The safety regulatory regime for medical devices is contained in the EU Medical Devices Regulation (EU) 2017/745 (MDR), together with the German Medical Device Law Implementation Act (Medizinprodukterecht-Durchführungsgesetz – MPDG) and several ancillary regulations.
The regime also governs software-based devices that are intended by the manufacturer to provide diagnostic or therapeutic services.
Reusable surgical instruments have now also been included in the MDR in their own category, referred to as “I R”.
Personal Protective Equipment (PPE)
PPE is governed by Regulation (EU) 2016/425 (the “PPE Regulation”).
The product safety regulatory regime for cosmetics is contained in the Cosmetics Regulation (EC) 1223/2009, supplemented by the German Cosmetics Regulations and various specific regulations concerning, for example, hazardous substances and packaging.
The European Biocidal Products Regulation (EU) 528/2012 (BPR) contains the safety regime for biocides. Several Technical Notes for Guidance provide further technical detail for the implementation of the BPR. On a national level, the BPR is flanked by the Biozidrechts-Durchführungsverordnung (ChemBiozidDV).
Food-based healthcare products need to comply with requirements laid down in Regulation (EC) No 852/2004, the Food Act (Lebensmittelgesetz) and any additional relevant applicable regulations, such as the Dietary Supplements Regulations (Nahrungsergänzungsmittelverordnung – NemV), which transpose European Directive 2002/46/EC on food supplements, and the Diätverordnung (Dietary Regulations – DiätV).
The German Food Code Commission (Deutsche Lebensmittelbuch-Kommission) issues general guidelines based on international standards on the production of food.
According to a statement published by the federal government, no genetically modified organisms (GMOs) have been grown commercially in Germany since 2012. Where GMOs enter the market, the relevant European framework applies, including:
Pharmaceuticals for human use are governed by the German Drug Act (Arzneimittelgesetz – AMG), which implements European Directive 2001/83/EC. Alongside the AMG, regulations such as the Medicinal Products and Active Ingredients Manufacturing Regulations (Arzneimittel- und Wirkstoffherstellungsverordnung – AMWHV) govern the manufacture and distribution of pharmaceuticals, as well as their use in clinical trials.
Blood products are subject to the framework laid down in the Transfusion Act (Transfusionsgesetz – TFG). The TFG follows the principle contained in many pieces of legislation in the areas touched upon in this chapter that statutory provisions contain the necessary minimum and are to be supplemented by more detailed technical guidance compiled by experts. The Haemotherapy Directive of 2017 (as amended), published by the German Medical Association together with the Paul-Ehrlich-Institute (PEI), provides that detail.
Psychedelics are classed as narcotics pursuant to Section 1 of the Narcotics Act (Betäubungsmittelgesetz – BtMG). This means that a permit to traffic these substances can only be granted by the Federal Institute for Drugs and Medical Devices (BfArM), or more precisely the Federal Opium Agency, in exceptional cases for scientific or other purposes in the public interest. Such purposes might include clinical trials where the requirements of the AMG will apply simultaneously.
All food supplements that contain CBD or other cannabinoids are considered novel food pursuant to Regulation (EU) 2015/2283 and thus are only marketable after prior authorisation. Their THC content must stay below 0.2%, or they will be classed as pharmaceuticals and be subject to the regulatory regime of the AMG (see 1.1 Medical Devices).
Medical Apps and Wearables
An app will be regulated as a medical device if it meets the MDR’s definition of a medical device, which it will normally do if it creates or modifies medical information through its own algorithm. As a medical device, it will be subject to the MDR and the MPDG (see 1.1 Medical Devices).
Where wearables are developed for medicinal use, such as for diagnosis and therapy purposes, they will also be subject to the MDR and MPDG regime. Common wearables such as Fitbits, however, are not classed as medical devices and are only subject to the Product Safety Act (Produktsicherheitsgesetz – ProdSiG) and related legislation.
Doctors may provide telemedicine services where face-to-face patient contact is not medically required. The framework for telemedicine is contained in the Social Code. This is flanked by a collective agreement between GKV-Spitzenverband and the German Medical Association, which sets out the requirements regarding patient authentication and data privacy, and quality requirements for telemedicine service providers in the public healthcare system.
