Life Sciences: What's new in France and Europe? - Dechert OnPoint

July 13, 2018

Read more about the recent developments in the life sciences sector in France and Europe.


  • The Court of Justice of the EU clarifies the status of e-health software and challenges the current French regulation
  • UK tribunal sets aside Pfizer / Flynn Pharma excessive pricing decision
  • New law aligns medical devices regulation with medicines
  • What will the proposed ‘Pacte’ law mean for French IP protection?
  • Changes coming to French foreign investment control in healthcare 


The Court of Justice of the EU clarifies the status of e-health software and challenges the current French regulation 

By Sophie Pelé and Jessica Garestier

The Court of Justice of the European Union (the "CJEU") issued an important preliminary ruling1 (the "Decision") on the qualification of drug prescription assistance software (Logiciel d’Aide à la Prescription, "LAP") as a medical device. Dated 7 December 2017, the Decision results from a question referred to the CJEU by the French Administrative Supreme Court2 (Conseil d’Etat) in the course of proceedings questioning the legality of a decree3 requiring that LAP and dispensation assistance software ("LAD") be certified, in addition to the CE marking required pursuant to the directive 93/42/CEE of 14 June 1993 concerning medical devices (the “Directive”). 

The Decision is particularly important as it clarifies when LAP and, more broadly, various e-health software applications, qualify as a medical device within the meaning of the Directive (I). It is likely to have significant consequences for the French e-health software industry (II).

I. Clarification of when e-health software qualify as a medical device 

While the Directive, as amended, has qualified software as a medical device when specifically intended by the manufacturer to be used for one or more of the medical purposes identified in the Directive, the CJEU had not yet had the opportunity to give its interpretation of these provisions. 

In the case at stake, the CJEU adopted a logical position by reiterating that software qualifies as a medical device when two cumulative conditions arising from the Directive are met, namely that (i) the objective pursued, and (ii) the action resulting therefrom, are of a medical nature. 

The CJEU has applied the Commission Guidelines on the qualification and classification of stand-alone software used in healthcare within the regulatory framework of medical devices.4 It refers to the “function” of the software to determine its regulatory status and considers that “software, of which at least one of the functions makes it possible to use patient-specific data for the purposes, inter alia, of detecting contraindications, drug interactions and excessive doses, is, in respect of that function, a medical device […] even if that software does not act directly in or on the human body." 

By contrast, the CJEU clarifies that if a software, “while intended for use in a medical context, has the sole purpose of archiving, collecting and transmitting data, like patient medical data storage software, the function of which is limited to indicating to the doctor providing treatment the name of the generic drug associated with the one he plans to prescribe, or software intended to indicate the contraindications mentioned by the manufacturer of that drug in its instructions for use,” it does not fall within the scope of the medical device regulation. 

While the scope of the Decision is limited to LAP, it is likely to be broadened and extended by analogy to all LAD and e-health applications. 

II. A decision likely to impact the current French legislation 

The Decision directly challenges the current French regulation, which provides for an obligation for LAP and LAD to be undergo a certification of conformity with the guidelines of the French National Authority for Health, in addition to the CE marking. Indeed, pursuant to the Decision, software qualifying as a medical device should not have to undergo a second certification procedure provided under French law as the CE marking is sufficient to place a medical device on the market within the EU. 

The Decision further brings into question the provisions added by the French Social Security Financing Act for 2018, pursuant to which all assistance software dedicated to the prescription and dispensation of a medical device and their associated services should also be certified by 1 January 2021.5 

The alignment of the French regulation with the Decision would have a positive impact in securing the regulatory requirements to market e-health software and applications, and should allow companies to save time and money in their launch process. 

This being said, the Decision also broadens the scope of software and applications qualifying as a medical device, thus requiring them to bear a CE marking as long as they have at least one “medical” function. This should enable the health authorities to enhance their control of the fast growing market of e-health applications. 

Given its huge potential impact on French regulation, the subsequent decision from the Conseil d’Etat, as well as the position of French authorities, will have to be closely monitored. 


1) CJEU, 7 December 2017, Case C-329/16, Syndicat national de l'industrie des technologies médicales (Snitem) and Philips France v. Premier ministre, Ministre des Affaires sociales et de la Santé.
2) Administrative Supreme Court, 8 June 2016, No 387156.
3) Decree No. 2014-1359 of 14 November 2014 regarding the certification obligation for drug prescription assistance software and dispensation assistance software laid down in Article L. 161-38 of the Social Security Code.
4) European Commission, Guidelines on the qualification and classification of stand-alone software used in healthcare within the regulatory framework of medical devices, MEDDEV 2.1/6, July 2016.
5) Law No. 2017-1836 of 30 December 2017 relating to the financing of the Social Security for 2018, article 58, amending article L. 161-38 of the Social Security Code.


