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2011 raps presentation subcontractors software social media fox rev 2
2011 raps presentation subcontractors software social media fox rev 2
2011 raps presentation subcontractors software social media fox rev 2
2011 raps presentation subcontractors software social media fox rev 2
2011 raps presentation subcontractors software social media fox rev 2
2011 raps presentation subcontractors software social media fox rev 2
2011 raps presentation subcontractors software social media fox rev 2
2011 raps presentation subcontractors software social media fox rev 2
2011 raps presentation subcontractors software social media fox rev 2
2011 raps presentation subcontractors software social media fox rev 2
2011 raps presentation subcontractors software social media fox rev 2
2011 raps presentation subcontractors software social media fox rev 2
2011 raps presentation subcontractors software social media fox rev 2
2011 raps presentation subcontractors software social media fox rev 2
2011 raps presentation subcontractors software social media fox rev 2
2011 raps presentation subcontractors software social media fox rev 2
2011 raps presentation subcontractors software social media fox rev 2
2011 raps presentation subcontractors software social media fox rev 2
2011 raps presentation subcontractors software social media fox rev 2
2011 raps presentation subcontractors software social media fox rev 2
2011 raps presentation subcontractors software social media fox rev 2
2011 raps presentation subcontractors software social media fox rev 2
2011 raps presentation subcontractors software social media fox rev 2
2011 raps presentation subcontractors software social media fox rev 2
2011 raps presentation subcontractors software social media fox rev 2
2011 raps presentation subcontractors software social media fox rev 2
2011 raps presentation subcontractors software social media fox rev 2
2011 raps presentation subcontractors software social media fox rev 2
2011 raps presentation subcontractors software social media fox rev 2
2011 raps presentation subcontractors software social media fox rev 2
2011 raps presentation subcontractors software social media fox rev 2
2011 raps presentation subcontractors software social media fox rev 2
2011 raps presentation subcontractors software social media fox rev 2
2011 raps presentation subcontractors software social media fox rev 2
2011 raps presentation subcontractors software social media fox rev 2
2011 raps presentation subcontractors software social media fox rev 2
2011 raps presentation subcontractors software social media fox rev 2
2011 raps presentation subcontractors software social media fox rev 2
2011 raps presentation subcontractors software social media fox rev 2
2011 raps presentation subcontractors software social media fox rev 2
2011 raps presentation subcontractors software social media fox rev 2
2011 raps presentation subcontractors software social media fox rev 2
2011 raps presentation subcontractors software social media fox rev 2
2011 raps presentation subcontractors software social media fox rev 2
2011 raps presentation subcontractors software social media fox rev 2
2011 raps presentation subcontractors software social media fox rev 2
2011 raps presentation subcontractors software social media fox rev 2
2011 raps presentation subcontractors software social media fox rev 2
2011 raps presentation subcontractors software social media fox rev 2
2011 raps presentation subcontractors software social media fox rev 2
2011 raps presentation subcontractors software social media fox rev 2
2011 raps presentation subcontractors software social media fox rev 2
2011 raps presentation subcontractors software social media fox rev 2
2011 raps presentation subcontractors software social media fox rev 2
2011 raps presentation subcontractors software social media fox rev 2
2011 raps presentation subcontractors software social media fox rev 2
2011 raps presentation subcontractors software social media fox rev 2
2011 raps presentation subcontractors software social media fox rev 2
2011 raps presentation subcontractors software social media fox rev 2
2011 raps presentation subcontractors software social media fox rev 2
2011 raps presentation subcontractors software social media fox rev 2
2011 raps presentation subcontractors software social media fox rev 2
2011 raps presentation subcontractors software social media fox rev 2
2011 raps presentation subcontractors software social media fox rev 2
2011 raps presentation subcontractors software social media fox rev 2
2011 raps presentation subcontractors software social media fox rev 2
2011 raps presentation subcontractors software social media fox rev 2
2011 raps presentation subcontractors software social media fox rev 2
2011 raps presentation subcontractors software social media fox rev 2
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2011 raps presentation subcontractors software social media fox rev 2

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Interactive case based session presentation on US and EU medical devices law from the RAPS regulatory convergence 2011 in Indianapolis

Interactive case based session presentation on US and EU medical devices law from the RAPS regulatory convergence 2011 in Indianapolis

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  • 1. Software, social media, and subcontracting Interactive case-based medical device session Tracey Fox (GE Healthcare) Erik Vollebregt (Axon Lawyers)
  • 2. Agenda <ul><li>Approach </li></ul><ul><ul><li>Brief introduction on the subject from US and EU angle </li></ul></ul><ul><ul><li>Discussion of specific problem cases </li></ul></ul><ul><li>Subjects </li></ul><ul><ul><li>Software </li></ul></ul><ul><ul><li>Social Media </li></ul></ul><ul><ul><li>Subcontracting </li></ul></ul>
