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Focus on Regulation

CAMD released roadmap concerning the priorities for the implementation of the MDR and IVDR

The Competent Authorities for Medical Devices (“CAMD”) has published a roadmap concerning the implementation of the Medical Devices Regulation (“MDR”) and In Vitro Diagnostic Regulation (“IVDR”). The roadmap has been prepared in cooperation with the European Commission and it is intended to address the challenges of the MDR and IVDR implementation.

Background information

The MDR and IVDR will be applicable from 26 May 2020 and 26 May 2022 respectively. Medical devices manufacturers, the European Commission, the competent authorities, notified bodies and other stakeholders such as authorised representatives, distributors, importers or standard bodies must immediately start to prepare for the application of the Regulations.

The CAMD has established an MDR/IVDR implementation taskforce with the aim to facilitate cooperation with the medical devices network during the implementation phase of the MDR and IVDR. The CAMD considers that a single European roadmap will help to implement an effective and secure regulatory system and to ensure better protection for public health in the medical devices sector.

The CAMD taskforce now intends to engage with all recommended parties to identify the project plan and deliverable of each priority and continue monitoring progress in relation to the implementation of the MDR and IVDR. Continue Reading

FDA Clarifies and Expands Eligibility for RMAT Designation for Gene Therapies

On November 16, in the context of announcing a comprehensive regenerative medicine policy framework (discussed here), FDA released a draft guidance document that describes the expedited programs available for the development and review of certain regenerative medicine therapies.  Importantly, the draft guidance clarifies certain aspects of the Regenerative Medicine Advanced Therapy (RMAT) designation established by the 21st Century Cures Act.  In particular, the draft guidance expressly includes “gene therapies, including genetically modified cells, that lead to a durable modification of cells or tissues” in FDA’s interpretation of a “regenerative medicine therapy” that may be eligible for RMAT designation.

The RMAT program builds on prior statutory changes that created programs for expedited product development and review, including fast track designation, accelerated approval, and breakthrough therapy designation.  Although RMAT designation requires preliminary clinical evidence that indicates that the therapy has the potential to address unmet medical needs, RMAT does not require evidence to indicate that the drug may offer a substantial improvement over available therapies, as breakthrough designation requires.  The draft guidance states that it is possible that the preliminary evidence needed for RMAT designation could come from clinical trials with “appropriately chosen” historical controls, well-designed retrospective studies, or even “clinical case series that provide data systematically collected by treating physicians.”  If an RMAT-designated product also receives an accelerated approval based on a surrogate endpoint, FDA could accept “patient registries, or other sources of real world evidence, such as electronic health records” to satisfy post-approval requirements.  In addition, CBER Center Director, Peter Marks, has highlighted the great value of early interactions provided under the RMAT program to address the unique manufacturing challenges associated with regenerative medicine products.

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FDA Issues New Guidance Documents on Regenerative Medicine but Delays Enforcement

Yesterday, the U.S. Food and Drug Administration (FDA) announced a comprehensive framework for development and oversight of regenerative medicine products, including innovative cell-based therapies.  This initiative builds on the agency’s existing framework to set forth more clearly which products are subject to regulatory enforcement. In September, as we previously discussed here and here, FDA’s Commissioner, Dr. Scott Gottlieb, prescribed a commitment for stepped-up enforcement against unscrupulous companies taking advantage of vulnerable patients.  In yesterday’s press release, Dr. Gottlieb reaffirmed this commitment, and also stated that the agency supports the innovation being pursued by “responsible product developers” who represent the vast majority in the field.  He emphasized the goal of providing greater clarity to facilitate understanding as to where the regulatory lines are drawn.  FDA’s announcement included four guidance documents, two draft and two final, which defined a risk-based framework to drive advances in regenerative medicine and set forth how the agency intends to focus its enforcement actions against products that raise potentially significant safety concerns.