UK tribunal sets aside Pfizer / Flynn Pharma excessive pricing decision 

By Mélanie Thill-Tayara and Marion Provost

The UK Competition Appeal Tribunal ("CAT") recently determined that the UK Competition and Market Authority ("CMA") erred in its finding that prices charged by Pfizer and Flynn Pharma were excessive and unfair. In a judgement of June 2018, the CAT stated that the CMA inappropriately applied the legal test established by the European Court of Justice in its United Brands judgment, notably by failing to take sufficient account of the situation of phenytoin sodium capsules relative to other anti-epilepsy drugs, in particular phenytoin tablets. 

By way of background, on 7 December 2016, the CMA fined Pfizer and Flynn Pharma nearly £90 million for having charged excessive and unfair prices for the manufacture and distribution of phenytoin capsules, a drug used to treat epilepsy. Phenytoin capsules are a mature drug, first put on the UK market 80 years ago, but still being used today. In 2012, Pfizer sold its marketing authorization for its branded phenytoin capsules Epanautin® to Flynn, which decided to de-brand the product and sell it as a generic. This had the effect that the phenytoin capsules, which at the time were sold at a very low price, were no longer regulated under the UK Pharmaceutical Price Regulation Scheme ("PPRS"). Subsequently, both parties significantly increased their prices for phenytoin capsules, by up to 2,600 percent in total. 

Although the price charged for phenytoin capsules was, over the period of the alleged infringement (September 2012 – December 2016), below the price of phenytoin tablets, the CMA’s cost plus analysis concluded that the prices charged by Pfizer and Flynn were (i) excessive and (ii) intrinsically unfair, as they bore no reasonable relation to the economic value of the capsules. 

This ruling relied on the test first set by the European Court of Justice in its United Brands judgment (1978). In that case, the Court laid down a two-stage test, as follows: (i) the difference between the selling price of the product and its cost of production appears excessive and (ii) should the answer be affirmative, the price that has been imposed is either unfair (a) in itself or (b) when compared to competing products.

On appeal, the CAT confirmed the CMA’s finding that Pfizer and Flynn each held a dominant position in their respective markets for phenytoin capsules (on the one hand: manufacture and supply; on the one other hand: distribution). In particular, the CAT noted that, despite competing capsules being sold by NRIM, Flynn was able to maintain relatively high prices. The CAT concluded that Flynn faced very few competitive constraints and was therefore able, in practice, to act independently from competition, which in turn allowed Pfizer to charge a correspondingly high supply price to Flynn. 

Regarding the assessment of the existence of an abuse, the CAT, while upholding the approach taken by the CMA in applying the United Brands legal test for excessive prices, found that the latter had incorrectly applied the test and went on to provide practical guidance to the CMA and companies on how the assessment should have been conducted. 

With respect to the first part of the test (excessiveness), the CAT considered that the CMA erred in law when assessing whether Pfizer and Flynn’s prices were excessive, by restricting itself to a rigid cost plus analysis (comparing the costs incurred by Pfizer and Flynn respectively with a reasonable rate of return on the product) and ignoring other methodologies. According to the CAT, this led to a result that would have pertained in circumstances of perfect or idealized competition rather than those prevailing in the real world, where phenytoin capsules face competitive pressure from other anti-epilepsy drugs, notably tablets. 

Regarding the second part of the test (unfairness), the CAT criticized the CMA for having considered that the prices charged were unfair in themselves and failing to analyze, based on evidence submitted by the parties, whether such prices were unfair relative to the price of comparable products, notably phenytoin tablets. While the United Brands test allows two alternatives for determining the unfairness of a price – intrinsically or in comparison to other products – the CAT stated that the CMA should not have based its judgment on just the first of those alternatives when the parties raised arguments related to the second. In other words, the CMA ought to have given deeper consideration to the suitability of tablets as a relevant competitor to phenytoin capsules. 

Finally, contrary to the approach taken by the CMA – which assessed whether the price charged bore a reasonable relation to the economic value of the product as part of its analysis of the unfairness of the price – the CAT ruled that this analysis should have been conducted separately, as part of a final, over-arching assessment of the existence of an infringement to competition law. This ruling suggests that this assessment may constitute a third criterion to be met in order for an abuse to be found. 

In light of the above, the CAT decided to set aside the CMA’s decision. 

While competition authorities have a renewed and growing interest in excessive and unfair prices cases, the CAT hereby sends a strong signal that the finding of an infringement on this ground requires a detailed and methodical assessment. In addition, the CAT also clearly signaled that the United Brands test, although relevant, is not the only one available to assess whether a price is excessive. However, considering that it was not in a position to rule on the existence of an abuse based on the facts and evidence presented to it, the CAT eventually invited the parties to submit their view on whether to remit the matter to the CMA for further consideration. 