  • 3. Software <ul><li>Main themes </li></ul><ul><ul><li>When is software regulated as a device? </li></ul></ul><ul><ul><li>Mobile and internet: handhelds, apps, websites </li></ul></ul>
  • 4. Software: Developments <ul><li>Decision supporting knowledge systems </li></ul><ul><ul><li>E.g. interpretation of diagnostic results </li></ul></ul><ul><li>Off-the-shelf medical devices software </li></ul><ul><ul><li>E.g. to be incorporated into other medical devices software </li></ul></ul><ul><li>eHealth - new paradigms, new problems </li></ul><ul><ul><li>I nteroperablity and network connectivity </li></ul></ul>
  • 5. Software: US <ul><li>Guidance for the Content of Premarket Submissions for Software Contained in Medical Devices – May 11, 2005, supersedes May 29, 1998 </li></ul><ul><ul><li>For the purposes of this document, we refer to devices that contain one or more software components, parts, or accessories, or are composed solely of software as “ software devices ,” including: </li></ul></ul><ul><ul><ul><li>firmware and other means for software-based control of medical devices </li></ul></ul></ul><ul><ul><ul><li>stand-alone software applications </li></ul></ul></ul><ul><ul><ul><li>software intended for installation in general-purpose computers </li></ul></ul></ul><ul><ul><ul><li>dedicated hardware/software medical devices. </li></ul></ul></ul><ul><ul><ul><li>accessories to medical devices when those accessories contain or are composed of software. </li></ul></ul></ul><ul><ul><li>This guidance applies to software devices regardless of the means by which the software is delivered to the end user, whether factory-installed, installed by a third-party vendor, or field-installed or -upgraded. </li></ul></ul><ul><ul><li>Software not covered by this guidance includes software designed for manufacturing or other process-control functions but not intended for use as a device. For further information or to clarify the requirements for your device, please contact the responsible FDA review division. </li></ul></ul>
  • 6. Software: US <ul><li>Guidance for Industry, FDA Reviewers and Compliance on Off-The-Shelf Software Use in Medical Devices – Sept 9, 1999 </li></ul><ul><ul><li>The purpose of this document is to describe the information that generally should be provided in a medical device application involving OTS software. </li></ul></ul>
  • 7. Software: US <ul><li>Draft Guidance for Industry and Food and Drug Administration Staff - Mobile Medical Applications – July 21, 2011 </li></ul><ul><li>At this time, the FDA intends to apply its regulatory requirements solely to a subset of mobile apps that it is calling mobile medical applications or &quot;mobile medical apps. “ </li></ul><ul><li>a &quot;mobile medical app&quot; is a mobile app that meets the definition of &quot;device&quot; in section 201(h) of the Federal Food, Drug, and Cosmetic Act (FD&C Act) 4 ; and either: </li></ul><ul><ul><li>is used as an accessory to a regulated medical device; or </li></ul></ul><ul><ul><li>transforms a mobile platform into a regulated medical device. </li></ul></ul>
  • 8. Software: EU <ul><li>Software in and as medical device </li></ul><ul><ul><li>Used alone or in combination with a medical device </li></ul></ul><ul><ul><ul><li>Including the software intended by its manufacturer to be used specifically for diagnostic and/or therapeutic purposes and necessary for its proper application </li></ul></ul></ul><ul><ul><li>Software for general purposes used in a healthcare setting is not a medical device (recital 6) </li></ul></ul><ul><ul><li>Supporting tools for device fall within the scope of ‘ medical device ’ (definition of ‘ accessory ’ ) </li></ul></ul>
  • 9. Software:EU <ul><li>Software is a medical device if one or more of the following four apply: </li></ul><ul><ul><li>Purpose of the software is explicitly mentioned in a Medical Device Directive </li></ul></ul><ul><ul><ul><li>e.g. diagnosis, monitoring, treatment, alleviation ( e.g. automated anesthetizer </li></ul></ul></ul><ul><ul><li>Software is intended for use by patients to diagnose or treat a physical or mental condition or disease </li></ul></ul>
  • 10. Software: EU <ul><li>Medical devices if one or more of the following four apply (continued): </li></ul><ul><ul><li>Purpose of software is to control or influence functioning of a medical device </li></ul></ul><ul><ul><li>Software is intended for analysis of patient data generated by a medical device with a view towards diagnosis and monitoring </li></ul></ul><ul><ul><ul><li>e.g. a software for diagnosis of brain scans for Alzheimer </li></ul></ul></ul>
  • 11. Software: EU <ul><li>As what should software be CE marked? (three possibilities) </li></ul><ul><ul><li>A medical device or an accessory to a medical device </li></ul></ul><ul><ul><ul><li>must be CE-marked as such </li></ul></ul></ul><ul><ul><ul><li>Example of accessory : software used for programming and control of pacemakers </li></ul></ul></ul><ul><ul><li>A component and integral part of a medical device </li></ul></ul><ul><ul><ul><li>cannot be CE-marked in its own right, but is covered by the conformity assessment of the medical device of which it forms a part </li></ul></ul></ul><ul><ul><ul><li>example : firmware of a ventilator or infusion pump </li></ul></ul></ul>
  • 12. Software: EU <ul><li>As what should software be CE marked? (three possibilities) </li></ul><ul><ul><li>None of the foregoing applies, then </li></ul></ul><ul><ul><ul><li>not covered by the Medical Devices Directives </li></ul></ul></ul><ul><ul><ul><li>example : overall software design tools (that are not accessories), administrative software for patient handling </li></ul></ul></ul><ul><ul><ul><ul><li>RFID reader linked to patient record </li></ul></ul></ul></ul>
  • 13. Software: EU <ul><li>Software decision tree as per EU draft MEDDEV on standalone software under MDD </li></ul><ul><li>Caution : final version may differ </li></ul>
