Any fast-growth business developing a biotech/pharma/medical device or cosmetic product faces a myriad of highly complex and regulatory challenges. Here are the legal considerations if you want to scale your healthcare product.
Can the risk of outsourcing be reduced?
SMEs tend to outsource most product development, manufacturing, clinical trials and advisory work. This has many touch points for legal. Each consultant and other service provider will require specific legal agreements. These need to cover confidentiality, intellectual property ownership, data protection and publication provisions to name but a few in order to protect the company and its assets. In some countries, employment law means that a company needs to be careful how it treats an individual consultant or they may be deemed an employee of the company, such that the company risks being forced to take on the legal obligations of the employee such as tax and pension implications.
Will structure maximise compliance and quality or hinder innovation?
It is understandable that entrepreneurs and SMEs do not generally like to be constrained by administrative matters and structure; however it is important to put some structure in place. There are a minimum number of Standard Operating Procedures (SOPs) that will need to be drafted and implemented in order to satisfy the regulatory authorities in areas such as clinical supplies, quality, clinical supplies recall, creating and changing SOPs, vendor selection and outsourcing, escalation management and communication of product safety risks. It is important that each employee reads the SOPs and it is recorded that they have done so.
>See also: Data protection and GDPR: what are my legal obligations as a business?
What is the best way to protect the company’s products/assets?
Protecting the company’s products and methods is one of, if not, the most important thing to do. The intellectual property (IP) is the crown jewels of an SME and the thing that may make the difference between obtaining third-party funding/investment or not. A detailed record of patents and filings should be kept. It is essential that a policy is put in place to capture new IP as it is created. Keeping a record of all articles written and published, and preclinical studies and clinical trials being planned and in process is recommended. Before an article is published or a study or clinical trial is commenced, a lawyer/patent agent should be consulted to ensure all IP is covered where possible or filing for cover can be planned in the future. It may be that a planned publication must wait until after a patent is filed. It can sometimes be a challenge to persuade third-party researchers to hold off on publication, but it can be essential.
Why do you need a legal compliance programme?
In the event there is a high volume of outsourcing, a number of countries involved, and also if there are clinical trials and/or promotion of marketed products, compliance is ever more important. Whether it be anti-bribery and corruption, competition law or data protection compliance, a company can be found liable itself and also for the activities of its service providers, with potentially very large fines and criminal sanctions, as well as bad press.
Due diligence of service providers and third-party intermediaries is very important.
Do they have a clear compliance history and an adequate compliance program that is continuously implemented within the company? It is essential for an SME to have an in-house anti-bribery and corruption and business ethics policies and programmes that are continuously implemented in order to be compliant but also as a defence to any claim of breach. A data protection audit and resulting activities and policies to ensure compliance can be very resource heavy, however the sooner in the company’s life this can be undertaken, potentially the easier and quicker it will be. Considering whether data protection officer(s) and compliance officer(s) need appointing is also an important consideration and can also be a legal obligation.
>See also: How to check if your consultants are IR35 compliant and ensure you hire consultants safely
What is the licensing and manufacturing strategy?
SMEs often enter into in-licensing, development and collaboration agreements in order to build their pipelines. Products in the portfolio are likely to be at different stages of development and require differing legal support. A company may even have one or more projects that it hopes to sell off or license out at some point in order to fund other in-house projects. Having a clear strategy and robust legal agreements will be important to investors. Manufacturing and product development may be undertaken in multiple countries around the world with the challenges of multiple legal jurisdictions. Ensuring the continuation of projects, including the supply chain, is challenging in current COVID-19 affected times and is also something to think about when entering future agreements. Do you want to, and also, can you, given where the expertise lies, keep everything within the EU and still conduct your project and stay within budget? Also, conducting development in varying countries raises the profile/knowledge of the product and the company in the healthcare provider community.
What is the clinical trials strategy?
Clinical trials can cost millions of pounds and the obligation for paediatric clinical trials, if applicable, makes things even more expensive. A company may decide to focus on a few core indications and undertake legal sponsor obligations in these areas, however, then accept enquiries from investigators at hospitals who want to undertake investigator-initiated trials (IITs) in other potential indications. There are advantages and disadvantages in this strategy. When a company is the legal sponsor of a clinical trial it is easy to ensure the rights in any IP generated related to the product vests in the company. IITs are very different and the trade-off for the company being the legal sponsor of the trial, is that the Institute conducting the IIT is likely to insist on ownership of the IP generated relating to the product. In many cases, the best a company can expect is for the institution to grant a non-exclusive license to the IP generated and a time-limited option for the company to negotiate an exclusive licence. On a positive note, this strategy means that the costs for the SME are pushed down the road and if something promising comes out of the IIT they can then negotiate the exclusive licence, albeit not owning that IP outright and having to pay milestones and royalties, but still potentially gaining a significant portion of the commercialisation income. The license terms will be critical for investors. A company needs to carefully consider approving the use of its product in any IIT and amongst the reasons is the potential for additional, and perhaps different, adverse events in the patient population of the IIT.