The next chapter of the Pfizer and Flynn story is thus yet to come. Although the case could be closed, in all likelihood it will be sent back to the CMA for reassessment in the coming months.


New law aligns medical devices regulation with medicines 

By Sophie Pelé and Jessica Garestier

The French Social Security Financing Act 2018 (the “LFSS”), adopted on 30 December 2017, strongly strengthens the requirements relating to the way medical devices are presented and promoted, with a view to align with the requirements already applicable to medicines. The LFSS introduces an obligation of certification and requires compliance with a charter intended for sales representatives of medical devices and associated services. These new measures are expected to profoundly impact the practices of this sector.

I. Adoption of a new charter and a certification procedure for medical devices promotional material 

In order to ensure that promotional, information and presentation activities do not adversely impact the quality of care and lead to unjustified expenditure on French social security, a "quality charter for professional practices of persons in charge of the presentation, information or promotion of individual use medical devices, health products other than medicines and associated services" (the "Charter") will be adopted in the next few months. 

The Charter will apply to all manufacturers and suppliers of health products and services reimbursed by the Social Security. It will be concluded by the French Economic Committee for Health Products (Comité économique des produits de santé ‒ the "CEPS") and one or several unions or organizations of industrials, no later than 30 September 2018, and is subject to the approval of the ministers for health and social security. Absent agreement by this date, the ministers have the ability to unilaterally impose the Charter. 

To ensure compliance with the Charter, a certification of such activities relating to health products and associated services will be implemented (the "Certification"). The Certification involves the review of the quality management system implemented by companies in order to monitor the measures implemented to comply with the Charter. The Certification procedure will be laid down by the French National Authority for Health (Haute Autorité de Santé, the "HAS") and the conditions for its implementation will be defined by decree which is expected to be published soon. In any case, this procedure will come into force no later than 1 January 2019. 

Moreover, the LFSS enables the CEPS to fix targets for the development of commercial, promotional, presentation and information practices, which may apply to a range of comparable or to specific products or services. 

Several decrees, whose publication is expected soon, will set out the penalties and the conditions under which the CEPS identifies any breach. 

II. Scope and consequences 

Even if the exact content of the Charter and scope of the Certification remain unknown, it is likely that they will be based on the existing ones relating to medicines. Consequently, the Charter should deal with any form of information – regardless of the means used – which aims to promote the prescription, the dispensation or the use of health products or services by any professional qualified to prescribe, dispense or use them. In addition to the requirement to comply with standard promotional rules (i.e., to provide full, sincere and adequate information and promote the appropriate use of products or services), additional qualification requirements and training obligations should be included in the Charter as well as more substantial obligations, such as the appointment of a person responsible for the promotion and the evaluation of the representatives. 

The Certification is expected to be mandatory for all manufacturers and suppliers of medical devices and associated services who conclude an agreement with the CEPS and have promotional activities relating to at least one reimbursed product or services intended for retail pharmacists and hospitals. This requirement should also apply to their subcontractors. The concerned companies will likely be audited by the French Accreditation Committee (Comité français d'accréditation, the "COFRAC") and such audits should be performed both prior Certification and periodically once the Certification is granted. 

In case of non-compliance with the Charter, the CEPS will be able to impose a fine varying in accordance with the gravity of the infringement of the Charter and/or the objectives defined, up to teh value of 10% of French turnover, excluding taxes, generated by the sales of such products or services. If a breach is identified while an audit is performed, the HAS may be informed and may report such infringement to the CEPS and the Directorate General for Competition Policy Consumer Affairs and Fraud Control (Direction générale de la concurrence, de la consommation et de la répression des fraudes, the "DGCCRF") which could sanction the company. 

As the gap between medical devices and medicines still remains significant, the implementation of this new set of rules will have a significant impact on existing practices, all the more so since it will apply in a context where the medical devices world is already changing to adapt to new EU regulation.


What will the proposed "Pacte" law mean for French IP protection? 

By Marie Fillon

The proposed law proposal entitled « Pacte » will be debated by the French parliament in September 2018. While aimed at reforming the French economy, it also includes measures aimed at strengthening intellectual property (IP) protections, especially for SMEs and startups. 

At the same time, the French government has announced the creation of a new provisional patent application, with the goal of adapting French IP protection to innovative companies. 

Extension of French utility certificates’ term 

Article 40 of the proposed law provides for an extension of the scope of protection of the French utility certificate ("certificat d’utilité"). 

This particular IP right can be used to protect inventions with a short life term. Indeed, while requiring the same validity conditions as French patents, it is currently protects the revel ant invention for a 6-year period. However, the utility certificate is not very often used in comparison with patents. 