The German Stem Cell Act (Stammzellengesetz – StZG) generally prohibits the import and use of embryonic stem cells, but exceptionally permits their import and use for research purposes. Section 6 of the StZG sets out the requirements for authorisation.
Distinction Between Medicines and Medical Devices
According to Section 2 (1) of the AMG, medicines are substances or preparations of substances that are intended to alleviate, cure or prevent diseases or pathological complaints (“presentational pharmaceuticals”), or that are intended to restore, correct or influence physiological functions using a pharmacological, immunological or metabolic effect, or to make a medical diagnosis (“functional pharmaceuticals”).
Medical devices, on the other hand, are products or equipment that are intended for a medical purpose. Unlike medicines, which have a pharmacological, immunological or metabolic effect, the main intended effect of medical devices is primarily achieved by physical means.
Under the EU regime, it is for the national competent authorities and national courts to assess products as medicines, medical devices, cosmetics or food, as appropriate, on a case-by-case basis. To assist with the classification of products, the European Medical Device Co-ordination Group (established by Article 103 of Regulation (EU) 2017/745) produced the non-binding “MDCG 2022 – 5 Guidance on borderline between medical devices and medicinal products under Regulation (EU) 2017/745 on medical devices” in April 2022, which provides detailed guidance.
Distinction Between PPE and Medical Devices
When it comes to the distinction between PPE and medical devices, the intended purpose is key. If the product is intended solely to protect the user (ie, the person wearing it) against one or more risks to their health or safety, the product is classified as PPE. Where the product is intended to protect a patient, the product is a medical device.
For instance, surgical gloves are medical devices, while protective gloves (eg, as used in medical laboratories) are PPE. Protective clothing against radiation for patients are medical devices; for users, they are PPE.
Distinction Between Cosmetics, Biocides and Medicines
The European Commission gave some guidance on the differentiation between cosmetics and biocides when various manufacturers sought to produce hand sanitisers in the wake of the COVID-19 pandemic. In summary, products that serve primarily or exclusively cosmetic purposes (ie, for deep cleansing or cleansing of the skin) are covered by the Cosmetic Products Regulation. Products that contain an “active substance” and are primarily intended to serve as a biocide fall within the scope of the legislation on biocides. The Biocide Regulation defines an active substance as a substance or micro-organism that has an effect on or against harmful organisms.
When differentiating between biocides and medicines, the key criterion is what the product is used against: medicines are intended to combat diseases, whereas biocides are directed against harmful organisms that transmit disease.
Distinction Between Medicines and Food
The Federal Office of Consumer Protection and Food Safety (BVL) and the Federal Institute for Drugs and Medical Devices (BfArM) have jointly prepared a position paper, to serve as guidance for the differentiation between food and pharmaceuticals. It sets out seven characteristic features, and provides a decision tree at the end. The criteria include patient population, nutritional value and/or substances used, and whether the same effect can be achieved through changes in diet.
Manufacturing facilities for medical devices do not require approval as such. However, the conformity assessment procedures may involve a notified body assessment of the manufacturer’s quality system. The manufacturer demonstrates conformity with the requirements of the quality system by complying with the applicable standards, including ISO 13485:2016 on Standards for Quality Management System on Medical Devices.
Manufacturers of medicinal products, on the other hand, must obtain a manufacturing authorisation. The authorisation will be limited to the premises and the medicinal products specified in the manufacturer’s application.
Furthermore, medicinal products must be manufactured in accordance with the principles of Good Manufacturing Practice, as set out in the AMWHV.
Manufacturers must appoint at least one “qualified person” to be ultimately responsible for certifying that each batch of finished product released onto the market has been manufactured in accordance with Good Manufacturing Practice and the specifications set out in the marketing authorisation.
A licence pursuant to section 13 of the AMG is required for the production of blood and blood products. Furthermore, the Transfusion Act sets out staffing requirements for blood donation facilities, among other matters.
Manufacturers must comply with good manufacturing practice. Compliance is presumed where the manufacturing is in accordance with the relevant harmonised standards – see Article 8 of the Cosmetics Regulation.
Pursuant to Article 4 of the Cosmetics Regulation, manufacturers must designate a “responsible person” within the EU who shall ensure compliance with the obligations set out in the Regulation for each cosmetic product.
Manufacturing authorisation is not required but product authorisation is; please see 2.4 Marketing and Sales.