  • 14. Software: Cases
  • 15. Case: Supplier of Software Component <ul><li>Diagnostic device (scanner) incorporates third party software </li></ul><ul><li>The GUI and the database management software was not supplied exclusively to the device company or to the medical device sector </li></ul><ul><li>The software company updated the GUI and the database management and deployed automatically via the internet </li></ul><ul><li>No clinical investigations were undertaken in respect of the upgrade/update </li></ul>
  • 16. Case: Supplier of Software Component <ul><li>The scanner no longer complied with the CE Mark </li></ul><ul><li>Potential Consequences </li></ul><ul><ul><li>Product Recall </li></ul></ul><ul><ul><li>Suspension of Sales while new CE Mark obtained </li></ul></ul><ul><ul><li>Loss of Insurance cover </li></ul></ul><ul><li>The device company did not have the right to: </li></ul><ul><ul><li>copy or modify the software; </li></ul></ul><ul><ul><li>reinstate previous versions of the software; </li></ul></ul><ul><ul><li>be notified of the upgrade; or </li></ul></ul><ul><ul><li>prevent the upgrade being deployed </li></ul></ul>
  • 17. Social Media: The Revolution
  • 18. Social media <ul><li>Main themes </li></ul><ul><ul><li>Obligation on manufacturer to monitor social media for AE reporting / PMS purposes? </li></ul></ul><ul><ul><li>What marketing is a manufacturer allowed to do? </li></ul></ul><ul><ul><li>Can third party social media use constitute (prohibited) advertising? </li></ul></ul>
  • 19. Social Media: US <ul><li>FDA held a hearing on use of Social Media in Advertising in November 2009 and planned to issue guidance in 2011 </li></ul><ul><li>Continues to take enforcement action against online promotional activities (e.g., Warning Letters & Notices of Violation) </li></ul><ul><li>FDA ’s apparent motto for social media : “It’s the message not the medium” (i.e. if a company cannot say something in its printed material, the same applies to websites, micro-blogs, blogs, etc.) </li></ul>
  • 20. Social Media: US <ul><li>April 2009 “Sponsored Link” warning letters to 14 pharmaceutical manufacturers utilizing Google ads </li></ul><ul><li>A sponsored link is a short ad with a web link to a product </li></ul><ul><li>Links on Google Website Searches included not only the drug name, but also a rough indication of what the drug is for, and a link to the web site but had no risk information, as required by prescription drug rules </li></ul><ul><li>Lesson Learned = Space restrictions in online media do not excuse: </li></ul><ul><ul><li>Lack of risk information Failure to adequately communicate the approved indication </li></ul></ul><ul><ul><li>Failure to include the established name </li></ul></ul><ul><li>Many drug manufacturers had previously assumed that such risk information info could be provided within “one-click” on the internet </li></ul>
  • 21. Social Media: US <ul><li>July 2010 Warning Letter </li></ul><ul><li>Facebook share widget </li></ul><ul><ul><li>Omission of Risk Information </li></ul></ul><ul><ul><li>Broadening of Indications </li></ul></ul><ul><ul><li>Unsubstantiated superiority claims/ Overstatement of efficacy </li></ul></ul>
  • 22. Social Media: EU <ul><li>No harmonised pan-EU policy or requirements for social media, so member state competence </li></ul><ul><ul><li>Use of social media by manufacturers themselves will often be perceived as advertising (e.g. under German HWG) </li></ul></ul><ul><li>Recent research shows that medtech companies in EU use social media mainly for corporate communications to maintain image </li></ul><ul><li>Manufacturer statements in social media can have consequences for intended purpose of device and consequently CE marking (off-label problems), because intended purpose is also determined based on promotional materials (article 1 (2) (g) MDD) </li></ul>
  • 23. Social Media: EU <ul><li>Social media use by third parties may constitute advertising </li></ul><ul><ul><li>No EU case law re devices, Damgaard case (EU Court C-421/07) for drugs: “dissemination by a third party of information about a [drug] may be regarded as advertising […], even though the third party in question is acting on his own initiative and completely independently, de jure and de facto, of the manufacturer and the seller of such a [drug].” </li></ul></ul><ul><ul><li>Third parties may include journalists and patient groups </li></ul></ul><ul><li>Manufacturer cannot get away with label compliant information </li></ul><ul><ul><li>Novo Nordisk case about drugs (EU court C-249/09): depends on the context if SmPC compliant information is advertising or not </li></ul></ul>
  • 24. Social media: EU <ul><li>EU PMS obligations are both active and passive </li></ul><ul><ul><li>Active : manufacturer to institute and keep up to date a systematic procedure to review experience gained from devices in the post-production phase </li></ul></ul><ul><ul><ul><li>Such procedure may include systematically reviewing statements in social media </li></ul></ul></ul><ul><ul><li>Passive : obligation for the manufacturer to notify the competent authorities of incidents immediately on learning of them </li></ul></ul><ul><ul><ul><li>If the manufacturer is active on social media networks, he cannot unsee what he has seen </li></ul></ul></ul>
  • 25. Social Media: EU <ul><li>EU PMS obligations do not vary depending on the source or medium of the information </li></ul><ul><li>No EU law legal barriers to using social media for PMS and vigilance purposes </li></ul>
  • 26. Social media: Cases
