Summary

In November 2013, a French commercial court ordered the notified body responsible for certifying the quality management system (“QMS”) and design dossier of Poly Implant Prosthèse (“PIP”), the manufacturer of defective breast implants, to pay substantial compensation to both distributors of the implants and the patients affected. As is well known, the defects resulted from the use of non-medical quality, industrial grade silicone gel in the implants. TÜV appealed this decision but this was rejected by the Court of Appeal of Aix-en-Provence by judgment dated 1 January 2014, upholding the Commercial Court of Toulon’s first instance decision.

Combined with last year’s European legislative developments in relation to notified bodies, the ruling has potentially far-reaching implications for notified bodies operating in the medical devices sector, and is also of interest to manufacturers as we wait to see if the Medical Devices Directive 93/42/EEC (“MDD”) revision will result in an adopted text ahead of the EU Parliament elections this year.

The First Instance Decision

The French court’s ruling required the notified body, TÜV Rheinland LGA Products based in Germany (“TÜV Germany”), and its French affiliate, SAS TÜV Rheinland France (“TÜV France”) (together, “TÜV”), to make initial compensation payments pending expert assessments to determine further compensation. Experts have been appointed to evaluate and report back to the court on distributors’ non-monetary loss in July 2014 and on the expected lifespan of prostheses for patients by the end of January 2015. Interestingly, only one of the defendants (TÜV Germany) was a notified body.

TÜV sought to defend the claims by pleading that the French court did not have jurisdiction and that the claims were inadmissible. However, TÜV’s ‘technical’ defences did not succeed and the court’s decision, if followed, could therefore have ramifications for notified bodies and their affiliates across the EEA.

Regulatory Background

In the medical devices sector in Europe the manufacturer is currently legally responsible for ensuring that its products comply with MDD requirements. In relation to medical devices which pose greater health and safety risks to patients (Class IIa, IIb or III), the manufacturer is obliged under the MDD to engage a notified body – such as TÜV – to review the manufacturer’s QMS for design, manufacture and final inspection and, in certain cases, to also review a design technical file. Once these have been audited, reviewed and approved, the notified body certifies the QMS and, if applicable, the design dossier. The manufacturer may then CE mark and market the devices in the EEA.

Reasoning behind the First Instance Decision

The court identified, by reference to the MDD and previous breast implant health concerns, the intended role and obligations of a notified body. The court considered that notified bodies effectively assume a public role and duty. In doing so, whenever they certify a product they are guaranteeing that the product has reached an EEA-recognised standard of safety. The court decided that TÜV had fallen short of its duty by failing to prevent or identify PIP’s fraud and that TÜV should therefore compensate those who had incurred loss in consequence. The rationale was as follows:

  • As a notified body in charge of PIP’s certification, TÜV Germany had an easy job as the only gel authorised for medical use was NUSIL gel. TÜV’s tests were not sufficiently probing regarding use of the authorised gel.
  • TÜV erred in never carrying out an unannounced audit or inspection at any of PIP’s locations. The court considered an unannounced inspection at PIP’s Seyne sur Mer location would undoubtedly have uncovered the presence of non-NUSIL gel stock. If an unannounced visit had taken place the fraud would have been detected earlier, considerably reducing the extent of the affected products’ distribution.
  • TÜV Germany did not carry out a sufficiently rigorous review of PIP’s financial accounts. Such a review would have detected the purchase of non-NUSIL gel by PIP, and identified a mismatch between the volume of NUSIL gel bought and the volume of PIP’s production. TÜV apparently ignored the quantities, quality and weight of the devices’ raw materials.
  • TÜV Germany’s breaches of its obligations to assess both design and manufacture, combined with a non-notified body’s involvement (TÜV France), contributed to PIP’s fraud. TÜV should therefore indemnify both distributors (for the interruption to supply as well as the destruction of their stock) and also patients.
  • Even though TÜV France did not have notified body status, auditors who inspected PIP were TÜV France employees. The court considered its role should have been limited to administrative, commercial, financial and translation assistance to TÜV Germany. However, having taken part in the audits, TÜV France should also take responsibility for the negligence.

Comment

European Commission Interim Measures

Partly in response to the PIP incident but prior to the French court’s ruling above, the European Commission introduced interim measures relating to the medical devices sector on 25 September 2013 (see Commission Implementing Regulation 920/2013, and non-binding Commission Recommendation 2013/473/EU).

The measures include a requirement on notified bodies to conduct unannounced inspections of manufacturers and to check samples, as well as rules on conflicts of interest. Importantly the measures require notified bodies to ensure that they are properly resourced, whether that involves the assistance of subcontractors or subsidiaries or not, and that their staff are fully qualified to carry out the assessments required. In particular there are restrictions on what may be subcontracted by notified bodies. The measures also require Member States and the Commission to take a more active role in the assessment, regular surveillance, monitoring and investigation of notified bodies.

What does this mean for industry?

If courts in other Member States adopt a similar approach, this decision signals that the potential liability exposure of notified bodies’ cannot be confined to contractual risks alone. Nor can a notified body necessarily rely on the fact that a manufacturer has acted fraudulently as a defence as the court may consider the fraud to have been discoverable by an appropriately thorough inspection, as in this case.

The French court recognised a wide public duty on the part of notified bodies by reference to the MDD, which appears to be owed not only to end-user patients but also to distributors. If notified bodies fall short of this duty, then they may face significant damages claims from both distributors and patients. Given the scale of distribution of products such as the PIP breast implants, overall liability could be significant. Notified bodies will therefore likely need to review their insurance coverage. These costs will necessarily have to be passed on to industry and ultimately commissioners and consumers.

For manufacturers the increased potential liability exposure of notified bodies and the requirements imposed through the interim measures is likely to mean that applications for certification will have a longer turnaround and that reviews and audits will be more expensive as well as more challenging. Ultimately this may well mean that products will take longer to get to market and that costs will increase. If, as expected, there is a consolidation of notified bodies (i.e. fewer in total, with less capacity between them) industry may also experience a ‘bottle-necking’ of applications, particularly once the MDD revisions are effective requiring notified body-reviewed upgrades to existing, as well as new, product dossiers.