of medical devices is expected to further increase. The increase of functionality (i.e. various types of services) of medical devices also comes with new indirect tax challenges.

One of the challenges medtech companies will (increasingly) face regards the possible application of a VAT exemption – the latter because a VAT exemption could trigger additional costs , i.e. non-deductible VAT, and thus have a substantial impact on the margins of medtech companies.

A specific medtech development that has recently been addressed in the Netherlands regards online medical consultations and/or digital diagnosis. Medtech companies, together with medical institutions, increasingly use online portals and apps, in which a certain level of medical assistance is provided.

Based on the new Decree, the services supplied by medtech companies might qualify as medical services falling within the scope of the VAT exemption, and thus require additional attention.

VAT exemption

Although from a commercial perspective a VAT exemption appears beneficial, applying for a VAT exemption could trigger various (substantial) negative effects from a VAT perspective, which will need to be considered, such as:  

  • the input VAT on incurred costs may no longer be fully deductible, triggering additional costs (non-deductible VAT);
  • substantial adjustments should be made to the financial administrations and financial systems in order to comply with VAT compliance obligations;
  • VAT exemptions could trigger VAT revision costs; and
  • VAT exemptions could have a negative effect on real property leasing agreements.

Medtech companies often work on the basis of long-term contracts with their suppliers or partners. The underlying contracts often do not leave room for (price) adjustments in the event of an unexpected increase in VAT costs for the medtech company. It is therefore not unthinkable that a VAT exemption, although commercially beneficial, will have a negative impact on the margin of medtech companies. 

Online (medical) services

The application of the VAT exemption for medical services provided by medical practitioners is further explained in paragraph 5 of the new Dutch Decree – in the case of online contact between the medical practitioner and the patient. The new Decree states that, in light of applying the exemption for medical services, the medical practitioners have to be in direct contact with the patient. According to the new Decree, the latter can (also) be established through email or conversation.

The VAT exemption does not apply in case of:

  • the provision of general information, which is not aimed at individual patients as such and is provided through a website; or
  • an online computer program offers medical information and/or answers medical questions based on online questionnaires (designed by medical practitioners), based on which a computer program asserts a diagnosis.

In these cases, the services rendered by medical practitioners do not qualify as a provision of healthcare, as there is no direct contact between the medical practitioner and the patient. It is aimed at the examination of a specific patient.

One could say that the Decree provides a rather broad approach toward the possibility of applying a VAT exemption on online medical consultations and/or digital diagnosis. This broad approach will, of course, raise a lot of questions and at the same provide for arguments to apply a VAT exemption in the event this would be beneficial.

VAT exemption on third party (service) suppliers

One of the points that stand out in the new Dutch Decree is that medical services should be rendered by a medical practitioner. Apparently, an online medical consultation and/or digital diagnosis based on smart logarithms and big data analysis is not yet regarded as the provision of healthcare. Nevertheless, medtech companies increasingly use their own medical staff and medical practitioners to render such services. From an indirect tax perspective, this could trigger a VAT exemption and thus incur additional costs for medtech companies. 

Aside from using its own medical staff, the European Court of Justice ("EcJ") has ruled on multiple occasions on the VAT qualification of services rendered by "third parties" or "subcontractors", which were part of a larger supply chain providing medical services. In these court rulings, the EcJ more or less laid down the basic principle that services rendered by third parties, which are an essential, inherent and inseparable part of an overall (medical) process, should be exempt from VAT (e.g. Verigen (c-156/09)). The fact that such services are rendered by "non-medical staff" should not be of relevance in this respect.

The fact that medtech companies do not use medical staff to provide online medical consultations and/or digital diagnosis does not automatically mean that these services are not exempt from VAT.

Points of attention

The above principles of the EcJ, which are also the basic principles of the new Dutch Decree, acknowledge the possibility that (some of) the services rendered by the medtech company, provided that conditions are met, could be exempt from VAT.

Given the overall aim of the VAT exemption for medical services as stated on many occasions by the EcJ (i.e. keeping costs low for patients) and taking into account the (future) possibilities medtech has to offer, the latter approach in the new Decree raises various questions, for instance:

  • What level of direct contact is required between medical practitioners and the patient in order to apply the VAT exemption?
  • If a patient is provided with its own online environment, does that by definition mean that the information provided in this online environment is aimed at this specific patient?
  • How much interference is required by medical practitioners in order to qualify for the VAT exemption for medical services?
  • What if an algorithm or logarithm can provide a more accurate diagnosis than the ones provided by medical practitioners?

