Supply chain and economic operator regulation under the MDR and IVDR
One of the interesting features of the new MDR and IVDR is the new chapter on economic operators (chapter II), which implements a completely new (to the medical devices industry at least) regime of supply chain regulation and related aspects.
The new supply chain regime was on the horizon for a long time because it was conceived in 2008 and has in the mean time been implemented for a number of product groups covered by EU legislation. It has now, totally expectedly, found its way to the devices sector via de MDR and IVDR.
A presentation about supply chain under MDR/IVDR
I presented about this at the RAPS Regulatory Convergence:
I find that many companies have difficulties in understand this framework and do not realize that becoming compliant under the MDR and IVDR requires a close look at the supply chain leading into the EU, and identification of each entity up to the end user as one of the economic operators regulated under the regulations: the MAID (Manufacturer, Authorised Representative, Importer and Distributor). We are used to the manufacturer having regulatory responsibility under the directives, but it’s new that the importer and distributor suddenly have important obligations in the supply chain and that the role of the authorised representative has changed a lot.
As you can see in the embedded presentation and the slide below at the RAPS Convergence above importers and distributors now have their own responsibilities with respect to PMS and vigilance and in verification of compliance of the devices that they import/distribute.
Given these overlapping responsibilities it becomes more important than ever to organise your supply chain contractually in a way as to avoid surprises, e.g. because a distributor decides to issue a local recall for a not so profitable product that will be visible for every authority in the EU via Eudamed and may spin off into something of epic proportions. Information sharing with(in) your supply chain becomes key, as well as division of responsibilities. I am pretty sure that your contracts can be improved because so far I have not seen any that are up to standards.
Regulatory is from Venus, tax is from Alpha Centauri and third party importer anyone?
These responsibilities and who has them should be part of your gap assessment for the MDR and IVDR. Companies organise their supply chain currently mainly based on tax considerations, but now they will need to add MDR/IVDR supply chain regulation considerations. It means making your regulatory department talk to your tax lawyers/accountants.
From my own experience these groups often find the other group’s work a form of esoteric voodoo because they use completely different definitions of the respective economic actors. The MDR/IVDR contain definitions for the MAID (which are described in a lot of detail in the bible of CE marking the Blue Guide) so it may take some time before your regulatory department has your MDR/IVDR supply chain regulatory ideas aligned with your tax planning, and find out in the process that an importer for tax law purposes is not necessarily the same entity as the importer for MDR/IVDR purposes. For example, many companies outsource warehousing in the EU to external parties, which often provide additional services like final labeling. That may make that external party an importer in the meaning of the MDR/IVDR, with all the regulatory obligations. That will likely lead to the third party asking you for more money for what they do, and you suddenly have a regulated external party in your supply chain that must refuse to import your devices if it comes to the conclusion that they may not be compliant.
Subsidiaries that must rat you out and run away
There are major problems with authorised representatives because the MDR/IVDR messes with corporate governance if you have your own AR in the EU, most often a company subsidiary. The MDR/IVDR make the AR into a sort of competent authority mole in your organization. It must monitor the manufacturer, admonish in case of non-compliance, report the manufacturer to the authorities in case of persistent non-compliance and then run away after terminating the AR agreement. That must be problematic for a subsidiary. Yet, the wise people that wrote the MDR and IVDR did not give this much thought.
Also the MDR and IVDR prescribe a mandatory format for the AR agreement and for a contractual handover regime in case of switch in AR.
Oh, and did you know the AR is product liable now for all of your devices in the EU jointly and severally with the manufacturer? Better not nominate a subsidiary with a lot of assets.
Because of the new distributor obligations you will want to revisit distribution agreements. And if you don’t your distributors will want to because they need to do a lot more to be able to distribute your products, like check compliance etc.
And there is more
With the new economic operator regime come a lot of other additional things that I presented about recently too at the MedTech Summit in Amsterdam, such as new advertising and marketing claims regulation and a new weird Frankenstein product liability regime:
“Immediately is already rather late”
As I sit here at the RAPS Convergence I see the companies that are trying to get their arms around this but most of them are already quite late in starting their work on transition. One of the lines that all the many notified bodies and competent authorities present are repeating over and over is: start now if you haven’t already. The gap is large. The impact enormous. Your EU market is at risk, as I have been saying myself too. One of the best statements I heard from the authorities and notified bodies was: “if you start immediately you are already rather late”.