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Focus on Regulation

CFIUS Annual Report Highlights Period of Increased Scrutiny for Foreign Investments

In 2015, the Committee on Foreign Investment in the United States (CFIUS), a U.S. Government interagency committee that conducts national security reviews of foreign investments, maintained a heavy case load, reviewing 143 transactions, according to CFIUS’s recently published annual report to Congress. Although the report covers transactions reviewed two years ago, it offers important insights about the Committee’s views on the growing national security risk of foreign investments. Continue Reading

UK MHRA Issues New Guidance on Human Factors and Usability Engineering for Medical Devices

The UK Medicines and Healthcare products Regulatory Agency (MHRA) has published new guidance on taking human factors into account when designing medical devices and ensuring that they meet the essential safety and performance requirements for devices.

‘Human factors’ refers to how a person uses or interacts with a device taking into account the context and environment in which the device is used, including physical factors such as lighting and temperature, the features of any hardware and software, the training or education of the user, and whether the device is intended for use in a hospital setting or at home. Usability engineering is the application of these factors in the design and safety assessment of devices to ensure that they are easy and safe to use, with the aim of minimising errors in use resulting from the design of the device.

The Guidance is for manufacturers of medical devices and drug-device combination products, as well as notified bodies assessing such products.

The Guidance advises device manufacturers to identify intended users and environmental and operational contexts, assess use- and user-error risks, test usability in appropriate contexts, and to document this process and the test results in a human factor summary report. The Guidance also advises manufacturers to actively and systematically seek feedback from users and incorporate this into continuous product improvement throughout the product lifecycle.

The Guidance refers to the essential requirements under the three existing EU Medical Device Directives (as implemented in the UK by national legislation) and will also be relevant for compliance with the new EU Medical Device Regulation (MDR) and In Vitro Diagnostic Device Regulation (IVDR), which will apply from May 2020 and May 2022 respectively. It is intended to be consistent with US FDA guidance on human factors related to medical devices.

The full Guidance is available here.

Continuing Coverage of FDA’s Crackdown on Stem Cell Clinics: Florida Clinic Cited for Unapproved Marketing and Inadequate Sterility Assurance

On the same day that FDA’s Commissioner, Dr. Scott Gottlieb, announced new policy initiatives regarding stem cell therapies and regenerative medicine, FDA announced stepped up enforcement in this area and posted a warning letter issued to U.S. Stem Cell Clinic located in Sunrise, FL.  FDA issued the warning letter following an inspection beginning in April 2017, for marketing stem cell products without a valid license and deviations from current Good Manufacturing Practice (cGMP) for the cell-based products.

On the heels of the agency’s seizure action of StemImmune Inc. (reported in our prior post), the warning letter further signals the agency’s priority for enforcement against “unscrupulous clinics” that mislead vulnerable patients into believing that such treatments are safe and effective.

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UK Publishes Draft Legislation Prohibiting the Manufacture and Supply of Cosmetic Products Containing Microbeads

On 11 September 2017, the UK Department for Environment, Food and Rural Affairs (DEFRA) published draft regulations prohibiting the manufacture and supply of rinse-off personal care products containing microbeads. The draft Regulations (available here) are to be laid before the UK Parliament for approval.

Under the draft legislation:

  • companies will be prohibited from manufacturing such products from 1 January 2018, and from supplying such products from 30 June 2018; and
  • failure to comply will be an offence punishable by a fine of up to 10% of annual turnover in England.


The new legislation forms part of the UK’s marine strategy to achieve and maintain clean, healthy and ecologically diverse marine waters by 2020 as part of a wider EU strategy. It is estimated that up to 680 tonnes of plastic microbeads are used in cosmetic products such as face scrubs and toothpastes sold in the UK each year. These microbeads do not biodegrade and can often end up in marine waters, being too small to be completely filtered out in sewage treatment systems. Evidence has shown that such particles absorb toxic chemicals and pathogens and are ingested by marine organisms, damaging their health and thereby entering the food chain. Voluntary measures have already been taken by industry, but the UK Government wishes by introducing these Regulations to ensure consistent compliance across industry.

