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Focus on Regulation

Regulate Frankenstein: the European Parliament calls for new rules for robots

robotWhen a parliamentary report cites Mary Shelley’s Frankenstein in its recitals and proposes new regulation for robots with artificial intelligence (“AI”), one cannot be sure whether the 19th or the 21st century has inspired the legislator. Last week, the European Parliament took a step to introduce new regulation of robots in Europe. Declaring that the EU needs to “take the lead” in this area, the Parliament endorsed a Report that asks the European Commission to propose rules on robotics and artificial intelligence, in order to fully exploit their economic potential and to guarantee a standard level of safety and security. The Report address various kinds of robots, amongst others autonomous vehicles, care robots, medical robots, or drones.

This follows an earlier report published in May 2016 on Civil Law Rules on Robotics with proposals on the regulation of the robotics industry at an EU level. Such regulation was argued necessary in order to ensure that the EU and its Member States maintained control over the regulatory standards at which the industry operated in the EU, as well as to ensure certainty for enterprises planning to develop their businesses therein. The parliamentary Committee on Legal Affairs released a preliminary study on the impact of robotics on civil law.

Liability rules

The issue with the question of liability for robots is that the more autonomous robots are, the less they can be considered simple tools in the hands of their manufacturer, programmer, owner or user. This makes the general rules on civil liability potentially insufficient and, in the European Parliament’s view, calls for new rules which focus on who should be held – partly or entirely – responsible for the acts or omissions of a robot.

But how to determine who should be responsible for damage caused by such a machine? The Parliament suggests that an obligatory insurance scheme as for cars could address the complexity of allocating responsibility for damage caused by increasingly autonomous robots. This could allow the manufacturer, the programmer, the owner or the user of a robot to benefit from limited liability insofar as the use of smart autonomous robots would be covered by a supplementary fund to ensure that any victims do not remain uncompensated for. Moreover, the Parliament urged the Commission to ensure that a specific legal status is established for robots in the long-run so as to establish liability in the event they cause damage.

From this, one can already appreciate the legal as well as philosophical complexities that arise from regulating robotics, as we find ourselves on the tipping point between covering such liability under established civil rules, and the need to develop new rules to cover acts for which the direct involvement of a human actor will be to a great extent eliminated e.g. a robot that takes autonomous decisions through machine learning beyond its original programming.

These are not new issues being raised by the Parliament. Indeed, the European Commission has already launched a consultation into the adequacy of Directive 85/374/EC on Liability for Defective Products, specifically citing questions as to whether the existing rules are fit for purpose in relation to “technological developments such as the Internet of Things and autonomous systems”. Questions of the adequacy of existing rules of liability for new technologies have also been considered in the work of Working Group 4 within the Association for the Internet of Things Innovation (AIOTA), and dealt with in the recently-published AIOTA report.

Whilst questions of liability for damage are important, and potential challenging when it comes to smart robotic machines, the more fundamental question in the European space is how to regulate the safety and performance of such machines as a precondition to them entering the market in the first place. It is at that level that questions of who is responsible, and for what, will bite the hardest in the short term, and which will potentially represent the greatest threat to innovation if not handled correctly.

Safety rules

robot ballBesides, all products – including robots – generally have to be safe, i.e. complying with reasonable safety expectations by meeting state-of-the-art requirements. However, in an area that drives developments at a rapid speed and also considering that robots’ and AIs’ abilities will probably be expected to surpass human abilities, it will be increasingly difficult to define safety standards. Hardware developers and software programmers are increasingly seeking for legal guidance to determine the requirements they are working against.

Social and ethical considerations – and a new agency

The European Parliament’s rapporteur in her draft report had suggested taking account of possible negative consequences on the job market that the use of robots might result in. Interestingly enough, Bill Gates recently argued that robots that take over jobs should in fact pay a form of income tax.

However, the Parliament’s majority did not agree to include the rapporteur’s concerns regarding the impact on the workforce in the final text approved. Instead, the Parliament potentially created a new workforce by asking the Commission to consider setting up a European agency for robotics and artificial intelligence, to supply public authorities with technical, ethical and regulatory expertise.

In the field of robotics and AI, ethical considerations have always been a driving factor. As an example, already in 1942, science fiction author Isaac Asimov defined “the tree laws of robotics”, e.g. that a robot may not injure a human being. In doing so, it does not come as a surprise that the Parliament appreciated that the growing use of robotics raises ethical issues, for example, to do with privacy and safety, and proposed that a voluntary ethical code of conduct on robotics for researchers and designers is created, to ensure that they operate in accordance with legal and ethical standards and that robot design and use respect human dignity. The proposed charter could have varying binding effects as it would constitute an umbrella framework, a soft law instrument, covering practices such as the robotics engineers’ ethical code of conduct, the conduct for research ethics boards, and the designer licence and user licence.