In addition, it can be of particular interest for medtech companies to understand at what point services such as the so-called E-Care, online medical consultations, E-visits, digital diagnosis or even introducing and/or applying robotics and AI into a medical treatment plan for individual patients will trigger a VAT exemption. Is it either on an individual basis, or because these services can be regarded as an essential, inherent and inseparable part of an overall (medical) process?

Assess (future) business development

Given the aforementioned, medtech companies are recommended to review the online services they currently offer, and to also assess future business initiatives from a VAT perspective. The latter is to determine any possibilities to further optimise the supply chain and to avoid VAT costs following the rendering of services that are or could be VAT-exempt.

The Association of European Businesses and the Federal Antimonopoly Service have adopted the Code of Good Practice in the Pharmaceutical Industry

Entry into force on 19 April 2016 of the Code of Good Practice in the Pharmaceutical Industry ("Code") in Russia signals a more constructive relationship between the industry and the Federal Antimonopoly Service ("FAS"), Russia's competition authority. The Code appears to give suppliers more freedom in determining their route to market, quid pro quo being transparency, objectivity and non-discrimination in dealing with distributors. The FAS is expected to promote this soft law mechanism among regulators in other countries, starting in BRICS.

The Code was prepared under the auspices of the Association of European Businesses ("AEB") in collaboration with the FAS. The AEB is an independent non-commercial organisation that promotes the interests of European companies conducting business in Russia (see ). The AEB is highly respected by the Russian authorities, including the FAS.

The purpose of the Code is to establish a set of rules by following which players in the pharmaceutical industry can ensure compliance with Russian competition law. Although not exhaustive, the Code covers most of the "hottest" topics that have led to recurring disputes between the industry members and the FAS, resulting in lengthy investigations, significant fines and onerous behavioural conditions going forward.

The Code is not a legally binding document, i.e. adherence to its rules is completely voluntary. However, a company able to demonstrate that it follows these rules can expect the FAS to decline to initiate a formal enforcement action in case of complaints by private parties and state authorities. This is particularly useful in light of the growing number of complaints being filed by distributors with FAS, challenging the decisions of their suppliers – from withholding authorisation to establishing certain terms of supply, credit limits, bonus schemes, reporting obligations, etc. (Because the FAS defines the pharmaceuticals markets very narrowly [by international non-proprietary names (INNs) and even by trademarks], these decisions are routinely reviewed through the requirements applied to market-dominant companies, which leads to significant fines [up to 15 percent of the Russian revenue in the affected market], and opens the door to private damages claims [including lost profits]. Given the social significance of the pharmaceuticals markets, the Russian courts tend to defer to the FAS' conclusions, making it very difficult to set aside the FAS' decisions in court.)

The Code is open for accession to both members and non-members of the AEB, including non-European companies. Moreover, the Code is not an "all-or-nothing" document. Those companies that are prevented from formally joining the Code due to their overall internal policies or some specific Code's rule being deemed unacceptable, can benefit from the safe harbours created by the Code by actually following its rules. However, in order to build toward a stronger defence, all companies must clearly document their efforts to comply with the Code's rules.

The Code expressly recognises that industry members differ depending on whether they are engaged in production, wholesale or retail, the extent and forms of their localisation in Russia, the types of their supply channels (independent distributors, state customers, pharmacy chains), and any other criteria, provided that they are reasonable. Accordingly, companies can shape their business models in a way that most accurately addresses their individual business needs, so long as they "endeavour to ensure the implementation of" effective systems of compliance with the relevant legislation.

One of the key elements of such a system is a written commercial policy, which establishes non-discriminatory and economically justifiable rules for the sale of a company's products and which should be available to potential buyers, e.g. distributors either by being posted on a company's website or provided to a potential buyer upon request. In particular, this policy should include:

  • the distributor selection criteria, which should be unambiguous, non-discriminatory and objectively linked to economic or legal considerations, including foreign legislation;
  • the procedure and timeframes for a due diligence review of a potential distributor, including a list of documents to be submitted by a potential distributor;
  • the procedure and timeframes for a decision to award or deny a distribution contract, including a mode of communicating that decision to a potential distributor;
  • if a supplier is market-dominant (bearing in mind that markets are defined by INNs or even trademarks) – a standard contract containing basic delivery, payment and other material terms;
  • criteria and procedures for granting discounts and bonuses which, again, should be unambiguous, non-discriminatory and economically justifiable; and
  • the procedure for informing existing distributors of the commercial terms and any changes.