  • 27. Social Media: Cases <ul><li>A patient association creates a Facebook page for a particular indication. </li></ul><ul><li>Several patients state that they have benefited from off-label use of a particular device and describe the off-label use concerned as well as give contact details of doctors involved. </li></ul><ul><li>Other patients state on Twitter that they have suffered from complications involving the device using the #Nameofdevicescompany. </li></ul><ul><li>A sales rep of the company takes part in the discussions and admits to a patient that the device is perfectly safe for certain off-label uses discussed in the group, however the manufacturer never cleared it for that use for IP license constraints. </li></ul>
  • 28. Subcontracting <ul><li>Main themes </li></ul><ul><ul><li>Manufacturer responsibilities for subcontractors in quality system </li></ul></ul><ul><ul><li>How (not) to draft a contract with a subcontractor </li></ul></ul>
  • 29. <ul><li>Subcontractors/Suppliers: </li></ul><ul><ul><li>Design of device (or part thereof) </li></ul></ul><ul><ul><li>Manufacturing of device (or part thereof) </li></ul></ul><ul><ul><li>Development of software (or part thereof) </li></ul></ul><ul><ul><li>Production of components / raw materials </li></ul></ul><ul><ul><li>Supply of devices that form part of pack or system </li></ul></ul><ul><ul><li>Inspection / testing / sterilisation </li></ul></ul><ul><ul><li>Clinical evaluation (CRO) </li></ul></ul><ul><ul><li>Authorised Representative </li></ul></ul><ul><ul><li>Business unit or subsidiary in group of companies </li></ul></ul><ul><li>Consultancy Agreements </li></ul><ul><li>Distribution Agreements </li></ul><ul><li>Agency Agreements </li></ul>Types of Contracts
  • 30. Subcontracting: US Sec. 820.50 Purchasing controls. Each manufacturer shall establish and maintain procedures to ensure that all purchased or otherwise received product and services conform to specified requirements. (a) Evaluation of suppliers, contractors, and consultants. Each manufacturer shall establish and maintain the requirements, including quality requirements, that must be met by suppliers, contractors, and consultants. Each manufacturer shall: (1) Evaluate and select potential suppliers, contractors, and consultants on the basis of their ability to meet specified requirements, including quality requirements. The evaluation shall be documented. (2) Define the type and extent of control to be exercised over the product, services, suppliers, contractors, and consultants, based on the evaluation results. (3) Establish and maintain records of acceptable suppliers, contractors, and consultants. (b) Purchasing data. Each manufacturer shall establish and maintain data that clearly describe or reference the specified requirements, including quality requirements, for purchased or otherwise received product and services. Purchasing documents shall include, where possible, an agreement that the suppliers, contractors, and consultants agree to notify the manufacturer of changes in the product or service so that manufacturers may determine whether the changes may affect the quality of a finished device. Purchasing data shall be approved in accordance with 820.40.
  • 31. Subcontracting: EU <ul><li>Manufacturer has obligation to control (Quality System) pre- and post market design and manufacturing (over subcontractors) of product. </li></ul><ul><ul><li>Medical Devices Directive Quality System related Annexes II, IV, V,VII </li></ul></ul><ul><ul><ul><li>EN ISO 13485 Medical Devices Quality Systems- Requirements for Regulatory purposes </li></ul></ul></ul><ul><ul><ul><ul><li>5.6 management review </li></ul></ul></ul></ul><ul><ul><ul><ul><li>7.4 purchasing controls </li></ul></ul></ul></ul><ul><li>Obligation is imposed on the manufacturer that places the device on the market or puts it into service – no MDD regulatory burden on subcontractor ! </li></ul>
  • 32. Multiple roles of subcontractor <ul><li>Audit for multiple roles of a party </li></ul><ul><ul><li>e.g. authorised representative and distributor, </li></ul></ul><ul><li>and multiple role related dependencies </li></ul><ul><ul><li>e.g. an authorised representative agreement that terminates immediately upon termination of the distribution agreement </li></ul></ul>
  • 33. Subcontracting: Cases
  • 34. Case: Tubing Component for Pump (1) <ul><li>Device manufacturer contracted out design and manufacture of tubing for device </li></ul><ul><li>The tubing complied with the technical specification, but did not work as anticipated in the clinical environment </li></ul><ul><li>The tubing was not defective (as per the supply agreement), but resulted in a Field Safety Corrective Action (FSCA) of the device </li></ul>
  • 35. Case: Tubing Component for Pump (1) <ul><li>The supplier was not contractually obliged to: </li></ul><ul><ul><li>Provide feedback regarding the actual performance of the tubing </li></ul></ul><ul><ul><li>Assist with the FSCA </li></ul></ul><ul><ul><li>Meet the additional specifications for the medical device </li></ul></ul><ul><ul><li>Undergo an audit by the Notified Body </li></ul></ul><ul><li>The relationship deteriorated and the supplier would only assist with the FSCA on payment of a significant sum </li></ul>
  • 36. Case: Insolvent Supplier (1) <ul><li>The device company and the supplier jointly fund the development of a tool to manufacture a specific component </li></ul><ul><li>The manufactured component is crucial </li></ul><ul><li>The supplier will own the tools and associated IP but: </li></ul><ul><ul><li>will only use the tool for the device company; or </li></ul></ul><ul><ul><li>grants the device company a perpetual, royalty-free licence of IP </li></ul></ul><ul><li>The supplier becomes insolvent </li></ul>
  • 37. Case: Insolvent Supplier (2) <ul><li>Manufacturer cannot continue production and has to switch </li></ul><ul><li>The liquidator disclaims the licence to the device company and sells the IP/tools to a third party competitor </li></ul><ul><li>Competitor serves cease and desist letter: demands recall of devices in supply chain </li></ul><ul><ul><li>The same issues arise with software source code </li></ul></ul>
  • 38. Thank you – any questions?
