On 1 July 2024, Germany has enacted stricter requirements for the processing of health data when using cloud-computing services. The new Section 393 SGB V aims to establish a uniform standard for the use of cloud-computing services in the statutory healthcare system which covers around 90% of the German population. In this blog post, we describe the specific new requirements for the processing of health and social data using cloud-computing. We will also discuss whether the new rules may impact medical research and other projects that utilize cloud-computing for processing health data.

1. Scope and Background of Sec. 393 SGB V

The new Section 393 SGB V (Social Security Code – Book V) has been enacted with the recent “Digital Act” (see our earlier blog on the Digital Act). The title of Section 393 SGB V is “Cloud-Use in the Healthcare System“. Hence, it aims to impose specific requirements for healthcare service providers, statutory health insurances and their contract data processors when they process health data and social data using cloud-computing services. According to the German legislator, the provision aims at enabling the secure use of cloud services as a “modern, generally widespread technology in the healthcare sector and to create minimum technical standards for the use of IT systems based on cloud-computing”.

The new requirements apply to data processing using cloud-computing irrespective of whether the cloud-computing is offered by an external vendor or utilizes a tool that the healthcare providers or health insurance has developed on their own.

The term “cloud-computing service” is defined in the law as “a digital service that enables on-demand management and comprehensive remote access to a scalable and elastic pool of shared computing resources, even if these resources are distributed across multiple locations” (Section 384 Sentence 1 No. 5 SGB V). This reflects the corresponding definition of cloud-computing in Article 6 (30) of the NIS2-Directive (EU) 2022/2555 on cybersecurity measures. Services that fall under this definition include, inter alia, Infrastructure as a Service (IaaS), Platform as a Service (PaaS), and Software as a Service (SaaS).

With regard to the terms “health data” and “data processing”, we refer to the corresponding provisions of the GDPR. As far as the new rule applies to “social data”, this term refers to a specific legal concept in Germany that applies to personal data that is intended to be processed by health and other social security insurances.

In terms of timing, the new Section 393 SGB V applies as from 1 July 2024 – without any transition or grace period or grandfathering rules.

2. Consequences for Healthcare Providers and Cloud Service Providers

Under Section 393 SGB V the processing of health data by using cloud-computing services is subject to special requirements. Intended to ensure data security, these requirements include that the data (a) may only be processed in certain geographical regions, (b) that technical and organizational measures are taken so that cloud service providers meet certain security requirements.

a) Geographical Requirements and Data Transfer Issues

Geographically, Section 393 SGB V requires that health and social data may only be processed

  • In Germany,
  • In an EU or EEA member state, or
  • In a third country under an adequacy decision by the European Commission.

Moreover, the new rules require for all these cases that the data processing entity has a business establishment (“Niederlassung”) in Germany.

In conclusion, and in contrast to the requirements under the EU GDPR, Section 393 SGB V does not recognize the execution of the EU Standard Contractual Clauses (SCCs) or other means like Binding Corporate Rules as adequate guarantees for cloud-computing services when personal data is processed in a third country that is not subject to an adequacy decision by the European Commission.

b) Stricter Technical and Security Compliance Requirements

From a technical and organizational viewpoint, under Section 393 SGB V the processing of health and social data using cloud-computing services is subject to stricter requirements. As such, data processing using cloud-computing services need to be in compliance with these key conditions:

  • Appropriate technical and organizational measures have to be implemented to ensure data security.
  • A current C5 certificate is issued to the data processing entity with regard to the “C5 basic criteria” (see below) for the cloud systems and the technology used. The C5 (Cloud Computing Compliance Controls Catalogue) certificate is a cloud-computing standard developed by the German Federal Office for Information Security (“BSI“) to ensure cloud service providers meet specific security requirements. It outlines a comprehensive set of controls covering areas like data protection, incident management, and compliance with legal obligations.
  • The cloud-computing customer (i.e., the healthcare providers and/or insurances) must implement the conditions and criteria specified in the C5 certificate test report that. The C5 standard expects a shared responsibility between the customers and the cloud-computing service provider.

Until 30 June 2025, a C5 Type 1 certificate is considered “current” under Section 393 (4) SGB V. Thereafter, a new C5 Type 2 certificate is required. Certifications meeting equivalent security levels to BSI C5 may also be acceptable if so specified in a government ordinance to be issued by the German Federal Ministry of Health.

With respect to healthcare providers and health insurance companies, there are also some further technical and organizational requirements which these persons and entities have to meet when using cloud-computing services. These partly depend on the type of healthcare provider or institution concerned.

3. Implications for Medical Research with Pharmaceuticals and Medical Devices

Whether the new Section 393 SGB V also impacts the data processing in medical research projects is not fully clear. From the black letter of the law, certain health data and some medical research projects could be subject to the new requirements of Section 393 SGB V.

