Why ethically-driven compensation must be addressed alongside EU device regulation

Risk of injury is an inevitable part of the use of medical devices. How can the medtech sector reduce risk in a responsible and ethical manner? And how can enforcement, liability and compensation be organized to encourage compliance and lessen the burden on patients when things go wrong? Amanda Maxwell reports on the views of legal expert Christopher Hodges on device regulation and liability.

In Europe, the medical device regulatory system and the well-established liability system are both undergoing review, making this a good moment to take stock and see how the different parts might fit together, according to Professor Christopher Hodges, a renowned expert of the EU legal system.

Professor Hodges was giving the first Malcolm Carlisle lecture, in memory of the late medical device legal expert and champion of a balanced approach to civil litigation and collective redress, Malcolm Carlisle. The event took place in London on 6 June and brought together leading lawyers, consultants and other key figures in the sector, not just from the UK, but also from Europe.

In his lecture, Professor Hodges upheld the principal foundations of the European regulatory system for medical devices and supported perpetuating them along the same basis: "I emphatically do not believe there is a case for major redesign of the regulatory architecture, such as by extending the pharmaceutical licensing regime per se to medical devices or any other products types."

Indeed it is medicines that are exceptional in requiring state approval when you look at the same basic quality system approach that applies to manufactured products in Europe, Prof Hodges suggested.

The legal expert described the existing medical device directives as "holistic and integrated". He noted how they are supported by controls within companies, such as quality systems, and external oversight and rely on a framework of tiers of controllers, working together – public authorities, manufacturers, qualified persons, notified bodies, suppliers, professional users, and end users.

Professor Hodges observed that while these regulations should work as intended, inevitably – especially in the area of health where there is inherent risk – things can go wrong.

And when things go wrong with devices, they can have serious effects on large numbers of people, prompting calls from society and politicians for more controls, with some areas being particularly sensitive, especially implants, healthcare products dealing with infertility, and those incorporating biologics and nanotechnology.

In all of these cases though, there has been evidence of bad practice involved that went either undiscovered or unchallenged by both internal and external authorities.

Indeed, however good most manufacturers’ own systems might be, if problems occur – because, say, one individual company behaves fraudulently or because of inherent limitations in the assessment by notified bodies – these can lead to a collapse of consumer confidence and political calls for increased regulation.

The fact that most manufacturers, notified bodies and regulators are doing the right thing will be forgotten in the spotlight of public concern, Prof Hodges warned.

Moreover, the decentralized structure can also create problems for notified bodies and competent authorities, especially given the variations in quality and in levels of resources available. Given the perennial problem of lack of resources, even some regulators may have insufficient powers to investigate.

Prof Hodges recognized that many of the improvements that are evidently needed in medical device regulations have already been taken on board in the European Commission's proposed revision of the medical device directive. These include the proposals for a single, large, comprehensive pool of all safety data.

But one improvement that is missing and which would benefit the sector, in his view, is the introduction of channels and incentives for whistle-blowing.

Enforcement – what happens when things do go wrong?

Talk of enforcement of regulatory law is a rare phenomenon in relation to medical device, indicating that standards of practice in compliance are generally consistently high, Professor Hodges stated.

Enforcement is a member state responsibility and the only general requirement at present is that enforcement and sanctions should be proportionate, effective and dissuasive.

However, more is needed in Professor Hodges’ eyes, for example:

• research into the powers available to national authorities and into the circumstances in which they are used; and
• development of a consistent policy and practice on enforcement across all national authorities to avoid form shopping to find the most lax jurisdiction.

Merits of different enforcement theories

Prof Hodges spoke of different enforcement theories which have surfaced during history and their relative merits. Apart from the deterrence theory which uses a punitive approach, he was also dismissive of the approach that is still taken in the US in their device regulations which assumes that companies need constant surveillance, investigation, and imposition of sanctions. This system, he believes, is “mediaeval and does not work"; it leads to a culture of constant suspicion, adversarial challenge and punishment.

