Finally! Another post on this blog. You would think that I would write a lot on a blog like this just before the date of application of the MDR next month, right? Well, I did – just not on the blog but I was working hard to finish my book on the MDR and IVDR before the date of application of the MDR – see below for more detail. Also, I was and remain overwhelmed with last minute advice requests about the MDR which is about to become applicable next month.
And in the end not even that many new or surprising things happened over the last months. Unsurprisingly, the date of application of the MDR was not moved again, so the date of application is really next month, and we will need to work with what we’ve got.
MDR applicable next month
What weird times right? We’ve not been at the point of being able to say that the MDR would be applicable next month so far – less than 50 days from now. Last year the date of application was moved just a little before we were able to say ‘next month’, but no such luck this year (as I’ve been predicting) so it is happening for real.
MDR roll-out has been happening slowly and still not so surely, see the latest version of the Rolling Plan. Still no harmonised standards, still no Common Specifications other than SUD reprocessing, etc. but rather a lot of cans being kicked own the road to the next quarter. Nothing out of the ordinary there.
Eudamed’s actor module is up on a voluntary basis for some time now, since December 2020. I have been able to play around with it and have been able to see that the promises around personal data protection are definitely not met. If you want the (mobile) phone number of a PRRC for a given manufacturer or importer, scraping it out of Eudamed is just way too easy. If I were a recruiter in the devices industry or looking to hire my competitor’s PRRC, this is where I’d look. If I were a manufacturer, I’d think a bit harder about creating a firstname.lastname@example.org email address and not having them put in their mobile phone number, for example.
The transitional regime of the MDR still keeps causing problems for many companies, and this will increase over the next months. On the one hand because it is truly kind of complex, on the other hand because companies have often not been planning ahead very well and are now finding that that have truly and irreversibly painted themselves in a corner.
And then there is of course the unproductive situation that some member states now allow their notified bodies to do remote audits for the MDR (e.g. Netherlands) and some do not (e.g. Germany). This shows how far we still are from an EU Health Union. Come on, if member states can’t even agree on this, how should they face the even bigger challenges that we will no doubt face down the road? My true European heart breaks in face of this pointless divergence.
Another problem is that (I am finding) the economic operator regime and the transitional regime in the MDR are still very badly understood by many economic operators, which leads to some specific problems in M&A.
A large part of the issues with economic operators come from companies not understanding the concepts of ‘placing on the market’ and ‘placing on the market’. This is the result of simply not reading the Blue Guide. “Does an importer need to physically touch the products?” – no, it says so clearly in the Blue Guide. “Does an importer need to own the products?” – it says so clearly in the Blue Guide. I’ll happily trade advice for money because that’s sort of my business model as lawyer, but you can really help yourself as well and I love more complex questions than this. So dare to be wise and read the Blue Guide.
Other concepts that companies do not seem to understand is that economic operators under the MDR and IVDR cannot be appointed (except for the authorised representative, who is mandated). The MDR and IVDR define roles, and company fits this role or it does not, regardless of how much appointing you do. Unless the appointment itself changes the fact pattern in a way that the company fits the economic operator definition concerned (e.g. importer by changing the supply chain in a way that that the entity that a manufacturer would like to be importer also becomes importer.).
How does it work if the manufacturer ships directly to customers in the Union? This is more tricky, and a business model of many companies. Companies sell direct to the Union customer and deliver the device via a fullfilment service provider in the Union. This is not a clearcut scenario under the MDR or IVDR, but it is clear cut under the Market Surveillance Regulation (Regulation 1020/2019), which is applicable as of 16 July 2021 and supplements the MDR and IVDR in terms of market surveillance on the points that the MDR and the IVDR do not address (like the above example). It requires that for supply scenarios in which there is no importer in the Union another economic operator must take responsibility (in our example the fulfillment service provider) for the product in order for the product to be placed on the market lawfully. In other words, happy times negotiating with your fulfillment service provider or other economic operators, because otherwise they cannot place the products on the market lawfully. And there is more, as I have explained before.
One of the biggest favors you can do yourself is under the transitional regime in article 120 (3) MDR. Why? Well, it’s complex and many others in the devices field don’t understand it either. Like they say: in the land of the blind the one-eyed man/woman is absolute monarch. The transitional regime still holds many interesting questions, mostly as regards obligations relating to legacy devices (do articles 6, 7 and 11 to 18, 22 and 23 MDR (distance sales, claims, importers, distributors, PRRC, repacking, reprocessing, implant card, systems/procedure packs and parts/components) apply to them or not? – I think so, but there are others that disagree), and many interesting surprises that can really ruin your day as a company (see below for example under Mergers and acquistions). More detail on this subject in a podcast with Gert Bos and me via Qserve.