Conclusion

With many countries such as US, Japan, China and South Korea, already developing their own rules on robotics and artificial intelligence, the EU is now aiming at taking pre-emptive steps to ensure that any vast roll-out of robotics does not fall below its highly established standards when implemented in the EU.

Such rules will inflame the necessary discussion of what happens next, once such robots become part of our daily lives. Developers, manufacturers and users of robots should closely follow this important debate which is likely to require a steep learning curve for the legislators and the enforcing authorities. It is an area that calls for a flexible and forward-looking approach to law making and regulation, to avoid a legal environment which becomes characterised by inefficiencies, stifled innovation, wasted opportunities, and the need for constant amendments as these technologies present new challenges that seemed to previously only factor into sci-fi novels.

Paschalis Lois, a trainee in our Brussels office, contributed to this entry.

Extension to the EMA’s Multinational Assessment Team Initiative as of April 2017

Starting in April 2017, the European Medicines Agency (“EMA”) will expand the Multinational Assessment Team (“MNAT”) Initiative to post-authorisation assessments. From this date, the MNAT Initiative will allow national competent authorities not only to participate actively in the development of new medicinal products, but also to be involved in the extensions of marketing authorisations for existing medicinal products.

Background

The MNAT Initiative provides the option for the EMA scientific committees to rely, for the assessment of new marketing authorisation applications, on an assessment team formed from national competent authorities (“NCAs”) of different European Union (“EU”) Member States in return for payment by the EMA to the individual NCAs.

In practice, every new marketing authorisation for human medicinal products submitted under the centralised procedure is assessed by a rapporteur and a co-rapporteur from the EMA Committee for Medicinal Products for Human Use (“CHMP”) or the EMA Committee for Advanced Therapies (“CAT”). These scientific committees are composed of individual experts from different NCAs who must choose teams of assessors and experts to support them. Traditionally, the scientific committees choose teams of assessors and experts from their respective NCAs. The MNAT Initiative is intended to encourage the scientific committees to form multinational co-rapporteur teams with the best expertise available from a broader number of EU Member States.

The aim of the MNAT Initiative is to allow a broader involvement of NCAs from different EU Member States in the work of the EMA scientific committees. With the MNAT Initiative, the EMA seeks to optimise the use of national resources, whilst maintaining the high quality scientific work of the EMA scientific committees.

Extension of the MNAT Initiative

The MNAT Initiative started as a pilot scheme in 2013. Currently, the MNAT Initiative allows the EMA scientific committees to form multinational co-rapporteur teams for the assessment of new marketing authorisation applications submitted under the centralised procedure. The MNAT Initiative is available to:

  • the EMA CHMP Committee;
  • the EMA CAT Committee;
  • the CHMP and CAT rapporteur teams;
  • the EMA Committee for Veterinary Medicinal Products (“CVMP”);
  • the Scientific Advice Working Party.

The MNAT Initiative is open to all members of the European medicines regulatory network, which is composed of the NCAs of all Member States of the European Economic Area (“EEA”). Apparently in 2016, NCAs from all but two of the 31 EEA countries have been involved in the initial evaluation of human medicines, as rapporteur, co-rapporteur or an assessor in an MNAT.

On 19 December 2016, the EMA Management Board endorsed the EMA document entitled “Multinational assessment team concept: the next phase – Broadening the concept to the post-authorisation phase”. This document provides that, from April 2017 assessment teams consisting of different EU Member States NCAs will also be able to evaluate applications for extensions of marketing authorisations of existing medicinal products.

The expansion of the MNAT Initiative will initially be limited to assessments of applications for extensions of indications and line extension applications, relating to products in relation to which an MNAT was involved in evaluating the original marketing authorisation application.

Building up capacity and capability in light of Brexit

Brexit raises the need for the EMA to find solutions and ways to reduce the Agency’s reliance on United Kingdom experts and, once the UK leaves, to compensate the loss of UK expertise.

The EMA reportedly views the MNAT Initiative as a means of compensating for the expected Brexit-related loss of UK expertise from the European medicines regulatory network.

