Five potential EU regulatory changes impacting the life sciences industry in 2023

A wave of important legislative changes is anticipated in the EU in 2023 making this year one of the biggest for the EU regulatory landscape governing the life sciences industry in recent times. Changes have been spurred by the COVID-19 pandemic, which emphasised the need to urgently modernise outdated EU pharmaceutical law and revise regulatory ambitions in the MedTech sector. In addition, the life sciences industry may be impacted by the introduction of class action mechanisms in the EU and initiatives to regulate the use of artificial intelligence (AI). Some of the current and anticipated proposals will not be adopted in 2023, or even before the end of tenure of the current European Commission in late 2024. However, those proposals that are adopted could have wide-ranging impact.

Regulation of clinical trials

Eight years following its adoption in 2014, the Clinical Trials Regulation 536/2014 (CTR) entered into application on 31 January 2022. The regulation replaces the Clinical Trials Directive (CTD) and the related national implementing legislation of individual EU member states over a transitional period. The CTR introduces a single set of rules for many aspects of clinical trials conducted in the EU rather than the largely national, and often inconsistent, rules created by the CTD. It is hoped that the regulation will contribute to harmonisation of the regulatory framework governing conduct of clinical trials throughout the EU.

The CTR foresees a tiered three-year transitional period established around the following key dates:

• Until 30 January 2023, sponsors had the option to submit new applications for approval of clinical trials in accordance with either the CTD or the CTR
• From 31 January 2023, all new applications for approval of clinical trials must be submitted in accordance with the CTR. Authorisation of the clinical trial, may, however, be obtained later.
• From 31 January 2025, new and ongoing clinical trials in the EU must be conducted in compliance with the CTR.

Entities involved in clinical trials in the EU are required to master the new framework quickly and prepare a strategy for compliance with the CTR that takes account of the transitional provisions.

An opportunity for collaboration may, however, facilitate the transition to the CTR. As a key priority action under the ACT EU initiative, EU regulators plan to establish a multi-stakeholder platform (MSP) in 2023. Its purpose, as mentioned in the related EMA press release, is to foster dialogue between stakeholders and “facilitate the evolution of the clinical research landscape by identifying key advances in clinical trial methods, technology and science, and finding practical solutions to enable and drive change“. A concept paper regarding the MSP, explaining how stakeholders can contribute to the design of the platform, was aimed to be published late 2022 but has been pushed until early 2023. The platform itself is scheduled to kick off in the second quarter of 2023 followed by stakeholder events during the third quarter.

Halting Europe’s essential medicines manufacturing exodus

As a result of the expiry of the first transitional period and MSP initiative, 2023 is likely to be a revealing year for clinical trials in the EU. The suitability of the legal framework of the CTR and the related Clinical Trial Information System to support conduct of clinical trials in the EU, as well as the readiness of entities involved in clinical trials in the EU, may become more apparent.

Extensions of transitional periods for the MedTech industry

On 6 January 2023, the European Commission adopted a proposal to amend the transitional periods provided in Regulation (EU) 2017/745 on medical devices (MDR) and Regulation (EU) 2017/746 on in vitro diagnostic medical devices (IVDR) – the “proposal”.

The proposal aims to prevent medical device shortages in the European economic area (EEA) market by introducing an extension to the transitional periods established in the regulations. The purpose of the extension is to provide medical device manufacturers with more time to bring their devices into conformity with the requirements of the regulations and relieve some of the current pressure faced by notified bodies.

The proposal establishes the following amendments to the transitional provisions of the MDR and IVDR:

• Extension of the period of validity of CE Certificates of Conformity issued in accordance with the Medical Devices Directive (MDD) or the Active Implantable Medical Devices Directive (AIMDD) that were valid on 26 May 2021 and have not been withdrawn by a notified body, based on the product’s risk class
• Extension of the transitional periods for medical devices covered by a CE Certificate of Conformity issued before 26 May 2021 in accordance with the MDD or the AIMDD:
  • for higher risk medical devices (Class III and IIb implantable devices): until 31 December 2027
  • for medium- and low-risk medical devices (other Class IIb devices, Class IIa and certain Class I devices): until 31 December 2028.
• Introduction of a transitional period for Class III custom-made implantable devices until 26 May 2026, provided that an application for a conformity assessment is lodged with a notified body by the medical device manufacturer by 26 May 2024, and a contract with the notified body is signed before 26 September 2024
• Removal of the “sell-off” deadlines established in Article 120.4 of the MDR and Article 110.4 of the IVDR for medical devices and in vitro diagnostic medical devices (IVDs). This means that medical devices and IVDs certified in accordance with the MDD, the AIMDD and the In Vitro Diagnostics Directive before the end of the transitional periods established in the MDR and the IVDR will be allowed to remain on the EEA market.