A number of medical and clinical research projects typically process health data from patients that are or were treated under the statutory health system. These projects especially include non-interventional studies with pharmaceuticals, post-market clinical follow up (PMCF) investigations with medical devices as well as registry studies that focus on a particular product or disease. Generally, research that involves real-world-data or aims to generate real-world-data appears relevant hereunder. Even clinical trials regularly process data from regular medical treatments that are conducted in the statutory health system so that the health data falls under Section 393 SGB V.

Therefore, the question arises whether the processing of health data for such medical research projects by healthcare providers and sponsor companies and their data processors (e.g., CROs) is also subject to the new compliance requirements of Section 393 SGB V if they use cloud-computing. The answer to this question is not straightforward but rather case-facts-dependent and requires a careful analysis of the individual circumstances.

While the risk appears low that clinical trials with pharmaceuticals, medical devices and diagnostics will be impacted by Section 393 SGB V, the situation appears different for studies that collect real-world data like non-interventional studies, PMCF studies or product/disease registries. For these, there is a risk that they may be subject to the requirements of Section 393 SGB V.

Relevant aspects to make an assessment for the respective research projects include the type of study/research, the origin of the processed health data, the technologies used for data processing and the legal status of the person processing the data.

4. Final remarks

With the new Section 393 SGB V, Germany has enacted new compliance and security requirements for the processing of health data when using cloud-computing services. The new requirements apply to healthcare providers, health insurances and their data processors and cloud-computing service providers that offer services to these groups. In this blog post, we have described the new technical, organizational and compliance requirements.

The new rules may also impact certain medical research projects that process (real-world) health data by using cloud-computing services. Such projects can include non-interventional studies with pharmaceuticals, PMCF studies with medical devices or (product/disease-focused) registry studies. Therefore, pharmaceutical and medical device companies should also review the potential impact of the new rules on their research activities.

The Life Sciences Team of Covington & Burling LLP in Frankfurt (Germany) will continue monitoring the developments in this area and is well positioned to assist clients in navigating through the various ongoing and upcoming legislative projects.

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Photo: View from the business delegation to the negotiations in Montreal, of which Covington were part.

On August 16th, 2024, in Montreal, Canada, parties to the Convention on Biological Diversity (“CBD”) agreed on the draft text (“Draft decision”) for the operationalization of the Global multilateral mechanism for benefit-sharing from the use of digital sequence information (“DSI”) on genetic resources (“MLM”), which may be adopted at the 16th meeting of the Conference of the Parties (“COP-16”) in October 2024.

Once the MLM is operational, companies which use DSI in their product development will be expected to share benefits (both monetary and non-monetary) to a global fund.  As we previously reported, the revenue from the MLM, initially expected to reach 15 billion USD per year, is intended for biodiversity preservation.  This extraordinarily ambitious figure was once again confirmed in Montreal. This explains the wave of diplomatic support and eagerness to have the MLM operational after COP16.  However, as lawyers we are very concerned that the rushed negotiations will result in an even more fragmented landscape of national ABS laws and diverging requirements.

In this blog post, we highlight five key takeaways from the negotiations and summarize the main features of the four MLM options that companies should be aware of.

Business sectors in scope

“Users” of “DSI” will be in scope of the new MLM.  The negotiations began in 2016, and for eight years, the negotiators have consistently refused to define “DSI” due to the technical complexity of such task.  Some countries even consider a definition unnecessary, as the broader the better.  The Draft decision currently lists seven sectors that the negotiators consider “highly reliant on” the use of DSI and thus in scope.  The evidence for selecting these sectors is a highly questionable research report that has been heavily criticized by companies and trade associations:

  • Pharmaceuticals, e.g., pharmaceuticals manufacturing, biopharmaceutics, life science research;
  • Nutraceuticals, e.g., food and health supplements;
  • Cosmetics, e.g., development and production of new cosmetics, production of existing cosmetics using synthetic production means;
  • Plant and animal breeding and agricultural biotechnology industries, e.g., plant breeding and crop modification research, genetic modification of livestock, support activities for plant production and veterinary pharmaceuticals, crop protection products, animal breeding, plant breeding and improving food safety;
  • Industrial biotechnology;
  • Laboratory equipment associated with the sequencing and use of DSI, including reagents and supplies; and
  • Information, scientific and technical services related to DSI, e.g., software and artificial intelligence used to characterize and analyse or store big data associated with DSI, as well as industrial sequencing or characterizing of DSI as a third-party producer for other industries, such as pharmaceuticals, cosmetics and agriculture.

The EU made a proposal that if companies can demonstrate that they do not “highly rely on the use of DSI”, they could be excluded from the MLM.  However, there was strong opposition to this language, and it may not make the final text.

Tax-like payments to the MLM

The Draft decision currently contains four options requiring companies to pay to the MLM:

  • Option A. Users of DSI should pay X% of the [profits][revenue][turnover] generated by products and services placed on the market that have benefited from the use of digital sequence information on genetic resources in their development.
  • Option B. Users of DSI in sectors that are highly reliant on the use of DSI in their commercial activities should contribute to the global fund X% of their [profits][revenue][turnover][sales].
  • Option C. A contribution to the global fund of 1% of the retail value of all products and services that have been developed or created using DSI.
  • Option D. Users of DSI that actively use DSI should contribute a portion of their [revenue][profit] to the global fund.