For more information visit: https://pink.pharmamedtechbi.com/PS119981/EMAs-Multinational-Approach-Brings-All-But-Two-Member-States-Into-New-Drug-Assessor-Fold

House of Representatives Moves to Invalidate Controversial Fair Pay and Safe Workplaces Regulations

In a move that likely was welcomed by Federal contractors, earlier this month, the House of Representatives passed a joint resolution under the Congressional Review Act (CRA) disapproving the Fair Pay and Safe Workplaces Final Rule (the Rule) that unless overturned will, among other things, institute new disclosure requirements and standards for reporting labor law violations. The Rule has been particularly controversial from the start – earning the title of the “blacklisting” rule – as it had the potential to prevent Federal contractors from receiving government contracts based on allegations of labor law violations that had not been finally resolved. The Senate is considering a similar resolution to invalidate the Rule, though there are certain procedural hurdles that may prevent it from passing its version of the joint resolution. Importantly, if the joint resolution passes the Senate and is signed into law, it will not only invalidate the previous Rule, but it will inhibit agencies from reissuing rules that are “substantially the same form” in the future. Continue Reading

Border Adjustability Tax in Peril?

The future of the Border Adjustment Tax (BAT) proposal, a critical element of the House Republican tax reform plan, is in doubt after signs of Republican opposition in the Senate emerged last week. Senator David Perdue (R-GA) became the most prominent Republican to overtly criticize the BAT, expressed in a Dear Colleague letter to his fellow Senators.  Under the “Better Way” tax reform proposal advanced by House Speaker Paul Ryan and Ways & Means Committee Chairman Kevin Brady , US business taxpayers would pay no tax on exports, and would not be able to deduct imports (ie the “Border Adjustment Tax”).  This “destination-based cash flow tax” is designed to tax consumption in the US, and remove tax-motivated incentives for businesses to locate outside the US.  The BAT would also provide significant revenue to the Treasury, allowing Congress to in turn lower corporate and individual tax rates.

In the letter to his colleagues, Sen. Perdue criticized the BAT as a “bad idea” on the grounds that it is “regressive, hammers consumers, and shuts down economic growth.” He argues that, as a result of U.S. imports being taxed, the “clear effect of the proposed border adjustment tax is an increase in consumer prices,” which would “hammer consumer confidence and lower overall demand, thus putting a downward pressure on jobs.” Sen. Perdue noted that proponents of the BAT believe that currency revaluation would strengthen the purchasing power of the dollar, thereby offsetting its burdens on taxpayers. However, he contends that a currency revaluation would “trigger a multi-trillion dollar reduction in the value of foreign investments held by U.S. investors including many pension funds and retirees,” having a massively negative impact on the retirements savings of seniors.

Sen. Perdue’s criticism of the BAT concept may mark a turning point in the debate. Although Speaker Ryan and Chairman Brady remain deeply committed to the BAT—possibly bringing with them enough votes to pass the concept through the House—the concept appears far less popular among Senate Republicans. For example, Sen. Orrin Hatch, the Chairman of the Finance Committee, has already raised questions about the wisdom of the BAT, such as whether it is consistent with America’s international trade obligations. Sen. Perdue’s renunciation of the BAT may cause a ripple effect among other Republicans, who have been hearing from major business interests who are opposed.

Meanwhile, President Trump – who has indicated plans to release his own detailed tax plan in the coming weeks — has also expressed skepticism about the BAT, which some have advanced as an alternative method of carrying out Trump’s stated preference for imposing tariffs on imports from foreign countries like Mexico and China.  It remains to be seen whether more Republicans will express opposition to the BAT.  If the BAT does not survive, we expect to see Republicans look for other offsets to pay for tax reform and other options to encourage businesses to locate their operations in the US.

Perdue Letter

Travel Ban Update: Appeals Court Upholds Temporary Halt on Enforcement

On February 9, 2017, the U.S. Court of Appeals for the Ninth Circuit issued an order denying the Federal Government’s emergency motion for a stay of the district court order temporarily pausing enforcement of the travel restrictions imposed by Executive Order 13769, “Protecting the Nation from Foreign Terrorist Entry into the United States.” As we reported in our January 30 and February 6 alerts, this Executive Order (1) blocks the entry to the U.S. of aliens from seven countries (Iran, Iraq, Libya, Somalia, Sudan, Syria, and Yemen) for 90 days, (2) suspends the United States Refugee Admissions Program for 120 days, and (3) halts indefinitely the entry of all Syrian refugees. Given the Ninth Circuit’s decision, enforcement of the Order is suspended while litigation continues.