The Code contains a detailed list of distributor selection criteria, which relate, for example, to a potential distributor's legal capacity, financial condition, technical capabilities and, most importantly, ability to conduct business in a legally compliant manner. 

Furthermore, the Code expressly provides that this list is not exhaustive, thereby entitling suppliers to use other criteria, or expand on the existing ones, so long as any additions conform to the spirit of the Code, i.e. they are unambiguous, non-discriminatory and objectively justified.

Unfortunately, on the topic of a candidate's legal compliance, in particular with the anti-bribery legislation, the Code's guidance is a bit cryptic: although the Code allows suppliers to consider requirements of the anti-bribery legislation, including that of foreign countries, the Code also provides that there ought to be "documented violations" of this legislation in order for a (dominant) supplier to reject a given candidate. The FAS' previous practice suggests that a (dominant) supplier may refuse to deal only if there is a prior decision of a state authority holding the candidate's legal entity or management liable for bribery offenses. It remains to be seen whether the "documented violations" language camouflages the FAS' previous position or represents a substantial departure from it.

The Code allows suppliers to limit the number of their distributors, provided that such a limitation is economically or technologically justified, depending on a supplier's business model, and that a supplier's commercial policy contains a competitive procedure for selecting the requisite distributors that is transparent, public and non-discriminatory. The negotiations that have led to the Code's adoption suggest that the FAS expects suppliers that will rely on this provision to have more than one distributor. At the same time, the Code expressly allows exclusivity for out-licensing and tolling manufacturing arrangements, the purpose of which is to localise production in Russia.

For those suppliers that, instead of limiting the number of their distributor as such, wish to set quantitative supply thresholds, the Code provides that a supplier may establish the minimum volume of purchases during a certain period, as well as a minimum shipment volume, provided such requirements are economically or technologically justified. The Code expressly permits the termination of a supply contract with a distributor that fails to meet these requirements unless this failure is due to a supplier's own actions or force majeure.

The Code acknowledges that the same medicines can simultaneously circulate on different markets, which justifies establishing different commercial terms for the sale of these medicines. This is particularly important for those medicines which are sold through both the state channel, where medicines are purchased in accordance with public procurement rules, and commercial channels, where medicines are purchased through arms-length transactions. In this regard, the Code appears to allow suppliers to establish lower prices for the state channel, with the implication being that suppliers may demand a confirmation from their distributors that the medicines were indeed sold into the state channel.

In addition, the Code acknowledges that commercial terms may also differ within the same channel if the parameters of sales transactions are also objectively different. For example, for large volume transactions, the price per unit may be lower and the FAS will not view this as discrimination, even if the supplier is considered to be market-dominant. The same is true for pre-paid transactions, ex-works as opposed to delivery sales, sales of products with shorter expiry periods, etc. Moreover, the Code provides that a supplier may set different payment terms, taking into account the duration of commercial relationships and its payment history with different buyers.

The Code provides that a supplier may provide its distributors with discounts and bonuses based on objective and non-discriminatory criteria, for example, for meeting certain purchase targets or entering into a public procurement contract. The basis for payment of such discounts and bonuses should be spelled out in the commercial policy. The same applies to credit limits – they should be set based on objective and non-discriminatory criteria, for example, purchase volume, accounts receivables, payments in arrears, etc.

The Code appears to depart from the FAS' prior position on suppliers' direct participation in public procurement auctions. With regard to a distributor that planned to participate in the same auction, until now, the FAS held a view that this is not a valid ground for refusing to supply to such distributor. However, the Code provides that a supplier is entitled to refuse supplies to such a distributor except where the supplier has a contractual obligation to supply, and this obligation arose before the supplier decided to participate in the auction directly.

The Code also touches on a number of regulatory areas which have long concerned the FAS but in which the FAS has struggled to develop a particular enforcement mechanism that would rely on competition law requirements. These areas include harmonisation of patient information leaflets, pharmacovigilance obligations and interactions with healthcare professionals. In respect to these areas, the Code appears to establish softer, declaratory requirements, but suppliers would be well advised to take note of these requirements as well.

