29 June 2020
Brexit readiness – 1 of 2 Insights
Overseas manufacturers of medical devices setting-up sales operations in Europe often ask regulatory lawyers where they should locate their sales offices for the purposes of regulatory requirements.
These decision are becoming even more critical when looking ahead to the upcoming EU Medical Device Regulation (MDR) and following the UK Brexit transition phase, both only a few months away in 2021. However, by focusing on a few key aspects of the current and likely future legal and regulatory regimes, there are some smart and commercial decisions that can be made.
To make sales in the EU27, an overseas legal manufacturer must have an authorised representative (AR) established in the EU. This AR can be a contract service, supplied by a third party who provides all the AR services to the overseas legal manufacturer. Alternatively, the legal manufacturer could appoint an EU27-based subsidiary as AR, and which will be similarly contracted to provide the AR services.
If the overseas legal manufacturer is planning to have employees in the EU27 to manage sales, there will be some kind of base, however small, in the EU27. The less expensive option in this case is likely to use the manufacturer's own subsidiary as AR, rather than a contracted-in AR. However, this assumes that the manufacturer has at its disposal an in-house regulatory function that can provide support for the AR duties (which could be from their home country). These AR duties are mainly regulatory in nature.
On the ground, the AR will need a physical office in the EU27 country in which it has its registered place of business (registered with the competent authority of that country), and at that physical office will need as a minimum:
An overseas legal manufacturer must have an importer who is "established in the EU" and who will, for the purposes of MDR, place the devices on the market in the EU.
This importer might be a third party (most likely where the importer will then distribute the products itself or sell-on the devices to a third party, who would be a distributor). However, if the overseas legal manufacturer wishes to make sales itself, rather than sell through third party distributors, it would generally do so by establishing a local legal entity to act as its own importer into the EU27. This legal entity could be the same as that performing the role of AR.
To make direct sales in the EU27, an overseas legal manufacturer will require a legal entity to act as its importer responsible for placing the devices on the market in the EU. They will in addition require an AR, which could be contracted-in as a service from a third party, but this role could equally be performed by the same entity that is acting as importer, if the necessary contracts, authorisations and functions are in place. Alternatively, manufacturers who prefer to sell through third parties may avoid setting up their own legal entity in EU27 by contracting-in AR services and having their distributors act as importers.
After the Brexit transition period has ended (31 December 2020), and assuming there is no other deal on this subject agreed between the UK and the EU, the overseas legal manufacturer will be required to have in place a UK Responsible Person who is established or resident in the UK (there are brief transition periods of four, eight or 12 months, according to the class of the device and before the UK Responsible Person must be in place and registered with the MHRA).
Because the devices will need to be imported into the UK, there will necessarily be an importer, who by definition must be "established within the UK". The MHRA has determined that the importer will, by dint of their function, be the UK Responsible Person.The overseas manufacturer will therefore want to determine who will be performing the role of importer into the UK. While they might appoint a third party to perform this role, if the overseas legal manufacturer intends to make sales directly in the UK, the most convenient option is likely to be to establish a UK subsidiary which will perform the dual role of importer and UK Responsible Person.
To sell their products directly both in the UK and EU27, overseas medical device manufacturers will need separate representation from legal entities established in the UK and EU27, if no deal covering these matters is struck between the UK and the EU.
Theoretically, all of these roles might be fulfilled by an individual. However, the name and contact details of the AR, of the importer into the EU27 and of the UK person responsible for regulatory compliance (who will also be the UK importer) will have to be included on the device labels.
An individual might at any time become indisposed or unavailable, which would mean having to change labelling at very short notice. This is not practical for most medical device manufacturers.
Furthermore, the AR in the EU27 and the person responsible for regulatory compliance in the UK, are both liable for product defects which cause loss or injury, in addition to (but separately from) the overseas legal manufacturer. While insurance is possible, it is not a desirable position for any individual to be subject to such a substantial potential liability, and insurance can in some situations become void.
Additionally, in the UK the address of the individual will be made publicly available on the MHRA's Public Access Registrations Database. Similarly, once EUDAMED (the EU medical devices database) is operating – specifically the UDI database – the name and contact details of the AR will be published by the European Commission.
Publication of the name and address of an individual in relation to the devices is unlikely to be desirable for that individual, especially if any product liability issues arise.
The optimal position from a practical perspective is to use a legal entity for all of these roles.
Regulations do not per se dictate the choice of EU27 country for the AR.
However, it is worthwhile noting that the competent authority of the EU Member State in which the overseas legal manufacturer's EU AR is registered will be the one responsible for much of the day-to-day regulatory interaction with that legal manufacturer.
This interaction will be very important to the ongoing EU27 regulatory affairs of the overseas legal manufacturer. Therefore, it will be worthwhile considering the following factors regarding the national competent authority when selecting the country in which the AR will be registered:
An overseas manufacturer of general medical devices making direct sales into the EU27 and the UK will need to establish a legal entity both in the UK and in the EU27 to meet the requirements of the EU27 under MDR, and of the UK post-Brexit.
The overseas manufacturer might choose either of these entities (or any other) as its headquarters for operations in Europe, as long as the AR and the UK Responsible Person are established and registered in the EU27 and the UK respectively. They must each have the necessary contracts, authorisations, and functions in place to meet the legal requirements of the EU and the UK, as required by their official regulatory roles.
Reasons for the selection of one country for a headquarters are many (and not set down in regulations), including languages spoken by the management team and in the selected country, access to the most suitable KOLs, access to clinical trial sites, access to a suitable talent pool, accessibility to other parts of Europe, as well as more personal matters such as schooling for ex-pat members of the management team's children, and access to cultural and other activities.
The alternative is for the overseas legal manufacturer to sell their products through a third party distributor that can take on the role of importer, while the manufacturer contracts-in the services of a third party AR in the EU27.
In the next instalment of our Brexit readiness series, we provide a short checklist for those administering company's trade marks.
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