Despite the FDA’s strong language establishing this framework, the agency also stated in the final guidance relating to “minimal manipulation” and “homologous use” that the agency intends to exercise enforcement discretion, applicable to products intended for autologous use, for violations of 21 CFR 1271, for a 3-year period, except for products that pose a potential significant safety concern.  The apparent justification for the enforcement discretion is to provide time for product developers to obtain FDA approval.  Unlike the agency’s September announcement on stem cell clinics, this one was not packaged with any new enforcement action announcements.  We will be closely watching as FDA continues to implement the revised framework and will keep you posted should FDA determine that there are potential significant safety concerns that warrant enforcement.

 

 

UK ‘Sugar Tax’ – Draft Regulations Published

The UK tax authority HM Revenue and Customs (HMRC) has published draft Regulations setting out further details on the new UK ‘Soft Drinks Industry Levy’, which will apply from 6 April 2018.

The new levy applies to all soft drinks packaged in or imported to the UK that contain added sugar and at least 5 grams of sugar in total (both naturally occurring and added sugar) per 100ml of prepared drink (“chargeable drinks”). A levy of 18p per litre will apply, rising to 24p per litre for chargeable drinks containing 8 grams or more of sugar per 100ml.

Companies that produce, package or receive imported chargeable drinks will need to register with HMRC and keep detailed records of products that are subject to the levy. There is an exemption for companies that produce fewer than 1 million litres of chargeable soft drinks in the relevant tax year.

The draft Regulations provide further details as to how the levy will be applied in practice, including:

  • definitions of fruit juice, vegetable juice and milk for the purposes of determining the source of added sugar (as the levy does not apply if the source of added sugar is solely from these ingredients);
  • how HMRC will calculate the sugar content of drinks intended to be diluted (e.g. cordials) in the absence of a serving dilution ratio on the packaging or where it believes that the suggested ratio has been set specifically to avoid the tax;
  • details of the registration process, the procedure for submitting returns to HMRC and the payment of charges; and
  • the procedure for claiming tax credits in relation to chargeable drinks that are exported from the UK or lost or destroyed.

The draft Regulations are available here and the consultation closes on 8 December 2017.

UK Advice on Mental Health in Advertising

On the back of a number of high profile initiatives to raise awareness of mental health issues in the UK this year, the UK Committee of Advertising Practice (CAP) has published a timely reminder for advertisers of how mental health is addressed under the UK advertising rules (the CAP and BCAP Codes).

There is no specific section on mental health in the Codes. Instead direct and indirect references to mental health issues are subject to the general requirements for advertising to be socially responsible and not cause serious offence, and the detailed rules on referring to medical conditions.

CAP advises advertisers to consider the following three questions when developing their ad campaigns:

  1. Is the ad socially responsible? For example, could it exploit consumers who are mentally or socially vulnerable? Or does it suggest that the advertised product or service could provide an escape from a mental health condition such as depression?
  2. Could the ad could cause offence or reinforce negative stereotypes about mental health problems?
  3. Does the ad refer to a mental health condition for which medical advice should be sought? If so, any treatment advertised must be supervised by a suitably qualified healthcare professional.  Could the ad discourage people from seeking appropriate treatment for a mental health condition?

The full advice is available here.

New rules for expanded access in Italy

Fast track for orphan diseases and rare forms of cancers

By Ministerial Decree of 7 September 2017 (DM 7 September 2017), published in the Italian Official Journal on 2nd  November2017, the Ministry of Health enacted new rules on expanded access to medicinal products, for which the authorisation procedure is still on-going, replacing the former Ministerial Decree of 8 May 2003, ruling on the same matter.

Under certain conditions, results of Phase I clinical trials may now be sufficient for requesting approval of an expanded access program intended to treat orphan diseases or rare cancers.

Overview of early access of medicinal products in Italy

In the European Union, early access may be achieved through “compassionate use programs“, which are contemplated by Article 83 of Regulation (EC) No 726/2004, on centrally approved medicinal products, while specific regulation of these is left to the Member States.

According to the Guideline on Compassionate Use of the European Medicines Agency, compassionate use programs should apply to group of patients and should be kept distinct from a named-patient supply (as meant in Article 5 of Directive 2001/83/EC). Read more

Expanded access under the old regulation

Expanded access according to Ministerial Decree of 8 May 2003 could be sought if “there were no valid therapeutic alternative for the treatment of serious diseases, or rare diseases, or pathological conditions that put the life of the patient at risk“.