Finally, the Code imposes certain obligations on the AEB Health and Pharmaceuticals Committee. This Committee must analyse the effectiveness of the Code's application, collect information about controversial situations and draw up recommendations for the Code's members, for which purpose a working group is to be formed consisting of the Code's members and representatives of the FAS. In addition, as a more distant task, the AEB is obliged to establish a dispute settlement mechanism that can be used to resolve disputes submitted to the Committee which arise between the Code's members.

Spanish Data Protection Agency ("SDPA") decision on disclosure of payments to HCPs

On 1 January 2015, a new version of Farmaindustria's Code of Good Practices for the Pharmaceutical Industry entered into force, including the main provisions of EFPIA Disclosure Code.

As it has already been advanced in previous editions, pharmaceutical companies will be obliged, during the first semester of each year, to disclose any payments made to healthcare professionals ("HCPs") and healthcare organisations ("HCOs) during the preceding year. These publications will need to be made for the first time during the first semester of 2016 in laboratories' webpages and shall remain available for a three-year term. Any payments related to research and development, donations to healthcare organisations, training activities, professional meetings (e.g. attendance to congresses) and provision of services will need to be disclosed. For HCPs, the information should be disclosed on an individual or on an aggregate basis. For HCOs, the information should be disclosed on an individual basis.

For the publication of HCPs' payments information, data protection regulations come into play (in particular the right to be informed and the consent to be obtained). According to Spanish Data Protection Regulation, data subjects must be informed of the collection of its personal data, including the existence of a file or personal data processing operation, the purpose of collecting the data, the recipients of the information, the obligatory or voluntary nature of the reply to the questions put to them, the consequences of obtaining the data or of refusing to provide them, the possibility of exercising rights of access, rectification, erasure and objection and the identity and address of the controller or of his representative, if any. In addition, data subjects must give their consent to processing of their personal data. Some exceptions exist for the obtaining of consent of obligation, such as when laid down otherwise by law or when personal data relates to the parties to a contract or preliminary contract for a business, employment or administrative relationship, and is necessary for its maintenance or fulfilment.

SDPA has issued the legal report 143318/2016 regarding a consultation made by various entities belonging to an association to confirm whether the publication of individual information related to transfers of value without obtaining consent of data subjects would be in compliance or not with data protection regulations. This request was based on the application of Directive 95/46/EC of the European Parliament and of the Council of 24 October 1995 on the protection of individuals with regard to the processing of personal data and on the free movement of such data. According to its article 7(f) "Member States shall provide that personal data may be processed only if: (…) (f) processing is necessary for the purposes of the legitimate interests pursued by the controller or by the third party or parties to whom the data are disclosed, except where such interests are overridden by the interests for fundamental rights and freedoms of the data subject which require protection under Article 1 (1)". According to the Court of Justice of the European Union decision of 24 November 2011, the direct effect of this article has been recognised, provided that the processing of data is necessary to comply with the legitimate interest of the data controller and that no other fundamental rights prevail.

In order to answer to the consultation, SDPA analysed this matter under the criteria of the consideration of legitimate interests and fundamental right of honour and privacy, and judgments of suitability, necessity and proportionality. According to article 18 of Farmaindustria's Code of Good Practices for the Pharmaceutical Industry, transfers of value should be published. The legitimate interests are to reduce the risk of perceiving the influence on healthcare professionals, to promote a culture of integrity and to increase the confidence of individuals on the integrity and independence of healthcare professionals.

SDPA determined that legitimate interest had been proven and that data subjects' consent would not be required in the case at hand, provided that the following measures were adopted to protect the privacy of HCPs:

  • adoption of protocols in webpages where transfers of value are to be published to prevent indexation on search engines; and
  • an indication is made on these webpages that the purpose of publication is to comply with the transfers of value requirements of Farmaindustria's Code of Good Practices for the Pharmaceutical Industry. It should also be indicated that it is not permitted to collect HCPs' personal data for any other purposes.

SDPA's legal report is significant since, until now, if HCPs did not give their consent to disclosure of their personal data on an individual basis, the main interpretation was that the payments information should be published on an aggregate basis (i.e. without disclosing the HCP's name, so that it would only be disclosed the total amount paid per each concept, the number of professionals and the percentage of HCPs that have not given their consent) unless the HCPs have given their consent for publication on an individual basis. If pharmaceutical companies now wish to publish the transfer of value to HCPs on an individual basis even if they have not given their consent, they will need to review whether the webpages where they publish the information comply with the prevention of indexation and purpose of publication requirements to publish HCPs' information.

