Presentation to OCRA – March 13th, 2019 – on EU MDR Implementation, at the Allergan Auditorium (Part 3)

 

Economic Operators

 

Most Medical Device companies understand the issues surrounding notified bodies. They have been well documented and are often discussed at MDR events. But I’d like to draw your attention to the multiple economic operators that will be involved with your EU activities.

MDR recognizes a number of different Economic Operators. At its most basic are manufacturer and a distributor.

But if you are a non-EU manufacturer you must engage an EU authorized representative and an importer. Each of these different Economic operators play a different role, and the role needs to be contractually documented.

You, as a non-EU manufacturer could possibly set-up your own subsidiary in Europe and assign the Authorized Representative role and the Importer role to your subsidiary. Or you can choose third parties to perform that role for you.

Above slide shows a non-inclusive list of what is required from each of the Economic operators.

Notice for instance that all parties have to verify the UDI in the EUDAMED database and that all parties need to be able to provide documents proving the conformity of the product. Or that they have to log complaints and forward them up the supply chain.

You may not know however that the MDR holds the Authorized representative jointly and severable liable for whatever goes wrong, and that the authorized representative must have the financial wherewithal to withstand a liability claim.

Understand that this goes somewhat contrary to what you normally expect. Normally you hold people liable for what they can control. In this case however, the EU commission decided to hold people liable for things they do not control.

You can cope with this issue in several ways: for instance, you can add the Authorized Representative to your liability insurance policy, or you can pay for the Authorized Representative’s insurance. Either way, there will be a cost involved.

If you read the MDR you will also notice that the Authorized Representatives (as do the manufacturers) need to have a Person Responsible for Regulatory Compliance at their disposal.

This does not necessarily mean that this person needs to be an employee. This person does however need to have a contractual agreement to provide the services to the AR or manufacturer as needed.

One solution could be to make your subsidiary contractually responsible to provide the authorized representative services. Cover them under your policy and outsource the actual functions assigned to the Authorized Representative to a company that offers those types of authorized representative services. Let me know if you need help with this.

Strategy.

Times of major environmental upheaval are good times to review your strategy. I know it’s a term that is often used and often abused. And often strategy refers to tactics.

But I really do think that companies should learn about the impact of MDR, then call for a time-out and dedicate time to review the existing strategy in view of the changed environment. MDR really affects every part of your business.

Unless you have a clear strategy, it will be hard to make good decision on how to go forward with the switch from MDD to MDR.

For starters, your portfolio management needs to reflect your strategy. You basically have 4 options you can choose:

Phase out now: All Class I products except for Class I measurement, Class I sterilized need to be compliant with MDR May 2020. What will you do?

There are the inevitable cost considerations. Does the decision make sense in view of the chosen strategy?

Keep under MDD, phase out later: Does it make sense to “milk” this product for a few more years? Maybe it helps me stay in touch with customers I need?

Keep under MDD, but convert to MDR later? Can I afford not to switch these products to MDR? Maybe I will sell this division to another manufacturer who can roll the product under their MDR effort?

Which are those products I absolutely have to transfer to MDR before 2020?

It is clear that these are decisions that cannot be taken by the regulatory department alone. These decisions are very clearly business decisions that need the involvement of the entire company.

Your choice of strategy will influence your decisions.

For instance, you may share a certain segment of the market with 2 other competitors. The economics are not good for you. Your share is too small, and you may simply give up.

If your competitors face the same economics, they may make the same decision and none of you will stay in this market and all of you will abandon it.

That may or may not fit your strategy. Maybe a better fit could be found by maneuvering such that your competitors abandon the market because the economics don’t work out. Leaving the entire market for you and making the economics work.

And of course, if you can, you should consider M&A strategies. With MDR coming up, prices of assets that have a hard time complying will be coming down.

Lastly, I want to point out that the MDR applies to everyone. Not just your company, all your competitors as well.

Sometimes you know that you should be doing things for the common good. But you can’t do them because no-one else does them. And doing the right thing sometimes costs money.

You find yourself in a situation where taking the action you think you should be taken inevitably leads to loosing market position.

Think of air pollution. If you run a factory that pollutes the air, you can’t just step back and say you’ll buy that expensive air filtration system that stops pollutants from entering the air. You competitors will continue doing so, placing you at an economic disadvantage. But once the rules apply to everyone, the company that has the edge on preventing air pollution has an opportunity to beat the ones that swear by the old way.

So, I see the same happen with MDR. Companies that can implement the many feedback loops mandated by the EU MDR and take advantage of these new processes, will be at a competitive advantage in the market.

It’s hard to argue against a system where market feedback and real-world data inspires continuous new product development. Look at MDR as the impetus needed to put this system in place and see how you can it work for your company.

Timing.

The MDR was voted and published in May 2017 and will be applied in May 2020.

Notified Bodies could start applying November 2017. Not all of them did – I recently learned of an Italian notified body that applied back in Nov-Dec timeframe with the Italian competent authority- and as you know not all of them will. It is expected that half of them will disappear.

The first notified body designated under MDR was BSI (published in January this year)

EUDAMED is still expected to come on-line in March 2020.

The common standards for medical devices without a medical purpose are expected to be published soon. Not sure when that happens, but it is generally expected to happen in Q4 this year. That will give companies in that field 2 quarters to comply.

It is clear that there is a lot of anxiety. I have met and spoken with several people that are closely associated with the EU Commission. I have met with the US person whose job it is to stay on top of these developments.

Ways are being looked at to postpone some of the mandated implementations. But as the MDR is law, a pure postponement would have to go through parliament which is very unlikely.