To benefit from the prolonged transitional periods relating to the MDR, manufacturers will be subject to several cumulative conditions. The impacted devices must not undergo any significant changes in the design or intended purpose and must continue to comply with the requirements of the applicable directives. In addition, the devices must not present an unacceptable risk to patient and user health and safety as established in Articles 94 and 95 of the MDR. Moreover, manufacturers must have started the process of transitioning their devices to the MDR’s requirements by (i) implementing a Quality Management System by 26 May 2024, (ii) lodging a formal application with a notified body for conformity assessment by 26 May 2024 resulting in the signing of the related agreement by 26 September 2024.

The proposal is being considered for adoption by the European Parliament and the Council through an accelerated ordinary legislative procedure. Following publication of the proposal, the European Commission launched an eight-week public consultation. However, the eight-week period was quickly shortened to eight days. The stakeholder consultation resulted in 246 comments and ended on 18 January 2023. The proposal has also been presented to the Working Party on Pharmaceuticals and Medical Devices, the European Economic and Social Committee and the European Committee of the Regions.

On 25 January 2023, the Permanent Representatives Committee of the Council examined the proposal to determine whether it will serve as a mandate for negotiations between the Council and the European Parliament. In parallel, the legislative proposal has been submitted to the European Parliament where it is in the preparatory phase.

The exact date of potential adoption is difficult to predict. The European Parliament and the Council are not subject to any time limit by which they must conclude their respective first reading. However, the Health and Environment Committee coordinators in the European Parliament have decided to cover the Commission’s proposal to amend the MDR in an urgent procedure that means the proposal could be voted on as early as the mid-February plenary session.

Launch of the EU pharmaceutical package

The European Commission plans to commence initiatives relating to the European Pharmaceutical Strategy (strategy) with the publication of the revised EU pharmaceutical package scheduled during the first quarter of 2023. The proposed revisions will form the basis of the future regulation of the pharmaceutical industry in the EU and are anticipated for publication in mid-March.

Key changes are expected to be proposed in relation to the Community Code on medicinal products, the EMA Regulation 726/2004 (the EU’s general pharmaceuticals legislation), the Orphan Regulation 141/2000 and the Pediatric Regulation 1901/2006.

The revised EU pharmaceutical package will be formulated in line with the main objectives of the strategy:

• Ensuring patient access to innovative and affordable medicinal products
• Supporting innovation, including in areas of unmet therapeutic needs
• Improving the security of supply chains, including in periods of crisis
• Adapting to scientific and technological developments
• Reducing excessive regulatory burdens.

Potential areas of legislative change may include differentiated incentives for drug development with potentially lower and more restrictive incentive for orphan medicinal products, reductions of marketing exclusivity periods and the introduction of a conditional data protection system, which may link a company’s intellectual property rights to launch of a medicinal product in all EU member states.  

The proposed revisions are highly anticipated as an opportunity to update and open EU pharmaceutical legislation adopted, on average, about 20 years ago. However, a delicate balance will need to be struck between the need for affordable and accessible medicinal products and the desire to foster innovation and competitiveness in the EU.

Class actions in the EU

The EU Representative Actions Directive (RAD) was adopted on 24 November 2020 and introduces an EU-wide legal framework across all EU member states for groups of consumers to seek collective redress when affected by an infringement of EU law harming the collected interest of consumers.

EU member states had until 25 December 2022 to introduce national legislation allowing groups of EU consumers to launch class actions against traders in every EU member state and a new cross-border mechanism for class actions. The EU member state national legislation will apply from 25 June 2023 and should introduce an effective mechanism for representative actions.

Key provisions and requirements established by the EU RAD that must be implemented by EU member states include:

• Enabling “qualified entities”, generally consumer organisations, to bring representative actions in the EU in the collective interest of consumers, either through domestic representative actions in one EU member state or cross-border representative actions across multiple EU member states:
  • For cross-border actions, the criteria for qualified entities will be harmonised across the EU and stricter than for domestic actions. In particular, cross-border qualified entities must demonstrate at least 12 months’ history of consumer protection, have a non-profit character and be independent.
  • For domestic actions, the criteria for qualified entities will be established at the national level and must be consistent with the objectives of the RAD.
• Qualified entities can seek injunctions, damages and redress from traders for infringement of a wide range of 66 EU laws including legislation governing medical devices, medicinal products, consumer rights, product liability and safety, financial services and data protection.
• To initiate an action, qualified entities need not individually identify all affected consumers. It will be sufficient to describe the group affected by the alleged infringement and the issues of fact and law at stake.
• EU member states may choose to establish an opt-in or opt-out mechanism, or a combination of both for purposes of permitting individuals to join domestic representative actions. Participation in cross-border representative actions will be based on an opt-in mechanism.
• Class actions may be funded through third party funders with an economic interest in the outcome of the proceedings, provided it is not detrimental to the collective interest of consumers and is fully disclosed.
• Punitive damages are excluded from the EU RAD. Recovery is limited to actual loss.
• The EU RAD includes a settlement mechanism whereby courts may invite parties to settle their dispute outside of court.
• Final decisions regarding an infringement in one EU member state can be used as evidence in proceedings against the same trader for the same infringement in other EU member states.
• A “loser pays” principle, whereby the losing party of a representative action will be required to reimburse the other party’s costs. Individual consumers will not, however, be subject to this principle unless they are found to have deliberately or negligently increased costs.