Amendment of Swiss Act on Therapeutic Products

On 18 March 2016 the Swiss federal parliament adopted an amendment ("Amendment") to the Federal Act on Therapeutic Products (Heilmittelgesetz; Loi sur les produits thérapeutiques; "Act"). Until 7 July 2016, 50,000 Swiss citizens could request a referendum on the Amendment. However, this is unlikely and the federal government will have to decide on the date of implementation of the Amendment. The Amendment covers several aspects, the most important ones being new rules on the granting of advantages to healthcare professionals, and a simplified process for granting a market authorisation for a limited period of time for drugs that are proven to be effective against sicknesses which are life threatening or may result in disability.

New Rules on the Granting of Advantages to Healthcare Professionals

The Amendment, among other changes, provides for new rules with respect to the grant of advantages to healthcare professionals. While the rules are, to a large extent, identical to the old ones, there are some important differences. Based on the Amendment it will not just be prohibited for persons who prescribe or dispense prescription drugs but also for those who supply or buy prescription drugs (and the organisations employing such persons) to request or to accept, for themselves or on behalf of a third party, any undue advantages. While the activity of healthcare professionals which are covered is broader, less therapeutic products are also covered under the Amendment. The old rules did not cover medical devices or, at least in Swissmedic's interpretation, category E drugs, which could basically be sold everywhere. This exception has now been expanded to all over-the-counter drugs. However, the Amendment gives the federal government the competence to extend the prohibition to further groups of therapeutic products, including medical devices.

Even though the Amendment no longer explicitly requires a causal link between the grant or promise and the prescription, dispensation, supply or purchase of the prescription drug, such link will still need to exist for the prohibition to apply. The law explicitly states that the following cases are permitted because no undue advantages exists:  

  • advantages of minor value that are relevant for the medical or pharmaceutical practice;
  • payments to support research, professional education or development, provided that certain criteria are met;
  • advantages given for equivalent considerations, in particular in connection with the purchase and delivery of therapeutic products; and
  • price rebates and reimbursements granted in connection with the sale of therapeutic products, provided they do not have any impact on the treatment decision.

Furthermore, the Amendment requires that rebates and pecuniary advantages granted in connection with the sale of therapeutic products be stated in the relevant documents, invoices and accounts of the purchasing and the selling persons and organisations and, upon request, have to be disclosed to the authorities. The federal government can exclude certain therapeutic products with small risk potential from such disclosure requirements.

A violation of the disclosure obligation can trigger a fine of up to CHF 50,000, while a violation of the provisions relating to the grant of advantages to healthcare professionals can be sanctioned by up to three years of custodial sentence or a fine. The enforcement of the relevant parts of the Act shall no longer be exclusively the task of Swissmedic, but also of the Federal Office for Public Health. This new assignment of competence will likely trigger stricter enforcement. This is true because Swissmedic exclusively considered the protection of public health as its core task and did not put much emphasis on the enforcement of the prohibition to grant undue advantages to healthcare professionals. This is quite different for the Federal Office for Public Health, which is also trying to reduce the costs of the Swiss health insurance system.

Facilitated grant of fixed-term MA for drugs against serious diseases 

The Amendment also provides for a simplified procedure that allows Swissmedic to grant a marketing authorisation for a limited period of time for pharmaceuticals that are proven to fight life-threatening illnesses or conditions that may result in disability, provided that (i) this can be reconciled with the protection of health, (ii) a substantial therapeutic benefit can be expected, and (iii) there is no alternative equivalent pharmaceutical available that has a Swiss marketing authorisation. Swissmedic will have to state which documentation is required for the grant of such fixed-term marketing authorisation.

Reform to healthcare financing 

On 5 May 2016, the Ministry of Health of Ukraine ("MOH") published for public discussion a draft regulation of the Cabinet of Ministers of Ukraine on Approving the Concept of the Reform of the Financing of the Healthcare System in Ukraine.