Yesterday’s ruling was unconventional in that oral arguments were held over the phone only two days before. These arguments attracted an exceptionally large live audience via cable news networks and websites like YouTube. The YouTube livestream alone received over 135,000 listeners as Judges Richard R. Clifton, William Canby, and Michelle T. Friedland heard oral arguments by August Flentje, Special Counsel to the U.S. Attorney General, and Noah Purcell, Washington State’s Solicitor General.

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Predicting the winds of change: business investment decisions and unexpected shifts in government policy

A change in government policy can sometimes have a profoundly adverse effect on businesses, particularly if that change is unexpected or sudden. Businesses, particularly those in highly regulated sectors, often rely on “clear assurances” from Government in relation to its policy objectives and areas of focus (and funding) as a basis for operating or investing in a particular sector.

There is a manifest public interest in Government, as the custodian of the public purse, being allowed to change its mind and not being bound to fulfil every policy statement it makes. However, reasonably relying on a clear statement from Government can, in certain circumstances, give rise to a legitimate expectation on the part of citizens and businesses that Government will stay true to its word.

So when is it safe for businesses to rely on statements of government policy when making investment decisions? Two recent judgments of the Court of Appeal, in the context of recent changes to the Government’s renewable energy policy and the subsequent impact on businesses in the renewable energy sector, should act as a warning for businesses whose operations may be exposed to unexpected shifts in Government policy.

Solar Century Holdings Ltd v Secretary of State for Energy and Climate Change [2016] EWCA Civ 117

In 2013, the Government proposed to replace its renewables obligation scheme (the “RO Scheme“), through which the Government provided financial support for large scale renewable electricity generation projects, with a new scheme based on contracts for difference. As part of this transition and to minimise the risk of disruption for developers, the Government’s proposal was to close the old RO Scheme to new capacity on 31 March 2017.

Following the Government’s announcement, there was a higher than expected rate of uptake of solar photovoltaics (“PV“) generation under the RO Scheme. Concerns that the higher uptake would cause the financial cap on government support for the RO Scheme to be exceeded led the Government to decide to close the RO Scheme two years earlier than planned, on 1 April 2015.  This decision was given effect by a renewables obligation closure order issued by the Secretary of State pursuant a statutory power granted under the Energy Act 2013.

The Government’s decision was challenged in the High Court by certain companies involved in the installation of so-called large-scale PV systems (also known as “solar farms”). The claim reached the Court of Appeal when the companies appealed against the High Court’s dismissal of their application for judicial review.

The solar farm companies argued that the decision was contrary to their legitimate expectation arising from the Government’s “clear and unequivocal representations” that the RO Scheme would not close before 2017.  As such, the companies argued that the statutory power to issue a renewables obligation closure order could only be exercised in accordance with the binding pre-legislative statements about the 2017 closure date.

The Court of Appeal concluded that there was no legitimate expectation that the RO Scheme would remain open until 2017. The Government’s statements were merely statements of policy: they did not say that there would be no circumstances in which the RO Scheme would be closed earlier, only that closure was planned for March 2017.

Even where an end date was given, the Court said that “there can be no immutable presumption on that ground alone that the policy will continue without change until that date, whatever changes in circumstances may arise“. The Court stated that this was because Government is “entitled to formulate and re-formulate policy when rational grounds exist for doing so, unless to do so would amount to an abuse of power by reason of the manner in which it has previously conducted itself“.

The companies argued that the operation of the RO Scheme was also subject to a clear proviso that the Government would keep its promises it had made in relation to maintaining support for existing investments until 2017.

The Court rejected the companies’ reliance on witness statements made in the course of proceedings as evidence of the Government’s intention because they “would not be available even to the best informed of readers“.  Instead, the Court focussed on what the Government had said publicly about maintaining support levels, in consultation and other policy documents.

The Court concluded that, while the companies were correct to say that ensuring a stable investment environment was an important aspect of the policy, this was not the only objective and that “it must have been apparent to all concerned that, if uptake of solar PV threatened [the financial cap], the Government might, and probably would, bring forward the closure date“.

Ultimately, given that the case concerned the apportionment of public funds to a range of deserving renewable energy technologies via the Government’s various financial schemes, the Court questioned the realism of the companies’ expectations, stating that there would inevitably be compromises involved and that “solar PV operators could not possibly entertain a secure expectation that their particular scheme would be protected at the expense of others“.