Should the proposed law be adopted by the French parliament, the protection term would be extended to 10 years, which should increase the attractiveness of this particular IP right. 

New opposition proceedings against French patents 

Article 42 of the proposed law provides for new opposition proceedings against French patents. 

Current French law does not provide for opposition proceedings before the French patent office against French patents. The French patent office issues a preliminary research report on French patent applications and an opinion on its patentability. However, it is the patent applicant’s responsibility to assess the novelty and inventiveness of its application compared to the prior art cited in the research report. The French patent office may reject the application only if the invention lacks obvious novelty. As a result, French patents are considered less strong than other European patents that are subject to novelty and inventiveness examination by the European Patent Office (EPO) and which may be the object of opposition proceedings. 

Should the proposed law be adopted by the French parliament, French patent applications could be challenged before the French patent office. Since the only way to challenge French patents now is via the courts, this new administrative process would greatly simplify patent challenges. And presumably, a more robust challenge process would lead to patents that are stronger and therefore more valuable. 

New French provisional patent application 

The French government has announced the creation of a 1-year provisional patent application, which would constitute a first step to accessing patent protection, at a reduced cost. The application for a provisional patent would be limited to a description of the invention, which would be kept confidential. The 1-year period would allow time for the applicant to complete its application (in particular the claims). It would be particularly interesting for applicants whose inventions are still evolving and not yet finalized, since they could still work on the final invention to be claimed while benefiting from the filing date of the provisional patent application. 

Please look out for further updates as the French parliament addresses the proposed law and details become more clear.


Changes coming to French foreign investment control in healthcare

By Isabelle Marguet

In France, as in many other countries, inbound foreign investments are controlled in sectors considered "sensitive." Foreign investors must obtain prior authorization from the French government before completing investments in these sectors. These controls were significantly extended in 2014 to include, among others, the healthcare sector. As a reaction to current political and economic concerns, most notably Chinese investment in French infrastructure and companies, the French government is considering new modifications to this system. Draft legislation has been submitted to the French Parliament, with action expected later this year. The UK and Germany have also recently amended and extended their own internal control procedures.

What to expect

- While the ultimate scope of changes is still to be finalized, as a first step we expect the control to be extended to include new "sensitive" areas, including "forward-looking sectors" like artificial intelligence and big data. The booming French HealthTech sector is therefore likely to fall within the scope of the system.

- The sanction powers of the administrative bodies in charge of this control is likely to be reinforced. The French government will strengthen the control of the commitments which can be required from foreign investors as part of the authorization procedure.

- Another interesting potential change relates to the extension of the “guideline procedure.” This procedure allows potential investors to confirm with the French Ministry of Economy, at an early stage of the process, whether the envisaged investment must be subject to a prior authorization. With the pending reform, this procedure likely will be open to the target companies themselves.

What’s not changing

While some things will change, the current scope of the existing system is already quite broad, and is not likely to be affected by the reform.

- The concept of foreign investors includes, in particular, foreign groups as well as French companies controlled by foreign companies (both in the EU and outside the EU).

- The transactions concerned are acquisitions of a line of business or a controlling interest in companies established in France, together with transactions that result in a non-EU investor acquiring more than one third of the capital or voting rights of a target business. It must be noted that even assets that do not constitute a "line of business" can also be included in this scope if they are considered as "strategic." This may be the case, for example, when the target company has entered into public procurement contracts with French hospitals for the procurement of a very specific product.

- In terms of activities in the healthcare sector, the scope of application of the control remains uncertain due to the vague term used in the May 2014 Decree. In a nutshell, it is supposed to include all activities essential to guarantee the interests of the country in terms of the protection of public health. In practice, investors will often consider as a prudent stance that most of the M&A transactions in the healthcare sector may fall within the scope of application of the system. New legislation is not expected to provide any clarity in this respect: lack of clarity is a way to keep the scope of this system as broad as possible.

In practice

The foreign investment control system in France is well established and works quite well in practice. A dedicated team is in charge of the procedure at the Ministry of Economy. This team is easily reachable and communications are smooth. They coordinate with other agencies that may be involved in the process, such as the Ministry of Health, and are the first point of contact for investors. Refusal of authorizations is unlikely in practice, as the authorities prefer to require certain commitments from the investor (relating to business continuity, employees, etc.) when a transaction is considered sensitive.


The overall framework of the system of foreign investment control is currently being discussed also at the EU level. In particular, draft EU regulation is being debated within the EU Parliament and other bodies, with France, Italy and Germany leading the charge. While EU member states are far from having a supranational body comparable to the U.S. CFIUS, more harmonized and coordinated procedures at the EU level could be a useful move towards more clarity and certainty for foreign investors looking to invest in European companies.

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