  • 39. Tracey Fox <ul><li>GE Healthcare </li></ul><ul><li>Waukesha, WI </li></ul><ul><li>USA </li></ul><ul><li>E: tracey.fox@ge.com </li></ul><ul><li>Tracey Fox is a Regulatory Affairs Manager at GE Healthcare. Tracey has an extensive background in quality and regulatory affairs, with qualifications including Six Sigma Master Blackbelt, Lead Quality System Auditor, Certified Quality Engineer, and US Regulatory Affairs Certification (RAC). She has led the development of the Global Advertising and Promotion Procedure and several regulatory affairs training courses at GE Healthcare. </li></ul><ul><li>Her educational background includes a bachelor's degree in Industrial Engineering from Marquette University, and a Masters in Regulatory Affairs from San Diego State University, where her thesis focused on Internet Advertising of Medical Devices. </li></ul><ul><li>She is a frequent speaker at conferences on the topic of promotional materials for medical devices. </li></ul>
  • 40. Erik Vollebregt <ul><li>Axon Lawyers </li></ul><ul><li>Piet Heinkade 183 </li></ul><ul><li>1019 HC Amsterdam </li></ul><ul><li>The Netherlands </li></ul><ul><li>Tel. +31 (0)88 650 6500 Mobile: +31 (0)6 47 180 683 </li></ul><ul><li>Blog: medicaldeviceslegal.com </li></ul><ul><li>T: @meddevlegal </li></ul><ul><li>E: erik.vollebregt@axonlawyers.com </li></ul><ul><li>W: www.axonlawyers.com </li></ul><ul><li>Erik has 13 years experience as IP and regulatory lawyer. After his stage at the European Commission he spent two years in the EU department at Liederkerke Siméon Wessing Houthoff. He subsequently worked as core member of the industry group &quot;Healthcare, Life Sciences and Chemicals&quot; at the Amsterdam and Brussels offices of Clifford Chance from 1999 until 2007. He was responsible for Greenberg Traurig ’ s European life sciences practice from 2007 to 2011. He became one of the founding partners of EU life sciences niche firm Axon in 2011. </li></ul><ul><li>His practice comprises advice to and litigation for clients from the pharmaceutical, medical device and biotechnology industry in legal, regulatory, intellectual property and anti-trust matters. </li></ul><ul><li>Erik is author of a number of publications on legal and regulatory subjects relating to pharmaceuticals and medical devices as well as editor of two Dutch legal journals in the field of pharmaceutical law and medical technology law, as well as author of the medical device law part of the Dutch language loose leaf commentary on pharmaceutical and medical technology law. He is a frequent speaker at national and international conferences of among others DIA and RAPS. </li></ul><ul><li>Languages: Dutch, German, English, Swedish, French and Spanish </li></ul>
  • 41. Additional materials on subcontracting
  • 42. <ul><li>Avoid “compliance with law” boilerplate </li></ul><ul><ul><li>Tubing example: the tubing complied with Applicable Law, namely the law applicable to a supplier of tubing, but not the MDD. </li></ul></ul><ul><ul><li>Software example: the revision to the software was permitted for software that was not a medical device </li></ul></ul><ul><li>Specify standards to follow </li></ul><ul><li>Critical suppliers: detail obligations at SOP level </li></ul><ul><li>Not every agreement is enforceable anywhere </li></ul><ul><ul><li>e.g. US law and forum agreement will not be enforceable in EU </li></ul></ul>Standards & “Compliance with Law”
  • 43. Standards and compliance Wrong Right “ Each party will comply with applicable law” “ The subcontractor will maintain an ISO 13485 certified quality system at all times and produce the Goods in strict accordance with the specifications and standards that apply to the device as placed on the market [set out in Annex [X] to this Agreement].”
