EU Proposes Significant Changes for Importers and Distributors

The European Union’s proposed Medical Device Regulation (MDR) will cause drastic changes to the obligations of manufacturers, importers and distributors involved in the medical device supply chain. These regulations differ from the current European Union (EU) Medical Device Directive (MDD), which provides obligations only for manufacturers. Importers and distributors are currently subject to fragmented national law obligations. Replacing the current MDD with a Regulation will require all economic operators in the medical device supply chain to be subject to the same rules everywhere.

These rules come from the EU’s New Legislative Framework for the Marketing of Products (also known as the Goods Package), consisting of Regulation No. 765/2008 on Market Surveillance and Decision No. 768/2008 on the Marketing of Products. These contain a common framework of general principles and reference provisions for the drawing up of community legislation harmonizing the conditions for the marketing of products. The MDR now implements these for the medical device field.¹

This article will give a brief overview of the changes to be brought about by the MDR for medical device manufacturers, importers or distributors and how these may impact current supply and distribution agreements.

New Under the MDR

Compliance with the MDR will require the following steps prior to placing the device on the EU market and resale in the EU market.

An important change in the new supply chain checks system is that each downstream economic operator has to verify that the previous economic operator complies with the MDR requirements. Thus, importers and distributors have to make sure that, prior to placing a device on the market, the manufacturer, the importer and the device itself meet the MDR requirements.²

Importers

This will mean that the importer must ensure that:³

• the appropriate conformity assessment procedure has been carried out by the manufacturer
• an authorized representative in accordance with Article 9 has been designated by the manufacturer
• the EU declaration of conformity and the technical documentation have been drawn up by the manufacturer
• the device bears the required CE Marking of conformity
• the device is correctly labeled and accompanied by the required instructions for use and EU declaration of conformity
• a Unique Device Identification has been assigned
• while a device is under their responsibility, storage or transport conditions do not jeopardize its compliance with the general safety and performance requirements set out in Annex I
• the manufacturer has taken out appropriate liability insurance coverage, unless the importer himself ensures sufficient coverage that meets the requirements of that paragraph⁴ 

The importer must furthermore:

• be able to identify any economic operator to whom they have supplied a device, any economic operator who has supplied them with a device and any health institution or healthcare professional to whom they have supplied a device for a period of five years
• label the device with their contact details
• take corrective action (e.g. recalls and report to authorities) autonomously
• engage in post-market surveillance (among other things report complaints)
• refuse to import devices of which he has reason to believe are not in conformity with the requirements

These importer obligations have far-reaching consequences. In practice, the importer will evaluate whether the manufacturer located outside the EU has the technical, scientific and financial capacity to produce a medical device compliant with the MDR. The importer is expected to investigate the manufacturer’s expertise and make the results of this assessment transparent by sharing them with the competent authorities and make them available also on his own website.⁵ A downright tricky obligation is that the importer has to verify that the manufacturer has applied the “appropriate” conformity assessment procedure and that the device bears the “required” CE Marking of conformity. This means that the importer cannot simply rely on a warranty with indemnity by the manufacturer in regards to compliance, but will need to actively audit the manufacturer and establish his own judgment as to the compliance of the manufacturer and refuse to import a noncompliant device. The EU authorities can enforce against the importer for noncompliance with these requirements.

The importer has an autonomous obligation to take corrective action and engage in post-market surveillance, which means that the agreement between the manufacturer and the importer will need to address how this will work among themselves.

Distributors

The distributor must verify that:⁶

• the product bears the required CE Marking of conformity
• the product is accompanied by the information to be supplied by the manufacturer
• the manufacturer and, where applicable, the importer have complied with the MDR requirements
• while a device is under their responsibility, storage or transport conditions do not jeopardize its compliance with the general safety and performance requirements set out in Annex I

The distributor must furthermore:

• label the device with his contact details
• take corrective action (among other things, undertake recalls and report to authorities) autonomously
• engage in post-market surveillance (i.e., report complaints)

Consequently, the distributor also accepts significant additional regulatory burden, with the obligations to verify that (1) the product bears the required CE Marking of conformity and (2) the manufacturer and, where applicable, the importer have complied with the MDR requirements. Like with the importer, the distributor will have to demonstrate to the authorities that it has actively checked these points and is not relying on the other party’s representations and warranties.

An interesting new question is raised by the distributor and importer responsible for storage and transport “while a device is under its responsibility.”⁷ When is a device “under the responsibility” of the distributor or importer? If this refers to contractual responsibility, distributors and importers will have a strong incentive to limit the duration that they are responsible for a device or try to push out this responsibility as much as possible. Also, does transport include both transport to and from the importer’s or distributor’s warehouse? And what if the importer or distributor doesn’t have a warehouse, but has products delivered directly from the factory to the manufacturer? This provision is likely to cause a lot of confusion until the concept of “responsibility” is interpreted by the European Court of Justice.