Personal Protective Equipment
Manufacturers must ensure that PPE has been designed and manufactured in accordance with the essential health and safety requirements set out in Annex II, where applicable (Article 8(1) of the PPE Regulation).
All businesses that produce, process or distribute food must be registered, and each site must be registered.
Those who produce, manufacture or handle food of animal origin also require approval.
Regulation (EC) 852/2004 requires all food business operators to develop, implement and maintain food safety management systems based on the hazard analysis and critical control point (HACCP) principles.
There are no specific obligations relating to corporate social responsibility, the environment or sustainability that would affect only medical products or consumer health products. However, general legislation does also impact those products over their life cycle – for instance, the Packaging Act (Verpackungsgesetz) transposes the European Packaging and Packaging Waste Directive.
General Rules on Advertising
Regardless of the type of product, misleading advertising is in breach of anti-competition law. Pursuant to Section 5 of the Act Against Unfair Competition (Gesetz gegen den unlauteren Wettbewerb – UWG), misleading advertising includes all actions that may cause market participants to make a decision that they would not have made otherwise.
Misleading actions include:
For medical devices, Article 7 of the MDR contains its own restrictions on advertising, prohibiting the use of text, names, pictures and signs that may mislead with regard to the device’s intended purpose, safety and performance by:
The German Drug Advertising Act (Heilmittelwerbegesetz – HWG) also applies to medicines and, according to Section 1 (1) No 1a), to medical devices as defined by the MDR. It contains further restrictions and distinguishes between the lay and the professional audience.
Section 11 of the HWG contains a list of prohibitions concerning advertising to lay people. For example, it is not permitted to suggest that health would deteriorate if a certain product is not used. The use of testimonials that could mislead is also prohibited, as is the use of health stories.
Professional circles are exempt from the negative list in Section 11 of the HWG. Where the target group is “medical professionals”, the requirement of truthfulness of information applies, meaning statements need to be backed by scientific evidence.
In relation to pharmaceuticals, Section 12 of the HWG contains a further negative list concerning adverts aimed at lay audiences. It prohibits all advertising in relation to notifiable diseases, cancer, addictions (with the exception of nicotine addiction) and complications in pregnancy.
Pursuant to Article 72 of the BPR, any advertisement for biocidal products shall include the sentences “Use biocides safely. Always read the label and product information before use.”
Regulation (EU) No 655/2013 established common criteria for substantiating advertising claims related to cosmetic products. Advertising claims must be true, substantiated, fair and honest, as well as clear and understandable, and must enable informed decision-making by the target group. Advertising with legal compliance is not permitted. The standard of assessment is the perception of the average end consumer.
The European Commission has published “Guidelines to Commission Regulation (EU) No 655/2013 laying down common criteria for the justification for claims used in relation to cosmetic products” for further guidance.
Medical devices may only be placed on the market or put into service if they bear the CE marking, which may only be affixed if the medical device meets the Essential General Safety and Performance Requirements and the relevant conformity assessment procedure has been carried out. The Essential General Safety and Performance Requirements are defined in Annex I of the MDR.
Which conformity assessment procedure is to be carried out and to what extent an independent testing and certification body (notified body) is to be involved depend on the potential risk posed by devices. For this purpose, the MDR categorises devices into four classes (I, IIa, IIb, III):
Products in Class I must pass the conformity assessment procedures at the manufacturer’s own risk. The manufacturer must prepare documentation, including risk assessment documentation, to be submitted to the authorities if requested. Devices in Classes IIa, IIb and III are subject to more rigorous procedures before a CE mark can be placed on the product. For medical devices in these classes, notiﬁed bodies participate in the veriﬁcation procedures and provide certiﬁcates. Manufacturers can contact a European Notified Body of their choice, which is designated for the relevant procedure and the relevant product category. The German notified body is the Technical Inspection Association (TUV).
Medical apps and wearables
Medical apps and wearables that qualify as medical devices follow the same regime. However, the documents that manufacturers have to prepare to demonstrate the conformity of their app with the basic requirements of the MDR differ. They include the following in particular:
Although there are some exemptions (eg, for pharmacies and hospitals), a manufacturing licence from the competent local authority is required for the commercial manufacturing of pharmaceuticals (Section 13 of the AMG).
