Could the new EU Medical Devices Regulation put the UK MedTech industry in peril?
pharmafile | September 28, 2017 | Feature | Business Services, Manufacturing and Production, Medical Communications, Research and Development, Sales and Marketing | life sciences, medical devices, medical technology, medtech, medtech regulation, pharma, pharmaceutical
Gill Jennings and Every’s Fiona Stevens discusses recent developments in medical devices regulation and the subsequent impact on IP and investment in the medtech sector.
There has been much debate in recent years about the difficulty in attracting both private and public funds into the UK biotech industry. At certain points, it seemed like a disproportionate percentage of the funding that was invested into UK biotech came from the US. It is likely that there are multiple reasons behind this, but one reason that has been put forward is that UK investors prefer a shorter timescale to exit and therefore a return on their investment. This may be why investment in UK medtech actually appears to be flourishing; there has certainly been no shortage of private equity investment recently, with investors realising that, with medtech being much less regulated than the biotech sector, returns can be generated in a relatively short timescale.
After four years of negotiations, the new EU Regulation on Medical Devices (MDR) and Regulation on In Vitro Diagnostics (IVDR) came into effect at the end of May. The course of progress and innovation in regulated industries is to a significant degree dictated by how successfully regulators are able to strike the balance between their twin responsibilities: on the one hand, exerting sufficient control to maintain standards and protect consumers; on the other, affording companies sufficient leeway to develop, protect, and profit from new ideas. It is possible that this new Regulation will throw that delicate balance into jeopardy.
For the UK medtech industry as a whole, the new regulation could fundamentally challenge the ‘go-to-Europe-first’ model that has by and large been a tried-and-tested success for the past 40 years. Some predictions suggest that the number of innovative medical devices receiving a CE mark for sale in Europe could fall by as much as 30% once the new MDR comes into force, which could be critical for the industry.
The MDR raises the level of compliance that products need to achieve in order to obtain the all-important CE mark, the mandatory conformity label that various categories of item need to have in order to be sold within the European Economic Area. While the CE mark requirements had previously provided a guarantee of credibility and quality assurance that had made European medtech companies such an attractive prospect for investors, elements of the new regulation have created concerns that the raising of the compliance bar may lead to a shrinking of the pool of medtech companies choosing to pursue their innovation in Europe.
Regarding the changes, the new MDR introduces more stringent clinical requirements and post-marketing surveillance rules. Requirements for clinical trials will be stricter, especially for certain high-risk devices, and manufacturers will have to provide compensation insurance for trial participants, demonstrate a plan for collecting device performance data and submitting reports to regulators, and equip devices with unique identifiers to be logged in an electronic database.
Certain devices will also be reorganised into higher risk categories, necessitating greater and more complex interaction with notified bodies and likely increasing costs for manufacturers. Medical smartphone apps will be especially affected, with many moving from the low-risk class I to the higher-risk designation of class II (or even class III in some cases). Other devices that have not so far been subject to the regulation – such as cosmetic contact lenses – will now come under its auspices, creating challenges for manufacturers that they may be unprepared for and ill-equipped to handle.
These changes will undoubtedly create additional complexity and cost for manufacturers of medical devices. It is possible the new EU regulatory regime will in fact make the route to market in the US through the Food and Drug Administration – which has historically been characterised by longer pathways to approval owing to higher clinical evidence thresholds, but which could be set to change – seem user-friendly by comparison, with European medtech companies and investment moving across the Atlantic.
It is not difficult to envisage the chain of events that would lead to the European market and regulatory environment losing its lustre and medtech innovators preferring to take their businesses to the US instead. Under the MDR, as well as the new demands placed on device manufacturers, notified bodies will also be subject to increased scrutiny, and this is likely to lead to decreased access to those notified bodies for manufacturers, as some will be de-designated for failure to meet the new standards. This, combined with the higher clinical thresholds that many manufacturers will face as their devices are reorganised into higher-risk categories, will lead to delays in obtaining the CE mark, and hence to the launch of products.
Delays in getting new products to market can be fatal. Companies that have followed the traditional path of releasing products in the European market first before targeting wider international growth may find that, if they continue to do so, with the higher bars to clear as a result of the new MDR, they may make themselves less attractive to investors. While the new regulations will create more certainty for buyers of and investors in products brought to market under them, those products will come at a higher price due to the additional investment of time and money involved in getting them to that point.
Medtech companies might, then, see value in moving some or all of their R&D operations out of Europe in pursuit of less complex and costly regulatory environments. But those that do move will have to think very carefully about the impact of their decision on their intellectual property filing strategies. Collaborations between inventors from multiple jurisdictions can cause complications which should be carefully considered to avoid falling foul of some very strict rules. Patent offices are government organisations, after all; the US, for example, exerts very tight control over what it will allow companies to share with other governments.
Many countries require companies to obtain approval before any technologies or processes that are the subject of a patent application may be exported out of the country, for instance. This is often especially the case when the company has not first filed for a patent in the country in which the invention has been developed. Typically, this approval must be given in the form of a ‘foreign filing license’ that has to be granted before the company can file for a patent in other jurisdictions. The specifics of the legislation can differ considerably between countries, though: in India, for instance, patent filing requirements relate not to the place of invention but to the inventor’s resident status. Whatever form they take, the consequences of being found to be in breach of these rules can be severe, and can include having a patent application refused, a patent being presumed invalid, and even penalties such as fines and imprisonment.
As a final (and potentially positive) thought, there is an additional complication, the potential impact of which will be very difficult to predict. Britain is signed up to the new MDR through the “implementation phase” of Brexit, but as it moves closer to exiting the EU, it is worth considering whether Britain may in fact be able to position itself to escape this damaging fate. If Britain were to develop its own regulatory regime, with the aim of reducing arbitrary barriers to market entry for new medical devices, it could establish itself as an attractive destination for manufacturers to make their home as they develop innovations, somewhere between the extremes of the EU and US systems. This could be key to sustaining the health of the UK medtech industry and maintaining levels of investment in it.
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