  • 44. Force Majeure <ul><li>Subcontractor will seek to manage risk by defining force majeure widely </li></ul><ul><ul><li>Definition of what is in scope of subcontractor ‘control’ / responsibility </li></ul></ul><ul><ul><li>Carve-outs for most prevalent problems that can cause subcontractor defaults </li></ul></ul><ul><ul><ul><li>Network failure, electricity failure, strikes, sub-subcontractor, supply chain problems </li></ul></ul></ul>
  • 45. Force Majeure <ul><li>Notified body must look at </li></ul><ul><ul><li>Scope of force majeure clause and manufacturer remedies available </li></ul></ul><ul><ul><li>In relation to manufacturer contingency / risk management </li></ul></ul><ul><li>Favourable force majeure clause for subcontractor is risk for manufacturer </li></ul>
  • 46. Force Majeure Wrong Right Neither Party shall be held liable for any failure or delay in the performance of any of the obligations on its part to be performed hereunder, if and to the extent such failure or delay is caused by any cause or causes beyond control of such Party including but not limited to fire, storm, flood, earthquake, explosion, accident, military operation, war, rebellion, riot, terrorist attack, wreck, epidemic, quarantine regulations, labor dispute, export- or import restrictions, shortage of manpower or energy, communications networks failure, embargo, failure or delay in transportation, inability to obtain required raw materials or machines and any laws, regulations or other governmental action. If any such delay exceeds ninety (90) days, either Party may at its option terminate this Agreement effective immediately by giving a written notice to the other Party. <ul><li>No clause (depending on the law applicable to the agreement – may contain more friendly rule) </li></ul><ul><li>The subcontractor shall not be held liable for any failure or delay in the performance of any of the obligations on its part to be performed hereunder, if and to the extent such failure or delay is caused by any cause or causes beyond reasonable control, reasonable control including possibility to deploy alternative solutions to remedy or limit the consequences of the circumstances causing the failure or delay in the performance. </li></ul>
  • 47. General Terms and Conditions <ul><li>General terms and conditions are always ( ALWAYS ) biased towards the party using them, giving that party maximum control over the relationship </li></ul><ul><li>Check for applicability of general terms and conditions </li></ul><ul><ul><li>Reference on order confirmation </li></ul></ul><ul><ul><li>Whose terms and conditions apply – subcontractor or manufacturer? </li></ul></ul><ul><ul><ul><li>‘ battle of forms’ </li></ul></ul></ul>
  • 48. <ul><li>Some partners should be obliged to assist with regulatory matters </li></ul><ul><ul><li>Investigations, Queries, Complaints, FSCAs, and Recalls </li></ul></ul><ul><li>Dual (prompt) notification and, where appropriate, Manufacturer should have the opportunity to contact authorities first </li></ul><ul><li>Co-ordinate: </li></ul><ul><ul><li>Responses to threats, claims and litigation by third parties; </li></ul></ul><ul><ul><li>Enforcement and inspection matters; and </li></ul></ul><ul><ul><li>Reports to authorities </li></ul></ul><ul><li>Assistance (at counter-party’s cost) with disputes, responses etc </li></ul><ul><li>Manufacturer must have access to all information needed for regulatory purposes, independent of the relationship with the subcontractor </li></ul>Regulatory Actions
  • 49. Regulatory Actions Wrong Right <ul><li>No clause in agreement </li></ul><ul><li>The Subcontractor represents, warrants and agrees: </li></ul><ul><li>to notify Manufacturer of and assist Manufacturer with any actual or potential governmental or third party action or procedure relevant to any Product as soon as the Subcontractor becomes aware of such action; </li></ul><ul><li>to immediately assist Manufacturer with all Product recalls or other FSCAs that may occur or be requested by the Manufacturer; </li></ul><ul><li>to coordinate any action or notification of action referred in (a) and (b) to any third party with manufacturer. </li></ul>
  • 50. <ul><li>Given the significance of the risk (device outside scope of CE marking), this is critical </li></ul><ul><li>Mechanism for: </li></ul><ul><ul><li>Setting the applicable standards </li></ul></ul><ul><ul><li>Reporting design or QS changes </li></ul></ul><ul><ul><li>Prior agreement to design or QS changes </li></ul></ul><ul><ul><li>Compelling support of previous version </li></ul></ul><ul><ul><li>Compelling supplier to implement a change </li></ul></ul><ul><ul><ul><li>Enhanced standards imposed in a recast of the MDD </li></ul></ul></ul><ul><ul><ul><li>Consider a right to take over (whether for bug fixes or to take to a supplier with an adequate QMS) </li></ul></ul></ul><ul><ul><ul><li>Consider “where required by a regulator or by law” </li></ul></ul></ul>Standards and Change Control
  • 51. Standards and Change Control Wrong Right <ul><li>Each party will comply with the rules and standards applicable to it. </li></ul><ul><li>Each party will comply with the rules and standards applicable to its products and services. </li></ul><ul><li>The subcontractor shall maintain a quality system that complies with the QS standards and specifications as set out in the Manufacturer SOP or Quality Agreement attached as Annex [X] (include ISO 13485). </li></ul><ul><li>The subcontractor shall submit to Manufacturer QA department for review and approval, a protocol for management and notification of changes that affect <part> design intent, quality, reliability or parties involved. </li></ul><ul><li>Subcontractor shall not make any changes to process or <part> components without prior notification to and consent of Manufacturer. </li></ul><ul><li>If changes are submitted for approval the subcontractor must provide the appropriate documentation that describes the nature of the change, tests performed to validate/qualify the component change, cost/scheduling impacts, and any other documentation that justifies the change. </li></ul><ul><li>The subcontractor shall submit to and cooperate with any periodic or unannounced QS audits by the manufacturer, its notified body or competent authorities. </li></ul>