Applicants must comply with Good Manufacturing Practices, which are set out in the relevant regulations relating to the production, preparation, processing, transfilling, pre-packaging, marking and release of medicines.
A finished medicinal product can only be placed on the market after a marketing authorisation has been granted by the German Higher Federal Authority or the European Commission (Section 21 of the AMG).
Personal Protective Equipment
Under the PPE Regulation regime, manufacturers must:
Before a cosmetic product can be released on the market, proof must be provided that it is safe for human health during the course of its intended use or what are considered to be reasonably foreseeable conditions of its use. A safety assessment must be performed and a cosmetic product safety report provided to demonstrate compliance with Article 3 of Cosmetics Regulation (EC) 1223/2009, which in turn imports safety requirements from Directive 87/357/EEC.
Certain ingredients are prohibited under Chapter IV of Cosmetics Regulation (EC) 1223/2009, based on their threat to human health. The Annexes contain lists of chemical substances that are either banned or restricted for use in specific product types or to certain limits in the final product.
Further requirements imposed by the Regulation include:
The BPR regime imposes two anchor requirements before biocidal products can be made available on the market and used:
A simplified authorisation procedure is available where a biocidal product complies with all of the following conditions, which are set out in Article 25 of the BPR:
The applicant seeking authorisation must submit an application to the European Chemicals Agency (ECHA) indicating which member state competent authority will evaluate the application (Article 26 of the BPR).
Authorisation holders must keep records of the biocidal products they place on the market for at least ten years after placing on the market, or ten years after the date on which the authorisation was cancelled or expired, whichever is the earlier.
The German Federal Office of Consumer Protection and Food Safety must be notified the first time a food product is placed on the market (Section 5 of the NemV), and of the placing on the market of foods for specific groups (food intended for infants and young children, food for special medical purposes, and total diet replacement for weight control – Section 4a of the DiätV).
Certain food products require a manufacturing authorisation (such as food for special medical purposes). The following requirements must be met for authorisation to be granted for food products for special medical purposes (Sections 11 and 14 of the DiätV):
Additional requirements vary according to the type of food product for special medical purposes.
Generally, only specific additives can be used when manufacturing a food product (Section 5 of the DiätV).
Dietary supplements can only be manufactured if they comply with Section 3 of the NemV. These can only be manufactured using nutrients listed in Annex I to the Food Supplements Directive in the forms listed in Annex II of the same Directive. In addition, the purity criteria set out in Regulation (EU) 231/2012 apply.
German manufacturers of medical devices and health products have an advantage, alongside their other European competitors, in that the regulatory environment is largely aligned within the EU, and the framework is not too dissimilar in some other states (eg, Australia).
Germany as a market, while consumer-friendly, does not entertain mass tort claims as seen in the USA, for example, and damages are fairly low.
While German manufacturers will explore other markets, Germany is a popular target market for non-German manufacturers.
The regime for post-marketing obligations, including corrective actions and recalls, is set out in Chapter VII of the MDR and can be summarised briefly as follows.
The post-market obligations relating to pharmaceuticals are not dissimilar to the above, although some details differ.
Marketing authorisation holders and pharmaceutical companies are to:
Specific requirements for biocides include:
Under Regulation (EC) No 1223/2009, notification is required of serious undesirable effects without delay to the competent authority where the serious undesirable effect occurred, including all serious undesirable effects that are known or that may reasonably be expected to be known, the name of the cosmetic product concerned, enabling its specific identification, and the corrective measures taken, if any.
The Product Safety Act obliges manufacturers, importers and also distributors to place only safe products on the market. In addition, manufacturers must conduct active market surveillance. This means that, depending on the hazardousness of the product, spot checks must be carried out, complaints must be investigated and dealers must be informed.
Manufacturers must also take precautions that will lead to a rapid and reliable elimination of the hazard in the event of a recall becoming necessary. This means that the manufacturer must operate a risk management system and make a prior organisation for the recall case.
The competent authorities must be informed as soon as it is known or there are clear indications that a product on the market poses a risk to health and safety.
Regulatory oversight over pharmaceuticals and medical devices is divided between federal authorities and state level authorities.
The federal BfArM (Bundesinstitut für Arzneimittel und Medizinprodukte) is responsible for the following, among other things:
• authorising clinical investigations of medical devices;
• deciding on the classification of individual medical devices and their differentiation from other products, on request;
• evaluating incident reports on risks relating to products already on the market; and
• assessing notifications of serious incidents and corrective actions.