The negotiators aim to create a payer base as broad as possible and make payments easy to collect.  Hence, Options A, B and D resemble a corporate income tax, whereas Option C is closer to a sales tax.  It was our impression that Options C and D are very unlikely to survive, with Option B most likely to be the final choice, possibly in a modified form.  We noted that even the UK expressed a preference for Option B, if the language would be tweaked.

A positive development in Montreal was the inclusion of language stating that users will receive “receipts” once they make their annual contributions to the MLM.  Such receipts could serve as “certificates of compliance” before national authorities, that “indicate compliance with the multilateral mechanism, provided that the used sequences have been published in a public database with the approval of the national authorities of the country of origin of the genetic resource from which the digital sequence information is derived.”

Non-monetary benefit-sharing obligations for companies

There was consensus among negotiators that all user of DSI should make non-monetary contributions, but only users who “generate money” from the use of DSI should be obliged to pay to the fund.  This distinction was put in place to protect non-profit research entities, e.g., databases and academic institutions.

Notably, the options for non-monetary contributions currently contain language suggesting that obligatory tech-transfers could be considered.  This proposal faced strong pushback from developed countries, with Canada stating that they are “not in any position to do forced expropriation from right holders.”  Other forms of non-monetary benefit-sharing include, e.g., capacity building and development, participatory and community-based research, knowledge-sharing, technical and scientifical cooperation.

Relationship with other international ABS mechanism and national ABS laws already regulating the use of DSI

With respect to other ABS mechanisms that may also apply to the use of DSI (High seas treaty, WHO Pandemic treaty, Plant treaty), negotiators agree that there should be “cooperation and support” between the international mechanisms.  However, negotiators appear to consider that real collaboration between multiple UN agencies is never going to happen.  As a result, real coordination and coherence between different ABS mechanisms is largely utopian.  As a result, users of DSI will have to make several monetary contributions, if the DSI they are using is regulated by different international mechanism simultaneously.  As Covington Partner Bart Van Vooren explained in his presentation during a side event at the Montreal negotiations, creating such a “Hybrid system” of overlapping obligations, will be extremely difficult to navigate for companies.

Implementation and Enforcement

International law cannot create binding obligations for “users of DSI”, so the MLM will be implemented through the national laws of the 196 countries that are parties to the CBD.  Some countries may choose to adapt their existing ABS laws under the Nagoya Protocol, others may adopt tax(-like) measures, while yet others are likely to outright decline to implement the MLM (e.g., Japan).  The United States attended the negotiations in Montreal even though it is not a party to the CBD, and stated expressly that “the U.S. cannot commit to mandate US users to contribute to the mechanism.” 

In short, it has become clear that the MLM will co-exist with national ABS laws.  This means that there will be multiple, co-existing legal sources for ABS obligations that could apply to the same (activity on) physical genetic resource, or (genetic, proteomic, metabolomic…) information derived from it. A user wishing to conduct R&D on genetic resources will have to determine which ABS regime(s) to comply with.

In the European Union, the ABS laws under the Nagoya Protocol are enforced through a Regulation in force since 2014.  This year, the Corporate Sustainability Due Diligence Directive (“CS3D”) has been added on top.  The CS3D expressly applies to compliance with the Biodiversity Convention and national implementing legislation (as well as the Nagoya Protocol).  As a result: compliance with the (globally diverse) implementation of the MLM on DSI will be enforced in the EU.  The CS3D will apply to EU and non-EU companies with a turnover in the EU in excess of 450 million EUR.  We will do a separate blog on CS3D and enforcement of ABS laws in the EU, so watch this space.   

For any questions, do reach out to Bart Van Vooren who leads Covington’s unique practice on Access and Benefit-Sharing from Biodiversity.

Last week, on 4 July 2024, the German Parliament (Bundestag) has passed significant changes to the country’s drug pricing and reimbursement laws. Just six months after the German Federal Health Ministry (BMG) presented a first draft bill for a “Medical Research Act” (Medizinforschungsgesetz or MFG), the German Parliament has now accepted a modified version of that bill. The Medical Research Act mainly amends (1) national laws for clinical trials with drugs and medical devices, (2) rules for ATMPs (3) drug pricing and reimbursement laws (AMNOG) and (4) initiates a re-organization of the regulatory agencies and ethics committees.

In this blog, we take a closer look at the much-discussed changes in the German drug pricing and reimbursement area. We will focus on two key elements:

  • The controversial new feature of “confidential reimbursement prices”; and
  • The new link between drug pricing and local clinical trials which offers pricing incentives for companies that can show that a “relevant part”  of the clinical trials for a new medicine were conducted in Germany.

We had noted in an earlier blog that the German rules for pharmaceutical pricing and reimbursement are among the most complicated legal areas in the entire world of life sciences laws. With the now coming new laws, Germany adds some additional complexity to its system.