The speaker then cited an approach where enforcement is informal and the emphasis is on improving compliance by persuasive or negotiated means. More serious matters can be escalated to more serious sanctions, but this is the exception rather than the rule. But the system given the most credence by Professor Hodges is the one that relies on social and behavioral psychology and ethics.

People will update rules if they conform to the individuals and internal ethical values, if the process of making and enforcing the rules is fair, and people are highly influenced by their peers. Compliance within regulated enterprises is repeatedly shown to be socially constructed, Prof Hodges said. Interestingly, he added, large corporations are far better at compliance than SMEs.

It is vital that larger companies look at how they can help smaller companies understand and achieve what they need to do, otherwise the problems that arise will impact everyone else.

This indicates, in Prof Hodges’ opinion, that public regulation and corporate structures should include a statement of corporate and public ethics. There should also be the creation of peer groups that can strengthen ethical behavior and, once again, a means of supporting individuals within companies who are worried that their employers are engaged in serious non-compliance or fraud, such as whistle-blowing channels.

The liability and compensation system

So much for encouraging responsibility among stakeholders in the medical device field: but what about when things go wrong? What about the liability and compensation aspects?

There are, of course, EU liability rules. But people have moved beyond the legal standard in their expectations and see those as a minimum requirement. People expect to be careful when things go wrong and reputable companies both need and want to meet their customers’ expectations.

In Prof Hodges’ view, two reforms are needed to support these trends: the first is to adopt more modern means of resolving disputes; and the second, to involve the complaint/dispute resolution process in a quality system approach within the legal and regulatory system.

There has been much activity in this area already and there is a revolution underway in Europe in dispute resolution towards the techniques of voluntary solutions, alternative dispute resolution (ADR) and restitution assisted by regulators, Prof Hodges revealed.

The area of consumer-to-business complaints in Europe is about to undergo major change with a shift towards consumer ADR (CDR) or ombudsman systems. Indeed, he added, the EU has just adopted a directive which requires all traders to belong to a CDR system, by 2015. It specifies quality criteria and a regulation to create a pan-EU online dispute resolution and a platform through which cross-border disputes can be sent.

Health disputes are, at the moment, excluded from this, but attention is turning to them.

Various good examples of dispute resolution already exist in various countries in Europe. These include, in France, the ONIAM system where a regional network of investigatory committees decides causation. Where fault is found, the medical or manufacturers’ insurance must make a reasonable offer, failing which penalties apply. In cases not involving fault, state funds pay.

Prof Hodges suggested that patients and companies waste far too much time and money on making, investigating and processing compensation claims. “I would take the unnecessary intermediaries and cost out of the system, associated with lawyers,” he said provocatively to a hall full of lawyers.

Instead, Prof Hodges set out a vision of a system where the initial scrutiny, triage, and investigation phases should be undertaken by independent experts, under an ombudsman model, and where validated claims should be automatically paid through standing insurance arrangements. In other words a system backed with standing compensation funds.

Indeed, the UK government, he said, has run with his idea and recently announced its intention to adopt a similar system by extending the remit of the parliamentary and health service ombudsman (PHSO) to cover all public and private health disputes.

Within such a comprehensive national structure, Prof Hodges said, reputable groups might create mutual pools of insurance as long-stops to cover catastrophic failures in cover, such as the German pharmapool, and the UK ABTA travel agents pool, or as the UK Keogh Report recently recommended, a pool of medical device manufacturers.

The system could also work better if:

• data is collected from complaints, disputes and all other sources and fed it back into a holistic quality system to inform improvements in practice i.e. within the post-market system;
• there is an integrated pan-EU model of advice, investigation, readdress and compensation, but both cross-border and national efficiency reasons; and
• there are efficient compensation arrangements, as part of both an integrated system of compensation arrangements and as part of a wider system of responsive care.

In conclusion, Prof Hodges said: “society now expects people to abide by ethical norms of fairness collaboration, and not to seek to rely just on the letter of the law. People expect something more, and will punish businesses in the marketplace if they do not find it.”