The state (Lander) level authorities are responsible for general oversight, inspections and enforcement (see Section 85 of the MPDG).
Notified bodies assess whether medical devices comply with the standards for CE marking and issue certifications.
The federal BfArM and the PEI are primarily responsible for issuing national marketing authorisations, for approving clinical trials, and for pharmacovigilance. The PEI assumes these responsibilities for biological pharmaceuticals and advanced therapy medical products, while the BfArM assumes them for all other pharmaceuticals (centralised authorisations are issued by the European Commission based on the evaluation of the European Medicines Agency).
The state (Lander) level authorities are responsible for issuing manufacturing, wholesale distribution and import licences, and for oversight, inspections and enforcement.
The BfArM and the PEI are themselves subject to oversight by the Federal Ministry of Health, which has the authority to issue directives.
The PEI is competent for regulating blood products. The state (Lander) authorities supervise the collection, processing, storage and testing of blood and blood products.
Generally, the states (Lander) are responsible for monitoring food products. However, there are some notable exceptions relating to notification requirements to federal authorities – see 2.1 Design and Manufacture.
The individual state (Lander) authorities are also responsible for authorising the manufacturing of specific products, such as iodised table salt substitute, dietetic food with added iodine compounds or food for special medical purposes (Section 11 (1) of the DiätV).
Authorisation of biocide products is a matter for the Federal Chemicals Agency (Bundesstelle für Chemikalien) at the BAuA.
The individual state (Lander) authorities are responsible for monitoring and market surveillance.
The market surveillance authorities responsible for products covered by the Product Safety Act are the administrative districts or trade supervisory offices.
BfArM has extensive powers (see Section 85(2) of the MPDG), ranging from making decisions on product classification where the notified body and the manufacturer cannot agree on the proper classification, through to stopping production and instigating recalls and seizures of products.
Pharmaceuticals and Blood Products
Under Section 69 of the AMG, the authorities have wide-ranging powers.
They issue the necessary directives to rectify any offences that have been identified and to prevent offences in the future. They may also prohibit the marketing of medicinal products or active substances and order their recall from the market and seize them in the following circumstances:
The Federal Chemicals Agency will inform the relevant Lander authority if an authorisation of a product has expired (Section 8 of the ChemBiozidDV); said authority will carry out any required surveillance functions (see also Other Products, below, for surveillance functions).
The competent authorities are tasked with verifying food businesses’ compliance with these due diligence obligations through regular, risk-based controls and sampling. To that end, establishments are classified into risk categories upon registration. In addition to the risk-based inspections, there are also ad hoc inspections to investigate acute issues. If violations are detected, the competent authorities take the necessary measures to remedy the situation, which may include recalls and product seizures.
Pursuant to Section 9 of the ProdSiG and the provision of the Market Surveillance Act (Marktüberwachungsgesetz – MüG), the relevant authorities are authorised to monitor by taking and assessing samples, and to take the necessary measures if they have reasonable grounds to suspect that a product does not comply with safety requirements.
For instance, they can:
Violations of the ProdSiG can lead to fines or imprisonment for the individuals responsible. Fines of up to EUR100,000 may be imposed on manufacturers and others (eg, importers) for certain offences, pursuant to Section 28 of the ProdSiG. Under Section 29, repeated and persistent violations of individual, specific obligations may result in a prison sentence of up to one year.
The AMG and MPDG provide for fines or sentences of up to three years – eg, for placing unsafe medicinal products or medical devices onto the market (Sections 95 and 96 of the AMG and Sections 92 and 93 of the MPDG).
Section 17 of the ChemBiozidDV renders certain breaches administrative offences, and makes any intentional acts that endanger the life or health of another or property of significant value criminal offences.
Real-life examples of the application of such penalties are rare and tend to involve counterfeit products rather than other safety-relevant breaches.
Claims in relation to defective products may be brought under the following:
The local civil courts (Amtsgerichte) will hear claims with value up to EUR5,000, and regional civil courts (Landgerichte) will hear higher-value matters, provided they have local jurisdiction pursuant to Regulation (EU) 1215/012 and the provisions of the Civil Procedure Rules (ZPO).