There are legal obligations and timelines on the registration of clinical trials and the disclosure of results from them, even if a clinical trial is unsuccessful, as well as access rights by third parties to such data.
SMEs will often contract with clinical research organisations (CROs) for the CRO to run the clinical trial. The company can essentially subcontract a large proportion of a legal sponsor’s functions but remains legally responsible and liable. Companies tend to underestimate the time it takes to negotiate and execute CRO agreements and the set-up activities for a clinical trial. Multiple clinical trial site contracts can also be a challenge to speed through. As soon as a company awards a clinical trial to a CRO it is advisable to put legal in touch with the CRO in order to move things as quickly as possible. This will help the company keep to its project timelines, which is also of interest to investors. Compliance at clinical trial sites and also data integrity are increasingly highlighted during this more digital age.
What is the regulatory strategy?
In addition to patents, a regulatory strategy is key to maximising the regulatory data protection of a product and therefore its value to the company and an investor. Companies are increasingly focussed on rare diseases, advanced therapy medicinal products and orphan indications, which means that they can take advantage of reduced regulatory authority fees, increased scientific advice and potentially a quicker route to market. SMEs may need guidance through the different stages of the regulatory and advice processes, and there may even be the need for appeals to decisions made by the regulatory authority. The laws relating to early access programmes (including data collection guidelines) tend to vary by country, and, within the European Union (EU), they also vary by member state. They are a valuable opportunity for a company to engage in early dialogue with government and arm’s length bodies about product uptake within the health service.
What will the price of the product be?
Clinical trials need to be designed with consideration for market access. The Medicines and Healthcare Products Regulatory Agency (MHRA) guidance highlights that data generated in early access schemes can be used to facilitate National Institute for Clinical Excellence (NICE) Technology Appraisal. Although early access schemes are not a substitute for data collection in clinical trials, they may be supplementary in addressing a variety of research questions, which could be informative for multiple stakeholders, including regulatory bodies, payers, healthcare professionals, and patients. Assisting SMEs to navigate through the complex world of legal regulations and assessments for reimbursement approval in each country is invaluable as it can be the largest hurdle of all. As ever, this varies by country.
Where will the product be positioned in the market?
As a product is being developed the company will be thinking about the positioning of the product in the market and raising the profile of the company within the healthcare sector. There are industry codes of practice that govern a company’s interactions with healthcare professionals and patient advocacy groups e.g. the ABPI Code, EFPIA, MedTech Europe, ABHI Code, etc.
Most importantly a company does not want to fall foul of the law preventing promotion of prescription-only medicines to the general public or promotion to healthcare professionals pre-marketing authorisation. It is recommended that any materials used at symposia or for promotional activities have a legal review.
Can a company use social media and technology?
There is an ever-increasing use of technology and social media generally throughout the product lifecycle such as novel (digital) clinical trial and subject monitoring tools and marketing methods. This can make projects more of a challenge to manage from a legal point of view, but it can be done successfully. A company should also keep in mind the impact of the use of social media on pharmacovigilance obligations. In-house, the company needs to address the use of social media by employees by implementing an appropriate policy. Companies can find themselves in difficulty with regulators and legally due to simple actions by employees on social media.
How will the product be commercialised?
Given the size and resources available, SMEs may license out a product in a particular territory or globally for the commercialisation stage, or it may be in a position to commercialise itself in some countries and appoint individual distributors in others.
Whatever the model, the legal terms will again be important to investors. Sequencing of launches can be important given territory pricing differences and also market sizes. There may also be third party patents to consider. Obviously, the sales and marketing materials must be compliant with industry codes of practice.
All in all, SMEs face a myriad of highly complex legal and regulatory challenges which must be navigated to ensure success of product development and financial success for the SME and its investors.
This article has been prepared for informational purposes only and does not constitute legal advice. This information is not intended to create, and the receipt of it does not constitute, a lawyer-client relationship. Readers should not act upon this without seeking advice from professional advisers. The content therein does not reflect the views of the firm.
Helen Middleton is a life-sciences commercial, IP and regulatory counsel at Sidley Austin
Further reading
Business compliance – 5 things to know to ensure your business is compliant