1. Background

The discussed changes to the German drug pricing and reimbursement laws are part of the German Government’s new National Pharma Strategy that aims to enhance Germany’s attractiveness as a place for pharmaceutical research, development, and manufacturing. The Government presented an underlying strategy paper in December 2023 and the Medical Research Act is the first legislative implementation step of that strategy. For an overview of this new National Pharma Strategy, we invite you to read our previous blog on this topic.

The Medical Research Act was first presented to stakeholders in late January 2024. For a comprehensive overview of this first draft, please see our earlier earlier blog. After an initial consultation, the Government revised the draft and initiated the legislative process at the end of May 2024. Overall, the Government has deployed an unusually fast pace and was successful with its plan to get the bill through Parliament before the summer break.

As noted above, the Medical Research Act introduces changes to several important German healthcare laws, the probably most controversially discussed amendments were those affecting the pricing and reimbursement for pharmaceuticals.

2. Existing German Drug Pricing and Reimbursement Procedure (Market Access)

Before discussing the specific changes to the drug pricing & reimbursement rules, we will briefly summarize the current framework for the market access and pricing/reimbursement of new medicines in Germany.

Drug pricing and reimbursement laws in Germany have undergone several reforms in the last decades. Most notably, in 2011, the so-called “AMNOG” (Arzneimittelmarktneuordnungsgesetz) reform enacted a new market access process for new drugs with a specific benefit-assessment. The AMNOG process has three steps:

  • First, an early benefit assessment is performed by the Joint Federal Committee (Gemeinsamer Bundesausschuss or GBA) to assess and determine the drug’s “additional benefit” against the relevant comparator therapy. This first step is important for the entire process and the outcome of the pricing negotiations.
  • Second, the pharmaceutical company negotiates the reimbursement price with the federal health insurance association (GKV-Spitzenverband) based on the outcome of the first step and especially the determined “additional benefit”. The “additional benefit” is the key criterion to negotiate the reimbursement price of the drug.
  • Third, if the company and health insurance association cannot agree to a reimbursement price, they enter into an arbitration process with a statutory arbitration board.
  • Legal remedies: If any party is unhappy with the arbitral award, they have the right to challenge the award before the competent courts.

Besides the AMNOG process, Germany has many other legal instruments and measures that aim to regulate the pricing and reimbursement of pharmaceuticals. For the purposes of this blog, however, we will abstain from discussing these other instruments and measures.

3. The new instrument of “Confidential Reimbursement Prices”

a) Purpose of Confidential Reimbursement Prices

One of the new features that the Medical Research Act introduces will be the option for pharmaceutical companies to keep the reimbursement prices that result from the AMNOG process confidential. This idea results from the observation that the German reimbursement prices were regularly used as reference prices in other countries so that unfavorable prices in Germany negatively impacted prices abroad. Because of this, some drug companies decided to remove drugs from the German market.

Hence, to avoid such market withdrawals from Germany and effectively, to impede international reference pricing, the Government was willing to offer the companies the option to keep the reimbursement price confidential. Consequently, the confidential reimbursement price would not be listed in public sources and not even be disclosed to pharmacies. In conclusion, this approach permits pharmaceutical companies to have two different prices for their product: the “public” price on the product package and the “real price” that was agreed in the AMNOG process but is kept confidential.

b) Practical Implementation and Process

While under the first draft of the Medical Research Act, there was a rather low threshold to request such confidentiality, the final version of the Medical Research Act has raised the bar and added new qualifiers. As such, to achieve confidentiality (1) the drug company needs to demonstrate local R&D activities in Germany; and (2) has to pay a 9% discount on the agreed AMNOG reimbursement price (i.e., this refers to the company’s sales price and not the final pharmacy-sales price).

Insofar, the confidentiality has an own price tag: 9% of the company’s sales price for the drug.

From a practical perspective, the now agreed rules set forth following (standard) requirements and process for setting “confidential reimbursement prices”:

  • The drug must have gone through the AMNOG process with a finally determined reimbursement price.
  • Within five (5) days after the price is determined, the pharmaceutical company can send a request for confidentiality to the federal health insurance association (GKV-Spitzenverband).
    This request must contain documentation that proves that the company has:
    – A pharmaceutical research department in Germany,
    – Own projects and collaborations with public institutions in preclinical or clinical pharmaceutical research in Germany.
  • Within seven (7) days of receipt, the GKV-Spitzenverband decides whether “sufficient“ proof has been provided.
    🡲 If this is confirmed, the reimbursement price stays confidential until the expiry of the product’s regulatory data exclusivity period.
    🡲 If the proof is deemed “not sufficient”, the matter is referred to the arbitration board of the AMNOG system that has to assess the provided documentation and make a final decision.
  • The final version of the Medical Research Act is silent on the question whether and which legal remedies are available to pharmaceutical companies and possibly the GKV-Spitzenverband depending on the decision of the arbitration board. We expect that in any event the pharmaceutical companies will be entitled to appeal in court negative decisions of the arbitration board.