For cross-border cases, this means that proceedings may be brought in the courts for the place where the following applies:
For domestic cases, the court with local jurisdiction will also normally be the court either where the defendant is based or where the harmful event occurred.
For declaratory model proceedings (see 4.6 Class Actions, Representative Actions or Co-ordinated Proceedings), the only court with jurisdiction is the higher regional court (Oberlandesgericht) where the defendant is domiciled, if that domicile is in Germany (Section 32c of the ZPO).
As German costs rules abide by the loser pays principle, the losing party is liable for the court fees, the other party’s statutory legal fees and any disbursements for witnesses and expert evidence.
Parties may retain their lawyers on the basis of hourly rates. However, in the case of court proceedings, these fees must not be lower than the statutory fees, and the difference is not recoverable from the unsuccessful opponent.
Where the claimant does not succeed with the entire claim, they will only recover the corresponding percentage of costs – eg, if they are 60% successful, they will recover 60% of the costs.
There is no mechanism to displace the costs rules by way of “without prejudice” settlement offers or lodgements.
Where authorities issue decisions at any step of the product life cycle, the applicant can raise objections (Widerspruch). The timeframe for doing so will normally be one month. The authority will need to review its decision. If it agrees with the applicant, the matter will be resolved. If it concludes, upon review, that it cannot agree, the question is escalated to the authority with supervision over the original authority. If that authority denies the objection, the applicant will be free to issue proceedings in the administrative courts.
There are numerous decided court cases, particularly on questions of the classification of medicines and devices.
Declaratory Model Proceedings
German civil procedure does not permit class or group actions as seen in other jurisdictions. However, in 2018 declaratory model proceedings were introduced into the Code of Civil Procedure (Zivilprozessordnung). This type of proceeding allows certified consumer associations to seek declaratory findings on questions of fact.
These findings may be relevant for the subsequent determination of numerous individual consumer claims, and will bind consumers who had opted into the proceedings by registering their individual claim in a public claims register.
The litigation is conducted by the consumer association. The registered consumers are not parties to the proceedings. Registration in the claims register suspends the limitation period for the consumer claims registered.
There are certain requirements regarding the size and standing of consumer associations, which must:
Upon filing the action, the consumer association must show that the subject matter of the action affects the claims of at least ten consumers. At least 50 consumers must then register their claims in the claims register within two months of publication of the action in order for it to proceed. Please see the Germany Law and Practice chapter in the Collective Redress & Class Actions 2021 guide for further detail.
Claimants can also bring a joint claim against the same defendant(s), provided the same court has jurisdiction over the individual claims. The court can decide to separate the claims if they do not have a common background and are better dealt with separately.
It is common for party representatives to explore settlement options in informal pre-action correspondence.
Once a matter is litigious, the ZPO impose a duty on judges to explore settlement options between the parties. As a result, parties are encouraged to settle their dispute in court and formalised ADR such as mediation, which runs parallel to court proceedings, is far less common than it is in many other jurisdictions.
An unsafe product may feature in civil claims, administrative processes and even criminal proceedings. However, those three avenues have very different purposes – satisfaction of a private damages claim, safety of the public and imposition of a penalty on an offender, respectively – and can only influence each other to a limited extent.
Please see 5.2 Legislative Reform.
The European Commission has put forward a proposal for a new refreshed Regulation on product safety in line with the New Consumer Agenda. If passed, the proposed Regulation would repeal and replace the current General Product Safety Directive 2001/95/EC with a new Regulation for consumer product safety.
In 2022, the German government issued a roadmap of intended reforms in the healthcare and life sciences sector that are expected to have a significant impact on pharmaceutical and medical device companies as well as healthcare providers and technology companies.
The roadmap envisaged changes to the drug pricing and drug reimbursement rules; changes in the areas of supply of medicines, vaccines and medical devices; and enhanced digitalisation of healthcare, where Germany is perceived to be lagging behind. New rules relating to pricing and supply were passed on 23 June 2023. A draft Act relating to digitalisation was made public on 13 July 2023.
There are also plans to make amendments to other areas affecting the life sciences industry, such as food advertising and the regulation of cannabis.
Artificial intelligence in medicine is a rapidly growing field. Digitally available information is evaluated in order to assist in diagnostics and/or to recommend optimised therapies.