Also interesting to keep in mind that the only really detailed guidance we have for the transitional regime comes from the CAMD, which incidentally has no formal role under the MDR and IVDR and no formal competence to issue MDR or IVDR guidance. Only the MDCG has this role under the MDR (see article 105), but the MDCG never issued such guidance.
Many countries that award a special status to the CE mark in their national market access procedures have difficulties understanding the transitional regime as well. Quite a few of these countries start to treat MDR certificates different and to refuse legacy devices certificates as a basis for registration locally. You may claim that your legacy certificate is just as valid as an MDR certificate, to which you will get the reply that it’s not just as good for outside of Union purposes. And outside the Union not as valid, because that is not a matter of EU law but of local law. The Commission is said to have done a roadshow at some point to explain this, but it has not convinced everybody, that’s for sure.
Mergers and acquisitions
One area where all the problems with the transitional regime and economic operators come together to create a complex and tricky stew that can invalidate the underlying assumptions for any M&A deal if poorly understood.
One the most wide-spread misunderstandings is that you can transfer CE marks, because you cannot. Either you transfer shares in the entity that has a CE certificate (share transaction), or you apply for a new CE certificate with the same or another notified body (asset transaction). Now this is where it gets interesting when you structure a transaction in a way that a new CE certificate must be issued to a new legal entity in an asset deal or a deal that is part asset deal. We know from Team NB that most of the manufacturers have gone all out in MDD and AIMDD certificates that will expire somewhere in the grace period between 26 May 2021 and 26 May 2024 in reliance on article 120 (3) MDR, with most expiring right at the back of this period:
But what has two thumbs and cannot be reissued after a significant change during the grace period? Indeed, your (AI)MDD certificate that has undergone a significant change because of the way you implemented the transaction or because you thought that you could transfer the CE mark as a asset (which you cannot) and then needed to have a new one, which cannot be issued during the grace period. You are stuck with needing to obtain an MDR certificate instead, which will cost you at least a year even if you are able to get on board at a notified body during this incredibly busy time. If you were relying on the company staying on the market during that period, the joke’s on you and your acquistion’s financial model has completely changed for the worse. And it was completely avoidable!
But there are other ways in which an M&A transaction as described in the management presentation can result in a siginificant change, even if you do not try to transfer a CE mark (because you cannot). The management presentation will often state things these days that are not possible because they would result in a significant change if they were to take place. In other words, management presentations occassionally claim things that cannot be true for the EU market, and should be written more carefully for companies relying on (AI)MDD certificates for (part of) the grace period.
For example, say I want to sell a medical software company that has several software medical devices, some on a CE certificate as class IIa or IIb, and some self certified class I. The company has kicked the MDR can all the way down the road with CE certificates expiring on 25 May 2024, has a plan to have MDR CE certificates in Q1 2024 and has a valid declaration of conformity for the self declared software, allowing this to also benefit maximally from the grace period. The management presentation states that the company will expand its software functionalities signifcantly for the class IIa and IIb software in the next two years to capture a specific service market before the competitors do. The company will also will port its self declared software to other operating systems. Would you believe this if you read it? You should at the very least have some very big question marks as to whether this is even possible. All of these plans will most likely consitute significant changes in the meaning of MDCG 2020-3 on significant changes. Implementing these changes will invalidate the company’s CE certificate(s) and the declaration of conformity for the self declared software, necessitating the company to have CE marks under the MDR well before it planned to during the busiest period for notified bodies. In other words: if the company implements this commerical strategy, it will not have access to the Union market for considerable time, while it scrambles to make its notified body issue the MDR CE certificates earlier than planned (which it is under no obligation to do and will likely not have time for). Thus, the commercial strategy in the Union depends on regulatory understanding of the constraints posed by an MDR strategy that relies heavily on the grace period. So would you now still pay the same amount for this company? Probably not, because now you understand why this company is actually overpriced and the management presentation presenting a strategy that the company will not be able to execute.
So, this is how you should read management presentations of devices companies with CE marks these days. Also, where possible: don’t rely on ‘transfers’ or need to re-issue (AI)MDD certificates in the name of a new manufacturer during the grace period – because you cannot. This should impact the content of management presentations and structuring of M&A transactions in the medical device sector. If it does not, now you know how to read them.
For wider context on M&A and MDR/IVDR transitional regime, check out the Medical Devices Made Easy podcast, which will soon feature a podcast in which Monir and I discuss M&A and transitional regime.