The law also offers an alternative timeline for the submission of the required proof. Instead of the five days mentioned above, the MFG also allows the pharmaceutical company to submit the proof already much earlier and way before the reimbursement price is determined. As such, the company can submit the proof within six months after placing the drug on the market. This alternative timeline aims to give companies more flexibility in their planning, as this option would allow them to get certainty (before the reimbursement is determined) whether they are eligible for the “confidentiality” mechanism. Hence, they could consider this outcome in their negotiations of the reimbursement price.

c) “Sunset Clause“ for availability of the Confidentiality Option

The new rules for confidential reimbursement prices shall apply as from 1 January 2025.

With respect to their validity, the lawmaker has set forth a “sunset clause” for the confidentiality option. Hereunder, the confidentiality option only applies to drugs whose AMNOG reimbursement pricing procedure is concluded until 30 June 2028. This time limitation was implemented because of the novelty of this instrument and to allow an evaluation of its effects on the German healthcare system.

d) Compensation Obligation of Companies that opt for Confidentiality

To effectively still apply the “real price”, the final Medical Research Act maintained a reimbursement system that was already present in the initial draft laws: Companies that opt for confidentiality will have an obligation to reimburse the health insurance funds and other payors the overpaid difference between the “public” and the “real price” (i.e., the company’s sales price). On top of this reimbursement, the company also has to reimburse the health insurances the overpaid portions of the mandatory surcharges for pharmacies and wholesalers and VAT.

This means, that the final price companies have to pay for the “confidentiality” of their reimbursement prices will be even higher than the above mentioned “price tag” of 9% of the company’s sales price.

e) Disclosure claims by third parties leading to Incomplete Confidentiality

Despite the articulated aim to secure confidentiality, in practice the confidentiality will be incomplete. This is because of the fact that the MFG grants certain players and companies in healthcare system a right to get access to the confidential price of the drug. These players include certain healthcare institutions, importers and legal entities that purchase the drug. Further, generic drug manufacturers may request information about the “real” reimbursement price when the product’s regulatory data exclusivity expires within 12 months or less.

4. Drug Pricing linked to local clinical trials in Germany

Additionally, and separate from the confidential reimbursement price option, the Medical Research Act introduces a new legal tool that creates a link between drug pricing and local clinical trial activities. In fact, another new provision sets forth drug pricing incentives for pharmaceutical companies that can demonstrate that a “relevant part” of the clinical trials for their new medicine were conducted in Germany.

Drugs for which a relevant portion of clinical trials were conducted in Germany will be given more leeway in reimbursement negotiations. Hence, the question is: when is a “relevant part” of the study conducted in Germany?  Pursuant to the law, at least five (5) percent of all participants in the clinical trial must be enrolled in German clinical trial sites.

If the pharmaceutical company can prove that at least 5% of the clinical trial participants for the new product were enrolled in Germany, that product’s pricing will benefit from a newly introduced legal relaxation of certain pricing guardrails. In fact, in that case, some of the so-called “pricing guardrails” will not apply for the determination of the reimbursement price of that product. We refrain from further elaborations on these aspects as the respective German rules and the mechanics of the pricing procedures are very complicated so that this would go beyond the scope of this blog.

Overall, the direction is clear: Drug pricing in Germany is becoming more intertwined with local clinical trials and R&D infrastructures and activities in Germany.

5. Further Comments and Next Steps

As to next steps and timing: Before the Medical Research Act comes into force, the Parliament-approved bill still needs to pass the German Federal Council (Bundesrat). We expect that the Medical Research Act will pass the Bundesrat after the summer break and will be promulgated in the fourth quarter of 2024. Then, the different sections of the Medical Research Act will come into force at different times. The here outlined provisions on the “confidential reimbursement price” and the new link between drug pricing and local clinical trials will apply as from 1 January 2025.

The final version of the Medical Research Act brought a set of last-minute changes and additions, especially in the area of drug pricing and reimbursement.  Clearly, the German Government wants to link drug prices with the requirement for local clinical trials and R&D infrastructures established in Germany. Simultaneously, the new laws reduce the burden for clinical trials with pharmaceuticals, medical devices and IVDs and speed up local approval processes for new studies. We have extensively discussed the planned changes for clinical trials and refer to our respective previous blog.

The “confidential reimbursement prices” as they are now stipulated do not only come with a high entry barrier (local R&D activities and infrastructures) but also at a high price (9% additional markdown). Initially, the confidentiality idea was intended to reduce the number of drugs that get withdrawn from the German market due to unfavorable reimbursement prices. Now, under the final provisions, it is difficult to imagine that companies will choose an additional markdown of 9% on an already unfavorable price over a withdrawal from Germany. In their decision making companies will also consider that the Medical Research Act introduces a low-threshold right to information about the “real” reimbursement price. Therefore, maintaining the confidentiality – despite its high price – appears rather difficult.

In comparison, the newly adopted local research incentives are a much more appealing approach to both bring research and development to Germany and retaining drugs in the German market. The removal of some of the restraining “pricing guardrails” can relieve individual drugs from otherwise obligatory two-digit markdowns. With a clear understanding of how to take advantages of such incentives, pharma companies are likely to organize their R&D activities accordingly.