It was furthermore required that clinical trials were on-going (phase III) or have been concluded (phase II or III). Read more

The new regulation – what it is not going to change

DM 7 September 2017 contains a detailed list of experimental medicinal products and medical conditions that may justify a request for an expanded access program.

In particular, it is now made clear that the expanded access may be sought for non-authorised products, as well as for medicinal products that are authorised in Italy or abroad but for a different therapeutic use, or which has been authorised abroad but not in Italy. Expanded access may be requested also for advanced therapy medicinal products (ATMPs).  Read more

Fast track for orphan diseases and rare cancers

DM 7 September 2017 lays down new and special conditions for expanded access in the case of orphan diseases or rare cancers.

While for other medical conditions results of Phase III, concluded or ongoing, are needed (or at least results of Phase II should be available, if the use is for life threatening or serious diseases), results of Phase I clinical trials may now be sufficient for orphan diseases or rare cancers. Read more

Declaration from the pharmaceutical company on the activation of an expanded access program

Under the new regulation, “Pharmaceutical companies, which intend to activate an expanded access program in Italy, shall inform AIFA on the date of activation, as well as on the date of termination of the program, specifying the medicinal product that they wish to make available free of charge pursuant to the [expanded access] regulation, without prejudice to the regulatory or safety grounds that may require a termination of the supply by operation of law“.

This provision is new and requires pharmaceutical companies to communicate the initiation and termination of an expanded access program. Additional regulation from AIFA, as to the formalities and procedures that must be followed by pharmaceutical companies for the communication, could be useful.

UK Food Standards Agency reviewing Feed Law Code and Guidance

The UK Food Standards Agency (FSA) is consulting on its proposals to amend the Feed Law Code of Practice and Practice Guidance. The Code and Guidance have to be taken into account by local authorities when enforcing feed law requirements in England (there are separate documents for Wales, Scotland and Northern Ireland). Continue Reading

Pursue Innovation or Maintain Eligibility? A Unique Faculty Model Could Cost an Institution $713 Million and its Future Participation in Title IV Programs

Instructor. Regular. Substantive. Those three words, as defined by the U.S. Department of Education (“ED”) Office of Inspector General (“OIG”), resulted in OIG’s recent recommendation that Western Governors University (“WGU”) repay to ED approximately $713 million in federal funds.

An otherwise eligible institution loses its ability to participate in federal student financial aid programs under Title IV of the Higher Education Act if, for the previous award year, more than half of the institution’s courses were correspondence courses or half or more of the institution’s students were enrolled in such courses (the so-called “50% rules”). In its audit of WGU, ED OIG reviewed 102 accreditor-approved online courses and determined that, largely because of WGU’s “unbundled faculty composition model,” 69 of those courses were “correspondence courses” rather than “distance education.” More than half of WGU’s students (over 60% of them) were enrolled in one or more of those 69 courses during the 2013–2014 award year, resulting in a violation of the 50% rules. OIG recommended that ED hold WGU liable for repayment of all federal funds disbursed to it since July 1, 2014 (the beginning of the next award year) because as of that date, WGU was no longer eligible to participate in Title IV programs.

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FCC Commissioners Debate Adjustments to Merger Review Standard

In the first major transaction approval under Ajit Pai’s Chairmanship, the Federal Communications Commission (“FCC”) recently approved, subject to targeted, transaction-specific conditions, license and authorization transfers in connection with CenturyLink’s $34 billion acquisition of Level 3.  The FCC’s recitation of its merger review standard in its order (the “CenturyLink-Level 3 Order”) differed somewhat from the description of the standard used in recent transactions reviewed during the Obama administration.  The Commissioners’ separate statements debated whether the new formulation merely clarified the FCC’s existing standard or constituted a substantial alteration of the standard.

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What blockchain can learn from the net neutrality debate: antitrust and regulatory aspects of “paid prioritization” for a nascent technology

First come, first served. That’s not the principle behind the clearance of Bitcoin transactions. Equally for other blockchain technology networks, the relevant factor to get a transaction on the next available block is not time, but often: money. “Paid prioritization” is a reality. Miners will first pick and clear those transactions which will most highly reward them.

