Members of Sidley’s Global Life Sciences team recently reviewed litigation, policy, regulatory and enforcement trends on several continents. We recommend that law and policy departments consider the following actions to manage risks and take advantage of business opportunities in 2016.
- Embrace new models for drug pricing and accelerate efforts to demonstrate value. New pricing regimes in the EU and China are heavily focused on comparative effectiveness, while the U.S. will also see new cost-constraining initiatives integrated with ongoing health reform activities and possible pricing legislation. Companies should respond by being transparent regarding pricing of new and existing products, preparing for aggressive negotiation over discounts and utilization management, and engaging patients and providers early in drug value and pricing discussions.
- Implement privacy safeguards for clinical trial data transferred from the EU. The EU Court of Justice recently dropped a bombshell by invalidating the Safe Harbor agreement under which U.S. companies could receive personal data from the EU. A new agreement is under discussion, but companies face enforcement if they do not implement alternatives for data transfers by the end of January, such as consent by individuals, data transfer agreements or adoption of an EU-approved data protection policy and program.
- Invest in crossover financing rounds of potential acquisition targets. These rounds are dominated by institutional investors looking to dollar cost average and enhance their allocation for future initial public offerings. By investing at this early stage, companies can get a toehold and insight on technology that they may want to see further derisked before acquiring in full while also securing a potential inside track to an acquisition.
- Reevaluate product acquisition and manufacturing strategies in China. Ongoing reform of the drug review and approval regime will result in different regulatory pathways for locally made innovative products versus products manufactured outside China. The new regime is not yet finalized but will likely provide new opportunities for global companies doing business in China to benefit by acquiring local companies, rearranging product filing strategies and optimizing local manufacturing capacities.
- Prepare for unannounced device audits and stricter vigilance scrutiny in the EU. Notified Bodies remain under pressure to apply strict requirements for device certification and audits; Member States are also heavily scrutinizing device vigilance. Device manufacturers should prepare for surprise audits, including of critical subcontractors and suppliers. They should also review vigilance reporting practices, focusing on reportability thresholds and the robustness of trend reporting.
- Audit data integrity in manufacturing and clinical trial operations. Scrutiny of data integrity will be a global focus for 2016 and beyond, as demonstrated by international good manufacturing practice (GMP) inspections focused on data integrity and the first-ever active enforcement by the China Food and Drug Administration (FDA) to ensure data integrity in clinical trials. Companies should get ahead by identifying and remediating systemic gaps, including software deficiencies, that could permit intentional or unintentional breaches of data integrity.
- Assess product liability risks arising from biosimilar regulation. Following approval of the first U.S. biosimilar in early 2015, unanswered questions about naming and labeling present product liability issues. One relates to the lack of a clear requirement for sameness of labeling for a biosimilar and its branded counterpart, which creates potential liability for failing to provide sufficient safety information about the biosimilar. Therefore, companies should assess the need for product-specific information in biosimilar labeling even when FDA does not deem it necessary.
- Avoid getting bound by transactional documents intended to be nonbinding. Recent cases highlight the risk that terms in letters of intent or heads of terms may be deemed legally binding unless the parties state otherwise in clear invalidating provisions. Because companies typically want most terms in these documents to be nonbinding, they should include invalidating language where appropriate. Similarly, it is important to avoid agreements to agree and agreements to negotiate in good faith unless additional provisions clarify the parties’ intent regarding such clauses.
- Update anti-corruption policies and controls. Anti-corruption enforcement is changing across the globe. Many countries with a traditionally lax enforcement record, including Brazil, China and Japan, are now playing an active role, and the first Deferred Prosecution Agreement was recently approved under UK law, which will likely serve as a template for future enforcement. These developments highlight the need for companies to identify country-specific enforcement risks in each region where they are doing business and assure that their policies sufficiently address those risks.
- Lock down GMP compliance of contract manufacturers and suppliers. Regulators are closely scrutinizing contract manufacturing organizations and active pharmaceutical ingredient suppliers, particularly in China and India. Enforcement against one of these partners can have disastrous consequences, including agency refusal to approve marketing applications for affected products. Assuring their compliance is therefore critical for protecting your product pipeline.
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