With the Medical Research Act set to take effect, it will be important for pharmaceutical companies to review the new rules and their implications for their businesses and R&D activities. The new rules may especially become relevant for the planning of clinical trials for new products if these are supposed to be launched in Germany. In the future, pharmaceutical companies will need to consider the new pricing and reimbursement rules already when planning clinical trials and determining clinical trial countries and selecting trial sites.

Finally, it will be interesting to see whether the German Government will extend the new concepts for linking pricing with local clinical research activities to medical devices and IVDs. This appears as a possible scenario moving forward but will (also) depend on the evaluation of the now approved legal instruments.

The Life Sciences Team of Covington & Burling LLP in Frankfurt (Germany) will continue monitoring the developments in this area and is well positioned to assist clients in navigating through the various ongoing and upcoming legislative projects.

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1.  Background

Gene and cell therapies are on the rise. On June 12, 2024, the German Federal Government was handed the strategy paper for a National Strategy for Gene and Cell Therapies. The paper is intended to serve as a basis for policymaking to give Germany a leading role in the field of gene and cell therapies (GCT) in Europe. The German Government recognizes that the age of GCT has started but that there are many legal, regulatory and practical shortcomings that impedes research and development of GCTs in Germany.

Back in the fall of 2022, the German Federal Ministry of Education and Research (BMBF) had commissioned the Berlin Institute of Health (BIH) to coordinate and moderate the development of a National Strategy for GCT. Eight working groups were created to develop the National GCT Strategy, with a total of about 150 experts from various stakeholder groups. The result of their work is a document divided into eight fields of action, in which various measures are proposed to achieve strategic goals in the field of GCT.

The National GCT Strategy is one of several highly targeted measures with which the German Government aims to make Germany more attractive as a location for pharmaceutical and healthcare innovation. Just six months ago, in December 2023, the Federal Ministry of Health (BMG) presented a strategy paper for the new National Pharma Strategy. We reported on this in detail in an earlier Covington blog.

Unlike the National Pharma Strategy, which was developed under the Social Democrat-led Federal Ministry of Health (BMG), the National Strategy for GCT is an initiative led by the Federal Ministry of Education and Research which is led by the liberal party FDP. The BMBF appears keen to play a leading role in the establishment of GCT in Germany. Industry stakeholders may welcome this as the BMBF is known to be a more industry-friendly part of the German Government than the BMG.

2.  The National Pharma Strategy as a possible role model

The example of the National Pharma Strategy and its rapid implementation already indicates what the next steps in the National GCT Strategy may be. Shortly after the National Pharma Strategy was agreed upon, the first draft of the “Medical Research Act” was presented on 26 January 2024 to implement key elements of the Pharma Strategy, including amendments in the areas of clinical trials, ATMPs and pharmaceutical pricing and reimbursement (AMNOG). We reported on this in two earlier blogs that discussed the proposed changes for clinical trials and drug pricing. The draft Medical Research Act is expected to come into force in the fall of 2024. Hence, the current German Government is keen to act fast to strengthen Germany as a place for pharmaceutical innovation and R&D.

As the German Government recognizes gene and cell therapies are a key strategic area, a similarly fast and determined implementation in the form of new policies and legislation could also be expected for the National GCT Strategy.

3.  Key Elements of the National Strategy for Gene and Cell-based Therapies

The National GCT Strategy as reflected in the new strategy paper is divided into eight “fields of action” in which the participating stakeholders see a need for action in order to put Germany in a leading position. Within each field of action, the paper defines strategic goals and proposes specific measures. It also indicates the time frame in which the implementation of the measure is expected, and which circumstances are considered to be indicators of success. In the following, we provide an overview of the eight fields of action, the respective strategic objectives and some proposed implementation measures:

Field of Action 1: Connecting and supporting stakeholders

Strategic objectives:

  • Coordinated implementation of the measures of the National GCT Strategy.
  • Strengthening political responsibility for the national future topic of gene and cell-based therapies.
  • Strengthening national GCT networks.
  • Establishing and expanding national and international networking activities in the field of GCT.

Selected proposed measures:

  • Establishing a governance structure for implementing the National GCT Strategy with the participation of the relevant stakeholders.
  • The creation of a “GCT network map” intended to provide a structured overview of the relevant GCT stakeholders, including those from research, healthcare, industry and government.
  • Exchange of information within the framework of networks with international and European clinical research groups, international regulators, as well as investors and donors.

Field of Action 2: Training and strengthening of skills in the area of GCT

Strategic objectives:

  • Development of training and professional development programs for junior and senior professionals, as well as improvement of the infrastructure necessary for training and professional development.
  • Development of appropriate career, bonus and interaction concepts.