The EU RAD represents a major change within the EU by introducing an EU-wide mechanism allowing consumers to take collective action against traders in relation to a broad range of consumer and products legislation. Only a very limited number of EU member states already had similar class actions mechanisms.

As a result of the EU RAD and related national implementing legislation, certain businesses may face an increased risk of litigation in the EU. The risk of litigation may also be more threatening given the possibility of facing consumer organisations having amassed claims throughout the EU and third-party funding of class actions. Record amounts have reportedly been set aside for class action funding in the EU in 2023. Moreover, distinctive regimes across EU member states implementing opt-in or opt-out mechanisms for purposes of bringing domestic representative actions and the possibility to rely on decisions in one EU member state as evidence in equivalent proceedings in another EU member state may result in class action forum shopping across the EU.

Initiatives towards to the regulation of Artificial Intelligence (AI)

As part of an EU strategy to regulate AI, the European Commission has proposed a novel regulatory framework to govern AI. The proposed framework is composed of a Regulation establishing harmonised rules on AI (AI act) and a Directive adapting non-contractual civil liability rules to AI (AI Liability Directive).

As currently defined in the proposed framework, AI refers to software developed with one or more techniques that can, for a given set of human-defined objectives, generate outputs such as content, predictions, recommendations, or decisions influencing the environments they interact with. This definition would encompass a broad range of technologies and products, including many medical devices incorporating software.

The requirements included within the proposed AI Act draw inspiration from the regulation of medical devices and data privacy. Key features of the proposed AI Act include:

• Broad material and territorial scopes in light of the definition of AI and the extension of obligations to providers and users based outside of the EU
• A risk-based classification system for determining requirements applicable to AI systems including:
  • Prohibited AI practices characterised as presenting an “unacceptable risk”, such as AI systems that deploy subliminal techniques beyond a person’s consciousness, exploit the vulnerability of special group of persons such as children, enable social scoring by governments, or allow live remote biometric identification in publicly accessible spaces used for law enforcement purposes unless those systems fall within the scope of the limited exceptions provided by the draft regulation 
  • “High-risk” AI systems, such as AI systems performing a safety function in relation to certain products including medical devices that would be subject to certification procedures and require a CE mark to be placed on the EU market. A demanding set of requirements relating to data governance, record keeping, transparency, accuracy and security would need to be fulfilled prior to affixing the CE mark.
  • Additional requirements for high-risk AI systems including obligations relating to registration, post-market surveillance, the implementation of human oversight, and incident reporting
  • AI systems creating “limited or minimal risks”, such as AI systems intended to interact with natural persons, that would be subject to transparency requirements similar to those established by the GDPR. These include notification obligations regarding the existence of the system and the use of personal data for certain purposes.
  • Providers of limited or minimal risk AI systems would be encouraged to adhere to voluntary codes of conduct reflecting the requirements that apply to high-risk AI systems and additional requirements relating to sustainability, accessibility and diversity in development teams, for example.
• Sanctions for non-compliance which could reach fines up to €30 million or six percent of global annual turnover
• Enforcement would be managed at EU member state level with an additional cooperation mechanism at EU level through the establishment of a European Artificial Intelligence Board.

In light of the growing use of AI components in medical technology, the current proposal for the AI Act has given rise to discussions relating to the co-existence of this Act with the existing legislative framework governing medical devices in the EU.

In particular, the MedTech industry has raised concerns of potential misalignment and duplication of provisions between the AI Act and the MDR or IVDR. In accordance with the risk-classification system of the proposed AI Act, most medical device software would be classified as a high-risk AI system. However, the risk classification system of the proposed AI Act is not aligned with the risk classification system established in the MDR or IVDR. This may result in medical devices being subject to the highest risk system under the AI Act while being classified in a lower risk class in accordance with the MDR or IVDR. Moreover, manufacturers of medical device software could be required to undergo certification procedures and comply with post-market surveillance requirements in accordance with the requirements of the AI Act and those of the MDR or IVDR.

These circumstances may increase the complexity of placing medical devices software on the EU market, as well as the related administrative and financial burden. However, potential impacts of the regulation of AI in the EU on the MedTech industry or the attractiveness of the EU market will depend to some extent on the final version of the AI Act that is adopted.