Contractual Compliance with the New EU Medical Device Regulation (MDR)
In just a few months (May 2020), the new EU MDR will come into force.
For manufacturers and industry bodies, the focus has centered on the increased requirements for clinical evaluations and investigations for both new and existing devices as well as the overhaul of EUDAMED, introduction of unique device identiﬁers and uncertainty around notiﬁed bodies.
However, the new MDR will also require a review of existing contractual arrangements and the entry into new agreements to guarantee contractual compliance with its provisions.
For example, the roles of various stakeholders (defined in the MDR as ‘economic operators’) in the supply chain will experience signiﬁcant change and the current position on legal liability in some instances has been amended.
As manufacturers and other economic operators review existing contracts and enter into new relationships prior to May 2020, it is essential to review the MDR to appreciate how the new regulations should be reﬂected in existing and future commercial contracts.
Below are ﬁve examples to illustrate why it is important to reassess the relevant agreements now. We have also specified some practical steps towards compliance which can be taken now:
1.Authorised Representatives (“ARs”)
The AR is a contact point within the EU who has received a mandate from a manufacturer located outside of the European Union to act on behalf of the manufacturer. While the concept is not new, the scope of the AR’s role under MDR has been greatly expanded to ensure that it is now also responsible for market surveillance with regard to a manufacturer’s medical device. There now exists a requirement to have this mandate in writing which must be signed by both the manufacturer and the AR and it must deﬁne the designation of the AR.
Therefore, the written mandate should specify at a minimum that the AR will attend to certain matters such as:
(i) Verifying that the EU declaration of conformity and technical documentation have been drawn up and that a conformity assessment has been carried out where required.
(ii) Keeping technical documentation available for the competent authority.
(iii) Co-operating with competent authorities and providing the ‘documentation necessary to demonstrate conformity of a device’.
(iv) Mitigating the risks posed by devices.
(v) Terminating the mandate ‘if the manufacturer acts contrary to its obligations underthe new regulation’ and informing the relevant competent authority where this arises.
Some of the foregoing requirements are open-ended and require careful wording when drafting and negotiating the mandate. For example, before determining that a manufacturer has acted contrary to the MDR, it should be specified that an AR is required to consult with the manufacturer about the particular issue and afford the manufacturer the opportunity to correct any perceived breach of the regulation.
2. Persons responsible for regulatory compliance (“PRRC”)
Manufacturers will now need to have someone available within their organisation to take speciﬁc responsibility for regulatory compliance of devices. Even micro and small organisations will be required to have such a person ‘permanently and continuously’ at their disposal. For such small organisations, the PRRC must be listed as a critical supplier on the manufacturers quality systems and a speciﬁc written agreement must be in place between both parties.
Accordingly, the PRRC should be engaged by way of employment agreement or consultancy agreement which will need to speciﬁcally conﬁrm their duties. This should include ensuring that the conformity of devices is checked in accordance with the QMS, technical documentation is drawn up and kept up-to-date and that ﬁeld safety corrective actions and serious incidents are recorded. In the event these duties are not satisfactorily met despite performance reviews, the manufacturer should be entitled under the terms of the contract to terminate and ensure another PRRC can be appointed as quickly as possible as this will obviously be a critical function for organisations.
Conversely, in order to comply with MDR, it should be clear within the relevant agreement that the PRRC shall be entitled to raise any concerns it has with any of the foregoing without suffering a detrimental impact to their employment status or appointment.
In the event that a number of persons are jointly responsible for regulatory compliance, the MDR is clear that their respective areas of responsibility must be agreed and set out in writing. Additionally, the terms of the contract should ensure the continuous availability of the PRRC and it should specify the qualiﬁcations of the PRRC in respect of the role as set out in the MDR.
3. Economic Operators
The generic concept of “economic operators” and the regulatory function afforded to them under the MDR is one the most seismic changes. Manufacturers, AR’s, importers and distributors are all deemed economic operators under the MDR.
Each economic operator is required to ensure their own compliance with the MDR but must also keep an eye on whether previous operators in the supply chain are compliant.
For example, distributors will be required to conﬁrm that a device has been CE-marked and includes an EU declaration of conformity and UDI. A sampling method may be utilised to conﬁrm compliance. In case of doubt, a distributor is required to refrain from bringing the device to market and will instead inform the manufacturer and importer that the device must be brought into conformity. In the event the distributor has ‘reason to believe’ that a serious risk is presented, it has a duty to inform the competent authority.
Distributors must also record a register of complaints from users or healthcare professionals and send this information to the manufacturer and importer, while also working together with the competent authorities to reduce the risks associated with devices available on the market.