Field of Action 3: Technology Transfer

Strategic objectives:

  • Improving the conditions for the early recognition and realization of the innovative potential of scientific findings.
  • Holistic advice and evaluation of transfer projects that cover the entire development process of an innovative investigational medicinal product (IMP), from production to application in patients.
  • Facilitating the utilization of the social and/or economic potential of scientific findings.
  • Establishing the recognition of technology transfer achievements as part of the scientific reputation of individual scientists and institutions.

Selected proposed measures:

  • Establishing a product development unit focused on GCT that can train, advise and support technology transfer institutions and key players in translational projects.
  • Enabling start-ups by providing clear, standardized terms and conditions for participation and licensing, as well as access to the necessary GCT infrastructure.
  • Successful technology transfer and support for spin-offs should be anchored in the state university laws as a goal of medical universities. Successful technology transfer achievements are also to be included in the academic institutions’ ratings.

Field of Action 4: Standards, Regulations and Regulatory Framework

Strategic objectives:

  • Defragmentation and standardization of competencies and processes in clinical R&D of GCT, as well as strengthening of the higher federal authority and its resources as a single point of contact.
  • Continuous adaptation of regulatory processes to developments in the GCT sector.
  • Increasing the availability of low-threshold regulatory advice.

Selected proposed measures:

  • Concentration of GCT-related regulatory procedures and responsibilities, including the manufacturing authorization, at the Paul Ehrlich Institute (PEI). According to this proposal, the approval of applications for clinical trials and the evaluation of medical devices with GCT-related applications, as well as expertise for products from bioreactor processes (GCT, antibodies, mRNA, etc.), are to be coordinated by a central point.
  • Strengthening the PEI with more resources to avoid a loss of expertise.
  • The introduction of sandbox procedures as innovation space. For new developments, such as gene and cell therapies, a procedure should be created that enables quick and flexible assessments.  

Field of Action 5: Expansion of quality and capacities in the area of GMP production

Strategic objectives:

  • Need-based development and expansion of qualified GMP infrastructures (manufacturing and quality control capacities), in particular for starting materials and for complex GCT products.
  • Ensuring the necessary personnel capacities and expertise for GCT production and quality control.
  • Increasing efficiency and accelerating processes in manufacturing.
  • Further development and risk-based streamlining of the framework conditions.

Selected proposed measures:

  • Creation of a central GCT-GMP and regulatory committee, consisting of all relevant stakeholders (including, for example, the BMG, PEI, industry), which continuously analyzes progress towards the strategic goals and drives it forward.
  • The targeted provision of sufficient financial resources from the German Government, the German States (Länder) and other capital providers for the establishment, expansion and operation of GMP infrastructures.
  • Creation of a central national production facility for the manufacture of critical starting materials for GCT for delivery to all commissioning GMP facilities.

Field of Action 6: Research and Development

Strategic objectives:

  • Improving the structural conditions for technology transfer research and development.
  • Identification and promotion of future GCT topics.
  • Improving the organizational and regulatory framework for preclinical and clinical GCT studies.
  • Ensuring the involvement of patients, patient advocates and patient organizations.
  • Changing attitudes and strengthening a bio-entrepreneurial spirit in the German GCT community.

Selected proposed measures:

  • The establishment of a national GCT network.
  • The establishment of new flexible funding formats with short lead times to cover currently not adequately addressed needs.  
  • The definition of standards for patient involvement in project budgets and the remuneration of patient representatives for their involvement in projects and selection procedures.

Field of Action 7: Market authorization and transition to healthcare provision

Strategic objectives:

  • Easier access to and targeted selection of patients for a GCT.
  • Flexibilization of reimbursement and care models in the application of GCT.
  • High-quality treatment of patients with innovative therapies by establishing interdisciplinary GCT treatment centers.
  • Optimization and establishment of the data landscape for the purpose of versatile usability in research and tracking of long-term data of GCT.

Selected proposed measures:

  • Ensuring quality assurance, including the establishment of therapy decision boards for the diagnosis and treatment of patients, by adapting reimbursement models.
  • Maintaining the necessary flexibility in the benefit assessment and pricing in the German AMNOG process in order to maintain access to and availability of GCT for patients.
  • Standardization of the collection and documentation of clinical data by linking existing registries and establishing a method-specific national GCT registry.

Field of Action 8: Interaction with Society

Strategic objectives:

  • Informing society about GCT by providing reliable and target group-specific information.
  • Support decision-makers by strengthening interactions with politics and open-minded social discourse.
  • Targeted promotion of the benefits of GCT through increased involvement and participation of research funding organizations, foundations and civil society.

Selected proposed measures:

  • Establishing a central, web-based point of contact for providing quality-checked information.
  • Compiling or creating target-group-specific information for various stakeholder groups.

4.  What will be the Next Steps?

The fast speed of the recent legislative proposals in the field of German healthcare and pharma laws has shown that the practical implementation of elements of the National Strategy for Gene and Cell Therapies could come similarly fast. This would also be in line with the approach by the German Government reflected in the new National Pharma Strategy.