Infinis Energy Holdings Ltd v HM Treasury [2016] EWCA Civ 1036

In the July 2015 Budget, the Government announced its decision to remove an exemption from the Climate Change Levy, a tax on energy supplied to non-domestic consumers, for renewable-source electricity (the “RSE Exemption“). The removal of the RSE Exemption took effect from 1 August 2015, giving businesses only 24 days’ notice of the change in policy.

The Government’s decision was challenged by two renewable energy generating companies in September 2015. The RSE Exemption was an important source of income for renewable energy generators, so the companies argued that the Government’s decision gave them an unreasonably short notice period of the RES Exemption removal, which had been completely unexpected. They claimed that they had a legitimate expectation that any removal of the RSE Exemption was subject to a minimum two-year lead time.  They also claimed that, given the significant adverse impact of the removal of the RSE Exemption on renewable energy generators and that the policy was within the scope of EU law, the decision was also in breach of the EU law principle of proportionality and contrary to rights under the Article 1 of Protocol 1 of the European Convention of Human Rights (the “ECHR“) to the peaceful enjoyment of their possessions (“A1P1“).

The High Court dismissed the case and Infinis appealed to the Court of Appeal.

Legitimate expectation

Counsel for Infinis argued that the very existence of the relevant legislation providing for the RSE Exemption, especially as it had been maintained for many years, had led businesses to expect that reasonable notice would be given before the RSE Exemption was removed. They argued that the Government must have expected renewable energy generators to plan their business and make investment decisions based on the expectation that the RSE Exemption would continue and that this was enough to bring the claim within the scope of the principles of legal certainty and foreseeability. However, at the outset, the Court of Appeal instead agreed with the Government that there was a clear and consistent line of EU law that, in order to give rise to a legitimate expectation enforceable in the courts in the context of a change to the national tax code, the public authority must give a “precise, unconditional and unambiguous assurance, whether by words or conduct, of an expectation as to how it will behave in future“. This approach also applied to the related EU law principles of legal certainty and foreseeability, as the various principles must be interpreted in a coherent manner.

Infinis also tried to argue that the applicable test differed depending on whether the decision concerned an administrative act or a change in a rule of law. The Court rejected this distinction – a uniform set of rules applied regardless of whether acts fell into the administrative sphere or the legislative sphere.

In the present case, the Court of Appeal held that the Government had made no promise or assurance that the RSE Exemption would be maintained indefinitely, nor that it would be subject a period of notice before being removed. In the absence of a clear, precise and unconditional assurance given to the contrary, it was always inherently foreseeable that there was a possibility of immediate withdrawal, not least because the Government and Parliament had a general discretion to alter the tax regime as they saw fit. The Court went further, stating that:

In the context of establishing and changing the rules of a national tax regime, a prudent and circumspect economic operator would appreciate that the tax authorities and national legislature might change the tax code without notice. They are entitled to do so, as it is their function in a democratic society to manage the public finances….

Proportionality and A1P1

It was common ground that, even though the precise approach of the Court to the issue of proportionality may not be identical in the context of EU law and the ECHR, for present purposes if Infinis failed under one it could not succeed under the other.

Infinis argued that the Government’s decision to remove the RSE Exemption detrimentally affected the commercial viability of Infinis’ contracts to supply electricity to customers and was therefore an interference with its protected interests under Article 17 of the EU Charter of Fundamental Rights and its right to peaceful enjoyment of its possessions under A1P1. As such, Infinis argued, any interference must be proportionate means to achieving a legitimate aim.  Infinis did not dispute that the Government could lawfully decide to remove the RSE Exemption, but challenged the method for implementing that decision, because it was done with almost no notice.

The Court quickly established that the decision to remove the RSE Exemption was pursuant to a legitimate objective, namely the appropriate apportionment of public revenue. It then went on to consider the implementation of the decision.

According to Infinis, the Government should have given a minimum of one fiscal year’s notice before withdrawing the RSE Exemption, which amounted to a delay of 20 months. However, as the Court stated, any delay in withdrawal of the RSE Exemption would have represented loss of revenue that the Government and Parliament considered was urgently required. Therefore, in the Court of Appeal’s view, Infinis was inviting the Court, by invocation of the principle of proportionality, to alter a fiscal measure by Parliament, which required weighing up a number of macro-economic considerations that it was primarily for the Government and Parliament to undertake.