Several other countries have already implemented, or are seeking to implement, equivalent measures, including in the US, Italy, France, Ireland, South Korea, India and Australia.

New Offences

Under the new Regulations, it will be an offence to manufacture and supply (by way of sale, promotional prize or gift) rinse-off personal care products containing microbeads of 5mm or less in any dimension. “Microbeads” are defined as water-insoluble plastic particles, consisting of a synthetic polymeric substance or a combination of such substances.

Cosmetic products covered by the ban will include products applied to any external part of the human body (including skin, hair, lips and nails), teeth or oral cavity, for the purpose of cleaning, protecting or perfuming, maintaining or restoring the body’s condition or changing its appearance. It will apply to products that are intended to be promptly removed by washing or rinsing with water, rather than left to be absorbed or otherwise worn off.

Sanctions and local authority powers

The Regulations will be enforced by local authorities who will have the power to require the person committing an offence to pay a fine of up to 10% of that person’s annual turnover in England.

Under the Regulations, local enforcement offices will have the power to enter business premises and carry out any necessary investigations to ascertain whether there has been an offence if they have reasonable belief that an offence has been committed. Local authorities will also have the power to issue variable monetary penalties, compliance notices and stop notices, and to accept “enforcement undertakings” signed by the offending company setting out the action it will take to prevent prohibited activities, compensate those affected by the offence, and steps to restore any likely damage to the environment.

The Regulations also provide for the publication of enforcement action taken by local authorities.

The Regulations require local authorities to consult on and publish guidance on the sanctions and penalties available under the Regulations, including the circumstances in which may or may not be imposed, factors to be taken into account in calculating penalties, and the rights to make representations and appeal decisions handed down by the local authorities.

Next steps

The draft Regulations are to be laid before both Houses of Parliament in the UK for approval.

If passed, companies will need to ensure that they stop manufacturing rinse-off personal care products containing microbeads by 1 January 2018 and companies (from manufacturers to distributors and retailers) will no longer be able to supply remaining stock from 30 June 2018. This will need to be factored in to supply chain planning and onward supply agreements.

FCC Launches Proceeding to Examine 911 Capabilities of Enterprise-Based 911 Services on Multi-Line Telephone Systems

The FCC intends to launch a new proceeding to examine issues related to 911 capabilities of enterprise-based 911 services provided over multi-line telephone systems (MLTS) and IP-based systems (collectively referred to as “Enterprise Communications Systems” or “ECS”).

Last week, the FCC released a draft Notice of Inquiry (“NOI”) examining the 911 capabilities of MLTS and IP-based systems such as cloud-based services that support voice communications.  In the NOI, the FCC seeks to “identify the reasons that the 911 capabilities of ECS appear to have lagged behind those of wireless, wireline and interconnected VoIP . . . [and] potential ways to ensure that ECS keep pace with technological developments and meet consumer expectations with respect to 911 access, routing, and location information.”

The NOI asks detailed questions regarding the ECS industry, including questions about vendors, equipment, services, business arrangements and the E911 and Next Generation 911 capabilities of ECS.  The FCC asks commenters to discuss the costs and benefits of “provisioning ECS to support 911 access, routing, and location information.”  Finally, the FCC seeks comment on potential ways to improve ECS support of 911 access, routing and location, including the implementation of industry standards or possible regulatory action.

The FCC will vote on the NOI at its next open meeting, on September 26, 2017.  The NOI does not propose any new obligations or rules but the FCC may do so as this proceeding progresses.  The NOI also indicates that the FCC is taking an enhanced interest in enterprise communications systems’ 911 service obligations.  We will continue to monitor this proceeding.