Change of Safeguard and Market Surveillance Obligations

Important changes have developed with respect to safeguard and market surveillance obligations. It is obvious that these changes are pretty much effected by the provisions of the Decision on the Marketing of Products. Under the MDD, it is the responsibility of member states’ competent authorities and manufacturers to take safeguard and corrective measures against medical devices posing a risk to the public health; under the MDR, this responsibility is expanded to include importers and distributors. Thus, according to the MDR, importers and distributors will be obligated to take all the necessary measures to prevent a medical device from being placed on the EU market, or even withdraw or recall it, should they believe that it is not in compliance with the MDR. Furthermore, should a device present risks to the users, importers and distributors should immediately notify the competent authority of the respective member state and the notified body. Since every device presents risks, we assume that this MDR requirement applies in case of risk that goes beyond the risks accepted as being outweighed by the benefits of the device.

Additionally, importers and distributors should immediately forward to the manufacturer or his authorized representative complaints or reports from end users about suspected incidents with the relevant device.

Importers will have an autonomous obligation to monitor compliance and have a quality system for doing so. For devices with higher risk profiles, they may need to carry out sample testing of marketed products, investigate complaints and keep a register of complaints of non-conforming products and of product recalls and withdrawals, and keep the manufacturer, authorized representative and distributors informed of such monitoring.⁸

These new changes should be carefully taken into consideration when revising current supply and distribution agreements in compliance with the MDR, because all the parties of the agreement should enter under their new respective obligations, which due to their importance should be fulfilled with no delay in order to prevent any individual liability issues that may arise.

Traceability of the Devices Throughout the Supply Chain

Traceability of the devices, other than custom made or investigational devices, throughout the supply chain is also another crucial feature of the MDR. All economic operators will have to track devices on the distribution of which they are involved. Manufacturers, importers and distributors will have to identify at all times from whom and to whom among them was the device supplied, including also the devices supplied to health institutions or healthcare professionals.

The obligation of traceability is closely linked to the safeguard measures, because it will enable the economic operators and the member states’ competent authorities to localize the problematic devices.

Other Obligations

The MDR introduces other new important obligations, which are addressed commonly to all or concern only one of the economic operators, such as:

• the importer is responsible to register the imported device in the electronic system on the registration of devices and economic operators,⁹ which will likely reside in the Eudamed database
• the manufacturer of an implantable device must issue an implant card, which shall be made available to the healthcare professional implanting the device.¹⁰

So, the manufacturers of implantable devices must make sure that all the downstream economic operators are obliged to associate the device with the card and that the last distributor makes the implant card available to the healthcare professional.

Amend your Agreements

One thing is for sure; once enforced, many of the new obligations mandated by the MDR will need to be reflected in distribution and supply agreements. Not only will new agreements need to comply with the provisions, but current distribution agreements may have to be revised accordingly if their duration extends beyond the date of entry in which MDR is enforced.

Not accounting for the MDR obligations and defining a modus operandi between contract parties for implementation of the obligations in distribution agreements between economic operators may cause serious compliance issues or invalidity of the agreements; for example, in the case that an agreement prevents a party from fulfilling its obligations under the MDR. In practice it will mean that parties must consider ways to overlap and interlock their quality systems so that action taken by one economic operator does not prejudice the interests or compliance of another upstream or downstream.

REFERENCES

1. 2012/0266 (COD), recital 22
2. 2012/0266 (COD), articles 11 and 12
3. 2012/0266 (COD), article 11
4. This provision (article 11 (2) (fa) refers to article 8 (10a) and thus provides that “appropriate’ in the context of the manufacturer obligation in article 8 (10a) “Before placing a medical device on the market, manufacturers shall ensure they are covered by an appropriate liability insurance covering any damages to patients or users that can be directly attributed to a manufacturing defect of the same medical device, with a level of coverage proportionate to the potential risk associated with the medical device produced, and in accordance with Council Directive 85/374/EEC”, which still does not clarify what ‘appropriate’ means in this context, making it difficult to determine the exact extent of the importer’s obligations.
5. 2012/0266 (COD), article 11(2)(-a)
6. 2012/0266 (COD), article 12
7. 2012/0266 (COD), article 11(3)
8. 2012/0266 (COD), article 11
9. 2012/0266 (COD), article 11(4)
10. 2012/0266 (COD), article 16(1)

Erik Vollebregt is a life sciences and intellectual property lawyer based in Amsterdam. He is founding partner of the boutique life sciences law firm Axon Lawyers, which specializes in EU legal and regulatory issues relating to medical technology. His particular focus is the European regulatory requirements for medical devices, and he is author of a blog on the same topic: medicaldeviceslegal.com. Mr. Vollebregt may be reached by email.

Arber Gjunkshi is a paralegal at Axon Lawyers. He graduated from the Ankara University Faculty of Law in 2007 and holds two LL.M. titles, one in Intellectual Property Law (Advanced IP) from Maastricht University and one in EU law (with special focus in EU competition law) from Hamburg University. At Axon Lawyers, Mr. Gjunkshi researches and advises with regard to pharmaceuticals and medical device regulatory and compliance legal issues, EU competition law and IP law matters. He also drafts various commercial contracts with regard to medical technology and IP licensing. Mr. Gjunkshi may be reached by email.

Axon Lawyers Save Supplier