The Court concluded that it “should be very slow to second guess the decision of Parliament in relation to such an assessment“, as there was “no simple, objective standard which the court can apply” to conclude that the withdrawal of the RSE Exemption was disproportionate to achieve the multiple policy objectives that Parliament and the Government sought to promote by doing so. The Court went on to note a number of other factors that suggested the withdrawal was proportionate, including that:

(a) the withdrawal left a large and valuable series of other financial incentives for the production of renewable energy;

(b) although the withdrawal was practically immediate, it was only prospective, in the sense that exemption certificates (which were capable of being sold commercially by renewable energy generators under the scheme) already generated remained valid after the RSE Exemption was withdrawn; and

(c) the evidence suggested that the impact to renewable energy generators had been specifically considered and that it was decided that it was outweighed by other considerations.

In the end, the Court took a dim view of the fact that Infinis’ evidence suggested that the loss of income that resulted from the withdrawal, although substantial, could not, and would not, have been avoided if Infinis had been given notice in the way it claimed was necessary. In light of this, the Court concluded that there was no real detrimental reliance by Infinis on any expectation that there would be a notice period of around two years before withdrawal of the RSE Exemption.

In other words, Infinis was in fact challenging the decision to withdraw the RSE Exemption itself, which had resulted in a sudden, substantial and unexpected increase in its tax liability, not the method of implementation of that decision. The Court was very clear that challenging such a decision on proportionality grounds before the courts was effectively a “no-hoper”, because it amounted to a challenge to the merits of the policy itself, in respect of which Parliament, as the democratically elected legislative body for the UK, had a wide margin of discretion:

In the context of proportionality, and in the absence of any legitimate expectation, however, a reduced income of this kind has little, if any, weight when set against the public interest as judged by Parliament. A mere change of income for individuals or companies because of a change in tax regime cannot be regarded as something which indicates disproportionality in a tax measure adopted by a state.

A Bigger Carrot: Commission Official Signals Availability of Larger Fine Discounts For Cooperation in Abuse Cases

In September 2016, the European Commission granted a 30% fine discount to Altstoff Recycling Austria for cooperating with an investigation into its alleged abuse of a dominant position in the Austria waste management market (see our previous post here).

The discount was granted on the basis of Paragraph 37 of the 2006 Fining guidelines, which allows for a departure from the general fining methodology due to “the particularities of a given case”. It may seem unusual that this paragraph, which also suggests increasing a fine for deterrence effect, would be used in this way, as the Commission’s regular practice to settle abuse of dominance cases is by accepting commitments pursuant to Article 9 Regulation 1/2003.  That provision allows companies to offer commitments that are intended to address the competition concerns identified by the Commission. If the Commission accepts these commitments it adopts a commitment decision making them binding on the parties without establishing an infringement.

Recently, at the 12th Annual Global Competition Law Center conference in Brussels, Kris Dekeyser, Director of Policy and Strategy at the Commission’s competition department, indicated that the Commission could grant discounts of greater than 30% in certain circumstances and in particular, if the firms cooperate early, acknowledge liability and suggest possible solutions or remedies. Dekeyser noted that ARA’s cooperation came “relatively late” in the investigation and that “fuller cooperation” could justify larger discounts.

These recent statements are a clear indication that the Commission intends to make use of this new form of cooperation “bonus scheme” more regularly. While it appears that the Commission wants to gain experience with the practice before issuing more formal guidance, it has at least opened the door to discounts of greater than 30% in certain circumstances.‎ Nevertheless, it remains to be seen whether companies under investigation for alleged abuses under Article 102 TFEU will ultimately agree to acknowledge liability in exchange for this financial incentive.

 

Ready, Set… Cures Act Expanded Access Policy Deadline is Almost a Go

As we have mentioned in a previous article, the 21st Century Cures Act (enacted December 13, 2016) gave companies 60 calendar days to make their expanded access policies for certain investigational drugs publicly available.  That deadline—Saturday, February 11, 2017—arrives in a matter of days.

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New Belgian Sunshine Requirements applicable to all pharmaceutical and medical devices from 1 January 2017

On 27 December 2016, the Belgian Law of 18 December 2016 concerning various health-related matters (“the Sunshine Act “) was adopted by the Belgian Ministry for Public Health[1].  The Sunshine Act introduces several substantial changes to the current Belgian legal and regulatory framework for medicinal products and medical devices.

Background

The Sunshine Act imposes a new transparency obligation on the pharmaceutical and medical devices industries. The Sunshine Act provides that medical device and pharmaceutical companies must provide the Federal Agency for Medicines and Health Products (“FAMHP”) with information concerning all pecuniary advantages or benefits in kind granted, directly or indirectly from Belgium or elsewhere, to a number of defined beneficiaries. These include healthcare professionals or healthcare professional organisations established in Belgium.