  • 52. <ul><li>For suppliers of critical components (or services): seek obligations regarding traceability of batches or devices </li></ul><ul><li>Distributors must also have obligations as regards the products that they distribute </li></ul><ul><li>Expressly refer to vigilance and PMS obligations and impose contractual obligations on them to comply with these requirements </li></ul><ul><li>Otherwise: recall / other FSCA more difficult </li></ul>Traceability
  • 53. Traceability Wrong Right <ul><li>No clause in agreement </li></ul><ul><li>The Subcontractor shall keep records of all [devices/parts] sold. The Manufacturer has the right to audit the Subcontractor’s records or request information when needed. </li></ul><ul><li>The Subcontractor shall implement the traceability procedures set out the in Manufacturer SOP attached to this Agreement and within the quality system of the Manufacturer as implemented and audited at the Subcontractor by means of the Quality Agreement. </li></ul><ul><li>The Subcontractor shall upon first request and within the time frames prescribed in the Manufacturer SOP provide the Manufacturer with any traceability information requested by the Manufacturer. </li></ul>
  • 54. Intellectual Property <ul><li>IP rights are exclusive rights intended to provide a tool to regulate freedom to operate of companies </li></ul><ul><ul><li>Patents, trademarks, copyrights, design rights </li></ul></ul><ul><ul><li>Manufacturer must own IP or have a contingency-proof licence to use IP </li></ul></ul><ul><li>IP problems are usually not easy or cheap to fix </li></ul><ul><ul><li>If a manufacturer overlooks IP issues, he may severely paint himself in a corner </li></ul></ul><ul><ul><li>If a subcontractor overlooks IP issues, he may need to adapt device, component or service </li></ul></ul>
  • 55. <ul><li>Ensure that the supplier/subcontractor assigns or provides a licence to copy, modify and sub-license the relevant IP </li></ul><ul><ul><li>Crucial for certain types of FSCA </li></ul></ul><ul><ul><li>This should extend to foreground and background IP </li></ul></ul><ul><ul><li>Query access to third party IP licensed to the supplier </li></ul></ul><ul><li>Check </li></ul><ul><ul><li>Consequences of insolvency of supplier </li></ul></ul><ul><ul><li>Consequences of termination </li></ul></ul><ul><ul><li>Access to source code in case of software (escrow) </li></ul></ul>Intellectual Property
  • 56. Intellectual Property Wrong Right <ul><li>No clause in agreement </li></ul><ul><li>The Subcontractor shall own all IP on the [component] as well as any IP developed during this Agreement, whether or not this IP was developed further to instructions or requests of the Manufacturer. </li></ul><ul><li>The Subcontractor will assign any and all Foreground IP in the Field for the duration of the Agreement to the Manufacturer and cooperate with the Manufacturer to perfect such assignment when requested. The Subcontractor grants the Manufacturer a paid-up, irrevocable world-wide licence to use the Background IP in the field for any purpose. </li></ul><ul><li>The Subcontractor will impose the same obligation as imposed on itself to any party it subcontracts any of its performance under this agreement to. </li></ul>
  • 57. <ul><li>If a subcontractor makes a critical component it may be acquired by a competitor </li></ul><ul><li>Provide options (e.g. poison pills) to avoid Sophie’s Choice where termination may be disastrous </li></ul><ul><ul><ul><li>Make agreement difficult to terminate </li></ul></ul></ul><ul><ul><ul><li>Source code release trigger </li></ul></ul></ul><ul><ul><ul><li>Change credit terms </li></ul></ul></ul><ul><ul><ul><li>Most favoured status </li></ul></ul></ul><ul><li>Subcontractor should not assign its contractual obligations or the entire agreement without consent </li></ul><ul><li>Subcontractor should not subcontract outside of scope of QS audit and CE certificate </li></ul>Change of Control/Assignment
  • 58. Change of Control/Assignment Wrong Right <ul><li>Subcontractor shall timely inform the Manufacturer in case it is subject of a merger or assigns this agreement to a third party. </li></ul>Subcontractor is not entitled to assign this Agreement or any of its rights or obligations hereunder without the prior written consent of the Manufacturer. Any change of control in the Subcontractor, merger, reorganization or consolidation of WDME shall be deemed an assignment. Manufacturer shall be entitled to refuse its consent if the acquiring party does not at the Manufacturer’s first request warrant that it will assume the Subcontractor’s obligations post-acquisition on the same terms and conditions.
  • 59. Subcontracting by Subcontractor <ul><li>Sub-subcontractor normally difficult to control and has less incentive to be compliant </li></ul><ul><li>Impose obligation on subcontractor to conclude so-called ‘back-to-back’ arrangement </li></ul><ul><li>Never allow subcontractor to subcontract outside scope of QS or CE mark </li></ul>
  • 60. Subcontracting by Subcontractor Wrong Right <ul><li>No clause in agreement </li></ul><ul><li>The Subcontractor is entitled to subcontract any of its obligations to a third party of his choice. </li></ul><ul><li>Force majeure includes any circumstance beyond the control of the Subcontractor, among other things […] default or strike of third parties. </li></ul>The Subcontractor shall obtain prior written approval of the Manufacturer if the Subcontractor intends to subcontract any performance under this Agreement to a third party. The Manufacturer shall be entitled to audit the third party and the proposed agreement with that party for suitability and compliance as a condition to its consent. The Subcontractor shall ensure that the third party is bound by the same obligations as the Subcontractor itself. Any default or force majeure on the part of the third party shall not constitute force majeure on the part of the Subcontractor. The Subcontractor shall not be entitled to enter into agreements on behalf of the Manufacturer.