There is no specific national legislation regarding AI nor is there any proposed legislation in this field as relevant legislation at the EU level is expected to come into force before long: a Regulation commonly referred to as the AI Act, and a Directive on adapting non-contractual civil liability rules to artificial intelligence (the “AI Liability Directive”).
The European Parliament adopted its negotiating position on the AI Act on 14 June 2023. The proposed AI Act will establish obligations for providers and users depending on the level of risk from artificial intelligence.
The AI Liability Directive provides for two main instruments: (i) a rebuttable presumption of a causal link between the fault of the defendant and the output produced by the AI system or the failure of the AI system to produce an output, and (ii) in the case of damage caused by high-risk AI systems, access to evidence held by companies or providers is to be facilitated.
Supply Chain Due Diligence
For pharmaceutical companies and medical device manufacturers, supply chain due diligence is not a foreign concept. The EU Medical Devices Regulation (MDR) and the respective quality assurance system contain numerous specifications.
ESG standards for the protection of human rights and environmental concerns, on the other hand, had – until recently – not been a mandatory part of supply chain due diligence. In Germany, this changed as of 01 January 2023 with the coming into force of the Supply Chain Due Diligence Act (LkSG). The LkSG imposes extensive due diligence obligations on companies to prevent human rights violations and reduce environmental risks in the supply chain.
Which companies are affected?
The LkSG applies from 01 January 2023 initially to German companies with more than 3,000 employees in Germany. From 01 January 2024 it will also apply to those with more than 1,000 employees. Employees of group-affiliated subsidiaries are included. Smaller companies are indirectly affected if they are suppliers of companies subject to the LkSG.
If a company falls within the scope of application, the LkSG obligations can extend beyond German borders because it must implement the requirements not only at its own domestic and foreign sites, but also at all domestic and foreign group companies over which it has a determining influence.
What do companies have to do?
The main obligations concern the company’s own business area (including relevant group companies) and its direct supply chain (upstream and downstream).
Companies must establish a risk management system under the supervision of a human rights officer. At least annually, a risk analysis of the company’s own business unit and its direct suppliers must be carried out. This will be the basis for any preventive measures: appropriate procurement strategies, training and internal control measures must be implemented in the company’s own business area in order to minimise risks.
For direct suppliers, contractual assurances and regular inspections are indicated, potentially aided by external certifications. Complaints procedures must be put in place for the reporting of risks and violations.
If violations become known in a company’s own business area, they must be remedied. If violations occur at direct suppliers, the company must respond immediately with corrective measures. If no remedy is possible, in serious cases, it must terminate the business relationship.
In relation to indirect suppliers, the company will only be subject to similar duties if there are actual indications of risks.
Companies need to map LkSG requirements in their ESG processes, compliance systems, purchasing processes, audit routines and contracts with direct suppliers. In the healthcare sector, any LkSG-related changes in the supply chain may also result in significant regulatory follow-up work, such as changes to marketing authorisations.
What are the potential sanctions?
Fines for breaches may amount to up to 2% of annual worldwide turnover. Furthermore, fined companies can be excluded from public tenders.
Of even greater importance may be the reputational damage. According to one survey, one in three German customers actively inquires about the ecological footprint of medical products. Such customer concerns include packaging, sustainable materials and environmentally friendly disposal or recycling, short transport routes and energy efficiency.
Medicinal Products in the Environment
Tying in with the issues the LkSG seeks to address are increasing concerns around residues of active pharmaceutical ingredients in the environment.
The most frequently prescribed medicines are anti-inflammatory drugs, asthma medicines and psychotherapeutics. For veterinary medicine, the most prevalent groups of medicinal products are antibiotics and antiparasitics, followed by anti-inflammatories and hormonally active substances.
Numerous measurement programmes show that residues of active pharmaceutical ingredients continuously enter the environment, especially water bodies. The reason for this is simple: active pharmaceutical ingredients tend to be poorly degradable and mobile. Many substances are excreted unchanged by the human body. Thus, every year, many tonnes of active pharmaceutical ingredients for human use and their degradation products enter the environment via sewage treatment plants. Veterinary medicinal products are predominantly discharged into the environment with manure and slurry used as fertiliser.