Obligation to disclose benefits to the FAMHP

The transparency obligation laid down in the Sunshine Act applies to all entities engaged in an economic activity, regardless of their legal status and the way in which they are financed. The obligation applies:

  • to marketing authorisation holders for medicinal products for human or veterinary use;
  • to importers, manufacturers and distributors of medicinal products for human or veterinary use;
  • to persons or entities trading or brokering medicinal products for human or veterinary use;
  • to distributors, retailers and manufacturers of medical devices.

As regards beneficiaries, the transparency obligation laid down in the Sunshine Act covers benefits provided to all healthcare professionals (“HCPs”), healthcare organisations (“HCOs”) and patient associations having their principal activity or registered seat in Belgium. In practice, this includes wholesalers, brokers, persons qualified to prescribe, issue or administer medicinal products, institutions involved in prescribing, dispensing or administering medicinal products and all patient associations which have their principal activity or registered seat in Belgium.

The Sunshine Act provides that any transfer of value in money or in kind must be notified to the FAMHP. The Law also lists a number of exceptions to this transparency requirement:

  • meals and drinks offered in the context of scientific events that are of an exclusively scientific nature, provided that:
    • the provision of meals and drinks is in connection to the scientific event;
    • the location, date and length of the scientific event do not create confusion as regards the scientific nature of the event;
    • the provision of meals and drinks is strictly limited to the official length of the event;
    • the provision of meals and drinks is limited to HCPs and HCOs.
  • advantages and benefits of negligible value that relate to the exercise of the medical, dental or pharmaceutical profession or that relate to veterinary medicinal products;
  • the economic margins and price discounts which are part of usual purchase and sales transactions for medicinal products and medical devices conducted by a company subject to the notification obligation or between such a company and beneficiaries;
  • free samples.

Content of the notification to the FAMHP

The Sunshine Act provides that the notification to the FAMHP must include the following elements:

  • the business name and company VAT number of the pharmaceutical or medical device company;
  • the name and VAT number or RIZIV number of the beneficiaries;
  • the total sum of the benefits provided throughout the relevant reporting period.

It is expected that Mdeon will be appointed by the authorities in the course of 2017 to perform the functions and tasks relating to the new disclosure obligation on behalf of the FAMHP. Mdeon is an ethical platform made up of associations of physicians, pharmacists, veterinarians, dentists, nurses, and of the pharmaceutical and medical devices industry. The role of Mdeon is to assess whether the hospitality and sponsorship offered by pharmaceutical and medical device companies to Belgian HCPs at scientific and educational events is acceptable on the basis of Article 10 of the Sunshine Act on medicinal products.

In light of the above, companies will be required to submit to Mdeon information concerning transfers of value granted to Belgian HCPs, HCOs and patient organisations. A report of all transfers of value provided by a company to individual HCPs or HCOs must be submitted to the Mdeon on an annual basis, at the latest on 31 May of the year following that of the relevant reporting period. The Sunshine Act specifies that where transfers of value in money or in kind are provided to a HCP or a HCO for work which falls within the category of clinical or non-clinical research and development, the transfers of value must exceptionally be disclosed as an aggregated sum.

Publication of disclosed information

The Sunshine Act provides that transfers of value will be made public on a Belgian transparency website accessible by the public. It is understood that publication of transfer of value will be made on Mdeon’s BeTransparent.be website. Publication will occur in French, Dutch and German.

This publication will occur at the latest on 30 June of the year following that of the relevant reporting period.

Entry into force of the disclosure obligation

Before the law can enter into force, several implementing Decrees must be published. Two Royal Decrees are reported in preparation, for adoption in late March 2017. One Royal Decree will specify:

  • the types of transfers of value that are subject to the disclosure obligation;
  • the practical and technical arrangements for both the notification and publication of transfers of value;
  • the date of entry into force of the Sunshine Act.

The second Royal Decree is expected to appoint Mdeon, as an accredited organisation, to perform the functions and tasks relating to the new disclosure obligation on behalf of the FAMHP.

The date of adoption of the above Royal Decrees will determine the date of entry into force of the Sunshine Act. It has been reported that the Sunshine Act will enter into force at the latest in April 2017. It has also been reported that the disclosure obligation will apply to transfers of value granted to Belgian HCPs, HCOs and patient organisations in the course of 2017.