Is this a problem? Not necessarily. As long as users have plenty of alternatives in the fields of cryptocurrency or smart contracts they can just use different networks. However, in the medium or long run this issue could trigger the attention of regulators and antitrust authorities. Blockchains in highly regulated industries such as financial services or stock exchanges and those with consumer-facing applications are most likely to be under the microscope.

Is this concern premature? No. Who would have envisaged ten years ago that antitrust authorities would choose internet search engines, e-commerce platforms and algorithms as their favourite subjects for investigations and conference talks? And compare blockchain with other internet industries that are actually subject to regulation: this article argues that blockchain activists and users can learn from the heated debate around the net neutrality of internet networks. In that case, regulators eventually prohibited higher fees for bandwidth-consuming content such as streaming services. So it is important that a blockchain network gets its governance issues right from the very beginning to avoid cumbersome regulation and antitrust procedures.

1. PAID PRIORITIZATION IN BLOCKCHAIN NETWORKS

Paid prioritization is a reality, in particular for Bitcoin. This phenomenon has already led to comparably high transaction fees for Bitcoin for small payments. While fees of around 300 satoshi/byte are almost guaranteed to get you on the next block, participants paying only at the lower end of the band will experience significant delay. In other blockchain networks alternative factors such as corporate affiliations or membership in a consortium could trigger similar disparity in clearing transactions.

A paid prioritization blockchain environment can create a dual speed blockchain: one for those who can or want to pay more and one for those who can’t or simply don’t want to do so and whose transactions accordingly lag behind. Depending on the governance of the blockchain network those with less buyer power will stand on unequal footing. This could in the long run particularly affect start-ups, SMEs or consumers.

2. PAID PRIORITIZATION AND NET NEUTRALITY

But this is not necessarily a problem from the antitrust perspective in itself. Paying more in exchange for a faster service is not a new concept. It is an integral part of our society in various business segments; a bank transaction is executed faster at an additional cost and next day delivery is available at a higher price.

There need to be additional factors affecting how different prices in a network trigger the attention of antitrust authorities or regulators. Paid prioritization has been at the heart of the net neutrality debate regarding internet access both in the EU and the US. A first possible explanation could be the fear of some regulators and internet activists that the increasing commercialization of the internet jeopardises the underlying idea of a de-centralised and open network which is accessible for everyone. More specifically, there is only one internet, and it has become a global enabler of freedom of speech and expression. We are far from having only one blockchain – so does the comparison with net neutrality really matter?

Probably yes. Regulators were not only interested in net neutrality because of the constitutional background and the intense lobbying of certain internet user groups. There were also commercial and competition law related aspects: internet bandwidth can reach a certain capacity and if fast lanes were to be created to prioritise certain content, slow lanes would equally have to be created. More bandwidth and thus faster content delivery comes at a higher price. In this way fast lanes would effectively be reserved for the prevailing service providers who can afford to pay more for faster content delivery. Simultaneously the delivery of rival content would shift to the slow lane.

In the EU, since 2016 a specific Regulation on open internet access enshrines the principle of net neutrality into EU law. In the US the Federal Communications Commission in 2015 explicitly prohibited paid prioritization and blocking or throttling end-users’ access. Interestingly, the new FCC chairman, Ajit Pai, announced his plans to repeal net neutrality regulations in the US earlier in 2017. As laid out in a testimony by the FTC, this could potentially increase the role of the FTC as antitrust enforcer stepping into the role previously played by the FCC (albeit that the current enforcement powers of the FTC regarding communication carriers are more limited).

3. FROM THE FIRST AMENDMENT TO FAIRNESS OF PLATFORMS

What can blockchain learn from the net neutrality debate? There are strong voices in particular from consumer organizations lobbying for net neutrality on the internet. Net neutrality has been described as a code word for the First Amendment, enshrining the principle of freedom of expression on the internet. The blockchain environment as an emerging de-centralised technology could well trigger attention from these groups even if the links to free speech are less obvious and there are more available alternatives. This is due to the fact that there is a general trend sometimes described as “hipster antitrust enforcement” which looks at the power of digital platforms in a gloomy way.