Residues of medicinal products are now found almost everywhere and all year round in flowing waters, but also in soil and groundwater samples. According to statistics from the Federal Environment Agency (Umweltbundesamt), 414 different active pharmaceutical ingredients, metabolites and transformation products have so far been detected in the environment, especially in water bodies. Concentrations in the range of 0.1 to 1 microgram per litre are regularly measured for many active substances, but in rare cases also several micrograms per litre. There are also isolated traces of pharmaceuticals in drinking water.
Active pharmaceutical ingredients are biologically highly active substances that specifically intervene in the regulatory mechanism of organisms. They can, for example, influence metabolism, shift the hormonal balance or change the transmission of signals from cell to cell.
Due to their biological activity, it is obvious that medicinal products also have effects on other living organisms when they enter the environment. For many medicinal products, the extent of the risks to the environment cannot, however, be accurately assessed, mainly due to a lack of data and long-term studies. That said, a well-known example of effects on the environment is that of synthetic hormones such as 17α-ethinylestradiol (EE2), the active ingredient in the contraceptive pill. Even in the very low nanogram/litre range, it has a lasting impact on fish reproduction. Another example is that of antibiotic resistance. Multi-resistant micro-organisms have been detected in flowing waters downstream of sewage treatment plant outfalls, which are often exposed to particularly high concentrations of antibiotics.
Legal background and the federal authorities’ call for reform
The authorisation of and trade in medicinal products for humans and animals are regulated by the German Drug Act (Arzneimittelgesetz - AMG). The purpose of the Act is to ensure the quality, efficacy and safety of pharmaceuticals in the interest of a proper supply of medicinal products.
The problem of pharmaceutical residues in the environment was first addressed by the German legislature in the mid-1990s. The Federal Environment Agency has since been assessing potential environmental risks posed by veterinary medicinal products.
For medicinal products for human use, it was not until EU Directive 2001/83/EC, amended by Directive 2004/27/EC, that the assessment of potential effects on the environment was made mandatory in the authorisation process. Since then, documents enabling an assessment of the potential risk to the environment from the use of a medicinal product must be submitted as part of any authorisation procedure. It has since been possible to link the authorisation of medicinal products for humans to meeting requirements for the protection of the environment.
After a medicinal product has been authorised, no systematic collection of data on residues of medicinal products in the environment and on possible unintended effects is carried out.
Furthermore, environmental risk assessment documents have only been submitted for newly authorised medicinal products. As a result, hardly any information is available for the majority of so-called “old medicines” that have been marketed for decades. To date, sufficient information for assessing the environmental risk is only available for an estimated 10% of potentially environmentally relevant active pharmaceutical ingredients from human medicine.
There is an increasing number of voices wishing to close those gaps. This includes proposals to extend the established system of pharmacovigilance – post-authorisation monitoring – to environmental factors to help identify pollution “hotspots” and the ecological effects of medicinal products, to improve the risk assessment of medicinal products and ultimately to increase their environmental safety. That number of voices includes the Federal Environment Agency, the central environmental authority, itself.
Oncology and AI
Cancer is the second most common cause of death in Germany. AI technology is being used to assist with cancer care in many ways: from diagnosis to therapy to aftercare.
Gentle and AI-supported screening
Currently, the best weapon against cancer is early detection. Modern technologies such as swallowable video capsules help in screening for bowel cancer. The video can then be analysed with AI support to point out areas where cancer is suspected.
More precise surgical techniques
Minimally invasive surgery with robotic systems, as well as imaging during surgery, have made procedures better and have led to fewer complications. In addition, overall management around cancer surgery in hospitals has improved with hi-tech assistance.
Therapy recommendations through big data applications
Modern diagnostic software including DNA sequencing of tumour tissue enables personalised cancer management. “Non-responders” can be identified before they are exposed to the side effects of therapy.
Therapy support with an app
With apps, which are paid for by health insurance as “digital health applications”, cancer patients can document their medication, complaints and emotional state in a digital diary and send relevant information and evaluations to their doctor in real time. Such apps can also assist the many patients who require nutritional therapies alongside their oncological therapy.
It is important that the framework conditions in Germany are improved so that the medical technology progress described above can be transferred more quickly from research to application – for the benefit of patients.
Providers in this field are currently assessing the impact of the two important pieces of draft European legislation, the AI Act and the AI Liability Directive, in order to ensure that the new legal framework is taken into account and creates stability in the development of AI-based cancer treatments.