The draft Concept suggests the following major changes to the current system of healthcare financing in Ukraine:  

Creating the State Guaranteed Package ("SGP") of medical services that any citizen of Ukraine can receive without charge. Services beyond the scope of the SGP will be provided upon co-payment or full payment by patients. Additionally, a separate category of privileged citizens will be entitled to any medical services beyond the scope of the SGP for free.

Creating the National Agency for Healthcare Financing ("National Agency") under MOH management. The National Agency will become the only purchaser of medical services at the expense of the state budget, based on unified basic tariffs and quality requirements. The National Agency will conclude public procurement agreements for the provision of the SGP with medical institutions of any form of ownership, whether private, state or municipal.

Implementing a new "money follows the patient" model of paying for various medical services. As a result, the current system of financing infrastructure maintenance (which is tied to the number of hospital beds) will be replaced by direct payments to suppliers for services actually provided.

The implementation of the new system of healthcare financing should result in the overall improvement of the quality of medical services and drive greater transparency and efficiency in the allocation of hospital resources based on quality of care. If properly implemented, it should result in better protection of citizens in case of illness, effective and fair distribution of funds from the state budget, greater independence of medical institutions. It should also increase the role of voluntary medical insurance.

New PMPCA guidance on advisory boards and increased scrutiny of "concealed" promotion

In early 2015, the Medicines and Healthcare products Regulatory Agency ("MHRA") raised concerns about pharmaceutical companies' improper use of advisory boards to disseminate promotional information. In response to this, on 25 November 2015, the Prescription Medicines Code of Practice Authority ("PMCPA") wrote to all members of the Association of British Pharmaceutical Industry ("ABPI") to point them to their guidance on this topic and encourage them to ensure that all relevant members of staff are educated on the appropriate use of advisory boards. Further, at the MHRA's February 2016 Hot Topics in Advertising: Prescription Medicines Seminar ("MHRA 2016 Seminar"), it was revealed that the MHRA had asked the PMCPA to tighten its measures on advisory boards and advised that they should be used with great caution. 

This resulted in the PMCPA publishing new Advice on Advisory Boards on 27 April 2016. The Advice stresses that advisory boards must comply with the ABPI Code, in particular Clauses 22, 23 and 24, and importantly adds that in order for an advisory board to be considered legitimate:

  • the choice and number of participants should stand up to independent scrutiny;
  • the number of meetings and the number of participants at each should be dictated by need, i.e. both should be strictly limited to no more than the number required to achieve the stated objective;
  • multiple advisory boards on the same topic should be avoided unless a clear need can be demonstrated;
  • companies should determine if and when advisory board meetings are required; advisory boards should never be held in response to participants' willingness to discuss issues; and
  • the content of advisory board meetings should relate solely to the matter in hand and, most importantly, discussion of clinical data about a particular medicine should only take place at an advisory board if such discussion is essential to meet the stated objective; to do otherwise might risk the meeting being viewed as disguised promotion for that medicine or promotion of an unlicensed medicine or indication.

It also provides step-by-step "points to consider" to guide the determination of whether an advisory board is in line with the ABPI Code.

This type of concealed promotional activity for prescription drugs is also under the microscope in the UK as a result of significant negative mainstream media attention on advisory boards in recent years, including a high profile campaign by the Telegraph (see examples of articles herehere and here) and recent scrutiny of the UK's methods of controlling off-label promotion. Research undertaken by academics at Lund University, Sweden, and King's College London, UK reviewed rulings by the PMCPA made between 2003 and 2012 and concluded that the UK self-regulatory system for exposing marketing violations relies largely on complaints from company outsiders, which may explain why most off-label promotion rulings relate to plainly visible promotional activities such as advertising. This contrasts with the US, where Department of Justice investigations and whistleblower testimony have alleged complex off-label marketing campaigns that remain concealed to company outsiders. The research concludes that the UK authorities should consider introducing increased incentives and protection for whistleblowers, combined with US-style governmental investigations and meaningful sanctions, and highlights the importance that UK prescribers are attentive to, and increasingly report, off-label promotion. The research was published in the industry press (for example, Pharma Times) and while the MHRA did confirm its pride in, and resolve to continue with, the current self-regulatory system at the MHRA 2016 Seminar, there does seem to be some pressure on the ABPI/PMCPA currently to ensure that enforcement is seen to be effective at controlling off-label promotion. Pharmaceutical companies should therefore carefully consider the complex rules on promotion when assessing not only their external, but also their internal communications and should apply particular caution to their use of advisory boards.