In the EU, these ideas are sometimes discussed under the term “Fairness”.  In an impact assessment of October 2017 on “Fairness in platform-to-business relations”, the European Commission expressly raised concerns regarding situations in which there is discriminatory access to data on a platform: “[s]ome platforms may favour own products or services, or discriminate between different third-party suppliers and sellers, e.g. on their search facilities or by capitalising on superior data access. The general inability for business users to verify the existence or absence of such discriminatory practices also leads to uncertainty that can in itself be harmful.”

Will we see a grass-root campaign for blockchain neutrality? And how would politicians and regulators react to such claims? While it is too early to predict the outcome of such a hypothetical debate regarding this nascent technology, it is conceivable that blockchain networks which are used in heavily regulated areas such as the banking sector or stock exchanges, could be the first to come under scrutiny. Relevant factors for policy or antitrust action will be (1) whether paid prioritization within a blockchain evolves into a problem for consumers or small businesses, (2) whether there are alternative blockchains to which those users can divert, and (3) whether those on the blockchain network who cause the clearance of transactions to be bottlenecked are easily identifiable. It will be more difficult, for instance, to take antitrust action against the masses of Bitcoin miners than against a more limited number of mining pools.

4. REGULATE BLOCKCHAIN?

Regulators might consider specific rules on blockchain and regulate the way they should operate in an effort to combat paid prioritization. But regulation is not the only supervisory mechanism available. Again, blockchain activists should carefully analyse how strongly the FTC argues against net neutrality regulation and in favour of antitrust supervision.

Acting FTC Chairman Maureen Ohlhausen in July 2017 commented: “[i]n dynamic, innovative industries like internet services, an ex post case-by-case enforcement-based approach has advantages over ex ante prescriptive regulation. It mitigates the regulator’s knowledge problem and allows legal principles to evolve incrementally. A case-by-case approach also focuses on actual or likely, specifically-pled harms rather than having to predict future hypothetical harms.”

The same comment could be made for blockchain. Competition law aims to preserve the competitive process while not dictating market outcomes. The premature stage of blockchain deployment in various business segments indicates that consumer demand cannot be forecasted by regulators and embodied in ex-ante regulation rules. Thus, competition law will be viewed as the most suitable tool to deal with such issues in the future, striking the fine balance between protection of competitive process and satisfaction of consumer demand.

And indeed, the determination of whether paid prioritization in a blockchain network harms consumers or competition requires a careful economic analysis. The precondition would be a dominant position or market power and a lack of competitive alternative which would set a high threshold for antitrust enforcement.

Thus, the lesson learned for blockchain from the net neutrality debate is: early engagement in political and regulatory discussions will help to educate decision-makers in order to fend off overly burdensome regulation. Existing antitrust powers may help shape the argument that ex post enforcement is more suitable for this dynamic technology.

5. DON’T HIDE BEHIND THE BLOCKCHAIN

Paid prioritization is not the only blockchain sphere where competition law might intervene. Recent speeches by EU antitrust officials and most importantly by Commissioner Vestager herself indicate the increasing focus of the Commission on antitrust issues caused by algorithms and other big data-applications. If a blockchain network were used to camouflage anti-competitive practices, antitrust regulators would use their existing investigation powers.

Information exchange through blockchain is probably blockchain’s most attractive aspect for competition law enforcers. As a matter of fact, competitors who are part of the same blockchain network can exchange commercially sensitive information given that each of them keeps an identical record of all transactions cleared within the distributed ledger. Other relevant antitrust aspects include the extent of access to closed blockchain networks if membership to such networks is a requirement for activity on the market.

The more blockchain technology evolves and penetrates into almost all industries, the more it will attract the authorities’ attention. Paid prioritization will most likely feature as one of the issues which regulators will carefully analyse. Blockchain activists should watch closely as the debate on net neutrality develops. These lessons learned will be important to help continue the dynamic growth of this exciting technology.

Watch Falk discuss potential blockchain competition issues

Myrto Tagara and Anna Stellardi, both trainees in Hogan Lovells’ Brussels office, contributed to this article.