However, there will still be some steps to take from the just presented strategy paper for a National Strategy for Gene and Cell Therapies up to the point when this will be implemented. It is likely that the implementation of the National GCT Strategy will be accompanied by significant legislative and policy changes. It will also be important to see how this new legislation will fit in with the overarching National Pharma Strategy and other currently ongoing legislation activities such as the Medical Research Act.

As the areas of gene and cell therapies and ATMPs are very specific and complex, it is likely that the German Government and other policymakers will be open to consider the input of the relevant industry stakeholders to convert the National GCT Strategy into new laws and policies. Insofar, the life sciences industry companies and stakeholders now have a window of opportunity to weigh in and get involved in the next steps of the policymaking and implementation of the new German Strategy for Gene and Cell Therapies.

The Life Sciences Team of Covington & Burling LLP in Frankfurt (Germany) will continue monitoring the developments in this area and is well positioned to assist clients in navigating through the various ongoing and upcoming legislative projects.

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In this episode of Covington’s Life Sciences Audiocast, Seán Finan and Rosa Oyarzabal discuss some important recent developments in the regulation of sustainability and green claims and labelling schemes, and the ever-increasing enforcement risk that comes with greenwashing.

On May 21, 2024, the UK Medicines and Healthcare products Regulatory Agency (“MHRA”) published a statement of policy intent for UK recognition of international regulatory approvals of certain medical devices (the “Statement”).  The Statement follows the Government response to the 2021 consultation on the future regulation of medical devices in the UK that details an intention to introduce alternative routes to market for medical devices, such as utilizing approvals from other countries and Medical Device Single Audit Program (“MDSAP”) certificates, in addition to the current UK Conformity Assessed (“UKCA”) marking process.

The MHRA has already taken similar steps in the medicines space, adopting a new International Recognition Procedure (“IRP”) in January 2024.

In relation to devices, the Statement applies to certain medical devices placed on the market in Great Britain.  For relevant devices, the MHRA proposes to recognize foreign approvals from regulators in Australia, Canada, EU/EEA and USA (which is a smaller number of acceptable regulators than under the MHRA’s IRP for medicines).  The Statement expressly excludes a number of medical devices from international recognition, including software as a medical device (“SaMD”) (including AI as a medical device (“AIaMD”)) and companion diagnostic products approved via US 510(k) (a route which relies on equivalence to a predicate).

The proposed framework is a draft and the final version is expected to come into force in 2025 at the same time as future core regulations.  It also remains the government’s intention to introduce transitional arrangements for UKCA marked devices at the same time.

Continue Reading UK MHRA Announces Intention To Recognize Certain International Approvals For Certain Medical Devices

In this episode of Covington’s Life Sciences Audiocast, Marie Doyle-Rossi, Anna Wawrzyniak, and Valeria Sturla discuss the position adopted by the European Parliament on 10 April 2024 on the Commission proposal to reform the core EU pharmaceutical legislation.

Parliament’s position comes less than a year since the Commission published its proposal, and constitutes a significant step in the legislative process. Although many of the Parliament’s amendments to the Commission proposal can be seen as improvements by the innovative industry, many challenges and some unresolved questions remain, especially in relation to the incentive regime.

During this audiocast, we therefore discuss improvements, challenges and unresolved questions of the EU Pharma law review, with a particular focus on incentives.

On April 30, 2024, the UK Medicines and Healthcare products Regulatory Agency (“MHRA”) outlined its strategic approach (“Approach”) to artificial intelligence (“AI”).  The Approach is a response to the UK Government’s white paper: a pro-innovation approach to AI regulation and subsequent Secretary of State letter of 1 February 2024, and is the culmination of 12 months’ work by the MHRA to ensure the risks of AI are appropriately balanced with the potential transformative impact of AI in healthcare.

AI in Healthcare

AI has the potential to revolutionize the healthcare sector and improve health outcomes at every stage of healthcare provision – from preventative care through to diagnosis and treatment.  AI can help in research and development by strengthening outcomes of clinical trials, as well as being used to improve the clinical care of patients by personalizing care, improving diagnosis and treatment, enhancing the delivery of care and health system efficiency, and supplementing healthcare professionals’ knowledge, skills and competencies. 

Continue Reading MHRA Outlines New Strategic Approach to Artificial Intelligence

On 10 April 2024, the European Parliament adopted its position on the Commission proposal to reform the core EU pharmaceutical legislation (see here and here).  In doing so, the European Parliament has met its ambitious timeline to adopt its position before the upcoming Parliamentary elections and marks a significant step in the legislative process. 

Parliament’s position comes less than a year since the Commission published its proposal, which consists of a new directive replacing Directive 2001/83/EC and a new master regulation replacing Regulation 726/2004, which will also consolidate the orphan and pediatric medicines regulations (see our prior EU Pharma Legislation Review blog series).  Many of Parliament’s amendments to the Commission proposal will be seen as improvements by the innovative industry, but there remain challenges and unresolved questions.

We provide below the top 8 takeaways for industry to consider during the next phase of the legislative process, which is a detailed review by the Council.

Continue Reading European Parliament adopts its Position on EU Pharma Law Review: 8 Key Takeaways for Industry