The life sciences industry under the antitrust spotlight in China: two practical points

The simple fact is that the Chinese antitrust regulators are determined to up their enforcement activities in the life sciences industry. Almost immediately after drug pricing was liberalised in 2015, an antitrust enforcement decision was announced against a government entity, a local health commission, for breaching a number of provisions in the Anti-Monopoly Law (AML). The pace has not let up since then. More cases have since made headlines, including abuse of dominance cases and cartel cases. Last month, draft guidelines were published on pricing conduct by companies for drugs in shortage and API manufacturers. And just a few weeks ago, the spotlight turned to medical device manufacturers. There has now been an official announcement from the regulators that local antitrust agencies will further investigate into the bundling of medical devices as a form of commercial bribery.

As it is in any jurisdiction there is no joy in operating day-to-day with the cloud of a potential investigation looming over the business.  How can companies operating in the life sciences space in China be prepared? Two practical points:

First, know who does what. The AML targets three types of conduct: restrictive agreements, abuse of dominance and anti-competitive mergers. In addition to this, the AML also prohibits so-called “administrative monopolies,” a term used to describe government conduct with anti-competitive effects. The Anti-Monopoly Enforcement Authority oversees the enforcement of China’s antitrust laws. The actual enforcement, however, is carried out by three separate agencies:

  • The National Development and Reform Commission (NDRC) is the regulator responsible for enforcing price-related breaches of the AML. The NDRC has been very active in the life sciences space and last month published its decisions against two local companies for infringing the AML by engaging in excessive pricing and the refusal to supply APIs.
  • The State Administration for Industry and Commerce (SAIC) is the enforcer responsible for non-price related breaches of the AML. The SAIC has previously imposed a fine on a Chinese pharmaceutical company for abusing its dominant position by refusing to deal.
  • The Ministry of Commerce (MOFCOM) reviews and approves mergers. In recent years, several pharmaceutical companies were sanctioned for not notifying their transactions to MOFCOM for prior approval. Fines were imposed on these companies.

Second, know what to expect in the event of an inspection. They are broadly similar to US antitrust or European Commission dawn raids in that the inspectors from the Chinese antitrust agencies have the power to seize electronic and hardcopy evidence. Likewise, obstructing an inspection can attract penalties and inspections can last several days. And as with a number of other jurisdictions, unannounced inspections in China are also becoming increasingly common.

ECJ sides with farmers on genetically modified crops

The European Court of Justice has held that Member States may not adopt emergency measures prohibiting genetically modified food and feed (GMOs) unless there is clear evidence that a particular GMO presents a serious risk to health or the environment in accordance with Article 34 of the GMO Regulation (EC) No 1829/2003.

Ruling in favour of farmers of genetically modified maize, the ECJ held that the precautionary principle, allowing provisional risk management measures where the possibility of harmful effects has been identified (but not conclusively established), should not be interpreted as relaxing the so-called “safeguarding clause” in Article 34. In this case, referred to the ECJ by an Italian District Court, new evidence of potential harm from studies carried out by Italian research institutes was not sufficient to support the requested emergency measures and invalidate the previous authorisation of genetically modified maize by the European Food Safety Authority.

While the majority of EU consumers remain averse to GM crops, this ruling shows that Member States will require conclusive scientific evidence in order to rely on the safeguarding clause which has previously been used to prevent the growth of GMOs.

You can read the full judgment of Fidenato and Others (C-111/16) here.

The responsibility to respect human rights in the banking sector

The question of how the UN Guiding Principles on Business and Human Rights (UNGPs) should apply to the banking and financial services sector is one that is attracting increasing attention. Indeed, the dialogue has intensified in recent months between UN bodies responsible for interpreting and implementing the UNGPs and representatives of the financial community, including the Thun Group (an informal group of bank representatives focused on understanding the application of the UNGPs to the banking sector). Continue Reading

Arbitration: a new forum for business and human rights disputes?

As the international community turns its focus to the third pillar of the UN Guiding Principles on Business and Human Rights – “Access to Effective Remedy” is the central theme of the upcoming 2017 UN Forum on Business and Human Rights – a working group of international law specialists has published a proposal to use arbitration to resolve disputes arising out of human rights abuses involving businesses (“BHR disputes“). Continue Reading