In light of the above, the first reference period prior to disclosure is likely to be from 1 January 2017 to 31 December 2017, with the first related publication required by 31 May 2018 at the latest.

Consequences for medical devices and pharmaceutical companies

The new disclosure obligation will have several practical consequences for pharmaceutical and medical device companies.

  1. All pharmaceutical and medical device companies are now subject to the disclosure requirements: Pharmaceutical companies that are members of pharma.be, the General Association for the Pharmaceutical Industry, are already required to collect and disclose information, including personal data, concerning transfers of value granted to Belgian HCPs, HCOs and patient organisations. Disclosure is based on the consent of the beneficiaries. Similarly, medical devices companies that are members of beMedtech.be, the Association for the Medical Technology Industry, and members of FeBelGen, the Association that represents companies that market generic medicinal products and biosimilars, must collect and disclose this information. Again disclosure is based on the consent of the beneficiaries. From the date of application of the Sunshine Act, however, all pharmaceutical and medical device companies, whether or not member of the above organisations, would be subject to the disclosure requirements.
  2. Informed consent from healthcare professionals for disclosure is no longer required: In accordance with the transparency rules established by pharma.be, BeMedtech.be and FeBelGen, member companies of these organisations must comply with data protection requirements related to the collection, processing and disclosure of transfers of value. As a result, HCPs can refuse to have their personal data publically disclosed on the website betransparent.be. As a result of the new Sunshine Act, companies would no longer be required to seek the informed consent of HCPs before disclosing information concerning transfer of value. HCPs would also no longer be able to refuse the publication of their personal data. In accordance with the EU Data Protection Directive and the related national Belgian implementing provisions, processing of personal data without the need for additional safeguards such as an informed consent is permitted where such processing activities is necessary for compliance with a legal obligation. In light of the fact that the Sunshine Act now imposes a legal obligation of collection, processing and disclosure of personal data concerning transfers of value, this data may be collected without the related informed consent of HCPS. From the date of entry into force of the Sunshine Act, companies will no longer be required to seek the consent of the concerned HCPs, HCOs and patient organisations for the collection and disclosure information concerning the transfers of value granted to them.
  3. Collection of information is required now: The Sunshine Act imposes on companies an obligation to trace and report transfers of value provided to HCPs, HCOs and patient organisations established in Belgium. This disclosure obligation already applies to all transfers of value provided from 1 January 2017 to 31 December 2017. Related notification of these transfers of value, anticipated to be to Mdeon, must be made by 31 May 2018 at the latest. A record of the information submitted for notification and all relevant supporting documents must be kept by companies for a period of ten (10) years from the date of publication.

The Sunshine Act provides that non-compliance with the disclosure obligation will be punished by fines ranging from €1,200 to €90,000.

[1]               http://www.ejustice.just.fgov.be/cgi/article_body.pl?language=fr&pub_date=2016-12-27&numac=2016024298&caller=list

FDA: Implementation of Amended Intended Use Regulations Delayed Until March 21, 2017

On February 7, 2017, the Food and Drug Administration (FDA) delayed implementation of its January 9, 2017, final rule addressing the regulation of tobacco products as drugs, devices, or combination products.  That rule, which also amended the intended use regulations for drugs and devices, was to go into effect today, February 8, 2017; however, implementation has been delayed until March 21, 2017, pursuant to a January 20, 2017 memorandum from the Assistant to the President and Chief of Staff, Reince Priebus.  The January 20 memorandum, entitled “Regulatory Freeze Pending Review” (82 FR 8346), directed the heads of Executive Departments and Agencies to temporarily postpone the effective dates of all regulations that had been published but had not yet taken effect in order to allow for review of the “questions of fact, law, and policy” raised by these regulations.

As noted in our prior alert, the final rule amends the last sentence of 21 C.F.R. § 801.4 (for devices) and 21 C.F.R. § 201.128 (for drugs) to clarify that a manufacturer’s knowledge, alone, that its legally marketed product is prescribed or used by physicians for an uncleared/unapproved use is not proof in and of itself that the manufacturer intends such use, nor is it sufficient to trigger the obligation to provide adequate labeling for that unapproved use.  The amended language clarifies that a new intended use is created only if the totality of the evidence shows that the manufacturer objectively intends for a drug/device to be used for uncleared/unapproved conditions or purposes.  In other words, the amended language clarifies that knowledge alone is not enough, but at the same time, preserves the ability of FDA to rely on knowledge of unapproved uses as part of an assessment of the totality of evidence.