Brexit, Swixit and Turkxit
We are in a Union for medical devices that shrinks faster than it grows these days. It makes my European heart sad. For context, see my recent presentation at the Select Sciences webinar about commercial readiness for the IVDR:
Swixit is happening next month. It can now safely be said that Switzerland and the EU will not be aligned on the Institutional Framework Agreement before the date of application, which mean that Switzerland is out of the Union for the purpose of the MDR next month. Swiss Medtech has made a convenient overview of what this means and recommends that everyone plan for a Swixit.
Out of the MDR Union, but not yet out of the IVDR Union – the transitional regime in the MRA keeps covering the last remaining year of the IVDD until 26 May 2022. If the IFA has not been signed by May 2022, we will have another Swixit but this time for IVDs as well.
Things are not going well between the EU and Turkey, with as most recent sad events sofagate and Turkey canceling the Istanbul Convention about domestic violence and equality for women. The relationship with Turkey is getting less and less stable, more defined by political opportunism and Turkey is clearly on a path of less and less endorsing European values, which makes it harder and harder to have it as part of the Union market. Turkxit looks exactly like Swixit from a legal perspective: by 26 May 2021 general medical devices exit, by 26 May 2022 IVDs exit. Plan for Turkxit to happen too, as it is a realistic scenario.
Brexit happened in the mean time. Yet, I still see many companies that have not understood that it actually means something when a country leaves the EU – it’s back to WTO level relationships. It means a lot of extra work to access this much smaller market, having to complete a lot more formalities to also be on the market in the UK, essentially a duplication of compliance infrastructure with associated costs. It means new trouble in Northern Ireland. That’s what Brexiteers would call progress.
IVDR applicable sooner than you think – you may already be too late for a timely CE mark
Companies with IVDs are waking up to the fact that the IVDR is on the horizon. This is sad, because many are too late already to get on board with a notified body in order to obtain a timely certification under the IVDR. Although this has been more than made clear you would think, companies still don’t seem to understand the quantum leap that people have been warned for for a couple of years now. The IVDR does not grandfather and does not contain the additional options for grace period that the MDR has been amended for end 2019. So if you have a currently self-certified IVDD IVD that is not class A under the IVDR, you must have a CE certificated under the IVDR by 26 May 2022. If you are going to start this process only now, you are most likely already going to miss that deadline. Well, it’s only core business as I routinely say to companies. Why make timely plans for effective market access in one of the biggest markets in the world, right?
For IVDRs we did receive some guidance on transitional provisions for class D devices (MDCG 2021-4), which answers the usual questions that you get if the roll-out of a new regulatory system is severely delayed but the system will still be applicable. In this case it’s about the delayed IVDR expert panels and reference laboratories needed for the approval of class D devices.
An important point made in the guidance is the confirmation that
“During the transition period, as long as no EURL has yet been designated for that specific device, category or group of device, the notified bodies may accept applications for a class D IVD and issue the corresponding certificate(s).”
When the class D device is re-certified after expiry of the initial certificate the reference lab procedure needs to followed. While this looks helpful to get class D devices on the market, it creates a big what if when the reference laboratory does not agree with the work of the notified body for the initial certification cycle.
So what have I been been writing if I haven’t been writing on this blog? I have been writing my ‘Enriched MDR and IVDR’ book, which I started in 2017. It is now good enough for publication and has gone to layout. I am self-publishing it electronically as of half May 2021 (also next month, conveniently just before the date of application of the MDR), so watch this space. It will be available as a watermarked pdf and ePub format. I’m still exploring options for distribution platforms and would welcome tips from other self published authors. Further details will be announced on this blog and I’m not taking any pre-orders for the moment.
The book is an enriched version of the MDR and IVDR as per the state of art end of March 2021, meaning that it consists of an introductory chapter discussing the MDR and IVDR generally, a mostly annotated MDR (clause by clause annotation of most articles and recitals, which was a lot of work) and a mainly annotated IVDR (clause by clause and recitals too, but with a lot of references back to the MDR because there is so much overlap).
Here is a sneak peak of two of the proofing pages for the lay-out concept (don’t mind the typos please – they’re proofing pages):
The book also contains a number of convenient tables to show overlaps between the MDR and the IVDR, the MDR/IVDR clincal investigation regime and the medicines clinical trial regulation etc. It contains many flowcharts (I love flowcharts) and graphics. And it can be yours for the price of just a couple of ISO or IEC standards (the exact number depending on where you buy them, as the price can differ considerably – I say give it up for the Estonian Centre for Standardisation and Accreditation that will never overcharge you for a European harmonised standard).
The second edition, which I’m planning for Q1 2022 now, will feature more IVDR content and of course additional MDR content as we are about to learn a lot about the MDR over the rest of 2021 when it will be applied in practice.