  • 61. Suspension of Performance Rights <ul><li>Suspension rights </li></ul><ul><ul><li>Allow subcontractor to hold manufacturer hostage </li></ul></ul><ul><ul><li>May prevent manufacturer to fulfill regulatory obligations </li></ul></ul><ul><ul><li>If not addressed in agreement, most civil law systems allow it under contract law </li></ul></ul><ul><li>Solution </li></ul><ul><ul><li>Contract out possibility to rely on suspension </li></ul></ul><ul><ul><li>Limit cases of reliance to specific circumstances </li></ul></ul>
  • 62. Suspension of Performance Rights Wrong Right <ul><li>No clause in agreement </li></ul><ul><li>Any [material] default on the part of the Manufacturer shall entitle the Subcontractor to suspend performance of its obligations until the default has been remedied. </li></ul><ul><li>Parties acknowledge that continuity of supply and the ability to implement FSCAs that may involve the Subcontractor are crucial for the Manufacturer to meet its regulatory obligations. For that reason parties agree that the Subcontractor shall not be entitled to suspend its performance under this agreement in case of alleged default [except in the circumstances set out in Annex [X] (or) except in case of a judgment finding default on the part of the Manufacturer] </li></ul>
  • 63. Termination Regime <ul><li>Termination regime has to be predictable and allow manufacturer sufficient possibility to substitute subcontractor </li></ul><ul><ul><li>‘ termination for convenience’ </li></ul></ul><ul><ul><li>Termination in case of change of control on the part of the manufacturer? </li></ul></ul><ul><ul><li>Watch out for short notice period (e.g. 30 days) </li></ul></ul><ul><ul><li>Termination assistance? </li></ul></ul>
  • 64. Termination Regime Wrong Right <ul><li>No clause in agreement </li></ul><ul><li>So-called ‘termination for convenience’ on short notice </li></ul><ul><li>If one party does not observe the obligations described in this Agreement and does not remedy its breach within 14 days after receipt of a notice of the other party, this non-fulfillment shall justify the termination of this Agreement and the other party is authorized to terminate the present Agreement with immediate effect without any obligation on its part for payment of any compensation or damages. </li></ul><ul><li>In case of a default on the part of the Manufacturer the Subcontractor may terminate this Agreement on [sufficient duration for substitution of subcontractor process] days notice subject to its Termination Assistance obligations, provided that the Subcontractor provides the Manufacturer with the termination assistance set out in clause [X]. </li></ul>
  • 65. <ul><li>Termination assistance clause should enable manufacturer to switch subcontractors without (substantial) disruption </li></ul><ul><li>Enable new supplier to take over and understand procedures </li></ul><ul><li>Intellectual Property (foreground and background): </li></ul><ul><ul><li>Transfer to Manufacturer; or </li></ul></ul><ul><ul><li>Perpetual, irrevocable, royalty-free, worldwide, sub-licensable and non-exclusive (consider exclusive or sole) licence to use and modify IP </li></ul></ul>Post-Termination Assistance
  • 66. Post-Termination Assistance <ul><li>Transfer of information and know-how </li></ul><ul><ul><li>Consider a positive obligation to assist (e.g. show-how) in case of know-how heavy services </li></ul></ul><ul><li>Release of source code or documents from escrow </li></ul><ul><li>All relevant regulatory data is handed over in a readable form </li></ul><ul><ul><li>Old subcontractor may not have an obligation to retain the data </li></ul></ul><ul><li>Right to source raw materials (in case subcontractor is only source) </li></ul><ul><li>Any significant changes may need to be looked at by the Notified Body – pre-certification of termination assistance </li></ul>
  • 67. Post Termination Assistance Wrong Right <ul><li>No clause in agreement </li></ul>In case the agreement is terminated, the Subcontractor will ensure that its performance continues on the same service level for the duration of the Termination Assistance Period. Pending the Termination Assistance Period performance is handed over to third parties appointed by the Manufacturer at cost of the Subcontractor pursuant to the Termination Plan annexed to the Agreement as Annex [X], unless the Agreement was terminated by the Subcontractor for breach of the Manufacturer, in which case the Subcontractor shall be entitled to charge its costs for such hand-over to the Manufacturer.
  • 68. <ul><li>Record-keeping obligations for a medical device manufacturer are an absolute requirement and are a crucial element of PMS </li></ul><ul><li>Manufacturer must own IP on data or have adequate licence </li></ul><ul><li>Automatic access rather than a contractual obligation to provide </li></ul><ul><ul><li>Little value if the supplier is insolvent or there is a breakdown in the relationship </li></ul></ul><ul><ul><li>Ideally subcontractor keeps relevant documentation on manufacturer server </li></ul></ul>Record Keeping
  • 69. Record Keeping Wrong Right <ul><li>No clause in agreement </li></ul><ul><li>The subcontractor shall periodically provide the Manufacturer with pertinent information about the products manufactured for the manufacturer. </li></ul>The Subcontractor shall keep all records supporting the QS and related to the products for the duration set out in the QS SOP in Annex [X]. Insofar as the Subcontractor has any intellectual property rights in the records, it hereby [assigns/licenses] these rights for all jurisdictions in the world, for any use and at no cost or royalty.

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