Flowing from the above, it will obviously be important when selecting distributors for medical devices to ensure that they have the requisite capacity to carry out these new regulatory functions. When documenting contractual relationships, it will no longer be sufficient to generally provide that the manufacturer shall assume responsibility for all quality assurance and regulatory operations in the particular territory. Roles and responsibilities should be detailed for clarity. In the event that the distributor reasonably believes that a serious risk is presented and intends to contact the competent authority, it should be required to notify the manufacturer and other economic operators to ensure that corrective action may be taken immediately. Termination, renewal and liability provisions should be adapted to take into account the new regulatory functions and reporting requirements should be included once again if such a key function is not being carried out satisfactorily. Agreements should set forth all terms which, if breached, are to be grounds for termination.
4. Liability and Indemnities
The new MDR provides that natural or legal persons may claim compensation for damage caused by defective devices. While this is not new it also requires manufacturers ‘in a manner proportionate to the risk class, type of device and size of the enterprise, to have sufficient ﬁnancial coverage in respect of their potential liability’.
Therefore, manufacturers will need to have to put a methodology in place to ensure sufficient ﬁnancial coverage, in most cases in the form of insurance coverage, based on the foregoing categories. Manufacturers should also ensure that corresponding and appropriate coverage and indemnities are in place with other relevant third parties such as sub-contractors and distributors in their commercial agreements -- particularly given the fact that they will now have regulatory functions of their own in the process and because the manufacturer will have entered into the arrangement on the basis that the third party has the expertise to carry out their new regulatory functions. Levels of liability and indemnity will also need to be negotiated contractually with ARs who now take on legal liability for defective devices where manufacturers have not complied with the MDR.
In order to achieve equivalence to existing devices on the market, manufacturers will need to demonstrate equivalence with respect to technical, biological and clinical aspects. In itself, this is not a departure from the existing system. However, as a new requirement, a manufacturer must also be able to demonstrate equivalence by having access to equivalent device data.
The MDR requires a contract between the manufacturer and the equivalent device manufacturer to access the technical documentation of that device. The contract must explicitly allow the manufacturer of the new device, full access to the technical documentation of the existing device on an ongoing basis.
It is a widely shared opinion that this will limit the use of equivalence in clinical evaluations to the same families of devices or to equal devices in subsequent generations. However, regardless of whether this is an inter-group facilitation or an interaction with a third-party, it is clear that a carefully drafted contract permitting ongoing access with carefully deﬁned termination and conﬁdentiality provisions should be utilised to ensure access is not revoked at the most critical period in the life-time of a device.
The new Medical Device Regulation will become effective in less than 6 months. Now is the time for medtech companies to review their commercial contracts and internal processes to spot issues in need of ﬁx and implement the advices above where required.
The coauthors of this series are available to support this effort and answer questions arising from the above. To arrange this, please feel free to contact either of us directly using the details below.
This is the third of a series of legal briefings from boutique medtech-focused ﬁrms Swiss Peak Technologies SA and DeNovo Legal on the key lessons that they have drawn from their respective practice.
Kevin Moore is the founder of DeNovo Legal (www.denovolawﬁrm.com). In 2011, Kevin became the only lawyer in Ireland or the U.S. to be selected to participate in the aﬃliated BioInnovate Ireland and Stanford Biodesign Fellowships. He established DeNovo Legal, a bespoke practice for the life science sector having gained a unique understanding of the I.P., compliance, ethical and funding challenges facing medical devices companies. Kevin has also lectured in Medical Device Law and Regulation at NUI, Galway, a module which he created and ﬁrst began teaching in 2016.
Sylvain Poitras is the founder and Managing Director of Swiss Peak Technologies SA (www.sptsa.com), a ﬁrm based in Geneva that provides medtech legal traction. Sylvain has been providing medtech law advice and support in Europe and beyond for some 20 years working with and for Big Medtech (Medtronic, Cardinal Health), SMEs and investors, including on EU-US cross-border issues. He is qualiﬁed as an attorney-at-law in the US (NY) and Canada (QC) and holds a Master of Public Health (MPH) in health-sector management from Harvard University. He has been a lecturer on European medtech law (CE-marking, innovation, contracting practices, compliance) at two leading Swiss universities (EPFL & UNINE) since 2010. Since its creation in 2016 Sylvain has been a health-sector mentor and judge with leading start-up accelerator MassChallenge Switzerland.
The information contained in this article is intended for general information purposes only and is subject to changes without notice. It does not therefore constitute legal or professional advice. Specific advice should be sought on any particular matter.