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As from 5 July 2007, pharmaceutical companies that fail to comply with particular obligations in connection with a centralised marketing authorisation (MA) risk incurring fines. This may result in a penalty equivalent to 5 per cent of their annual turnover in the EU.

The new fines arise under EC Regulation 658/2007 (Fines Regulation), which was adopted by the European Commission (EC) on June 14 2007. The Fines Regulation gives effect to Article 84 of EC Regulation 726/2004, which authorises the Commission to impose financial penalties on MA holders if they fail to observe their obligations. The Fines Regulation sets out:

• the procedure for investigation of infringements
• the maximum amount of the fines that can be imposed
• the circumstances in which they will apply.

The EC already has the power to suspend or revoke an MA and this system of fines now provides further means to enforce the regulation. This provides another option in circumstances where suspension or revocation of an MA would not be in the interests of public health.

Q: What fines may be imposed under the new regulation?

A: If a company is found to have intentionally or negligently failed to comply with certain of its MA obligations it may now face a financial penalty. The fine may be as much as 5 per cent of that company's annual EU turnover in the preceding business year.

If the company continues to fail to comply with its obligations, the Commission may impose further periodic penalty payments until the infringement ends. This could amount to a daily fine of up to 2.5 per cent of the company's average EU turnover per day in the preceding business year.

Scope of fines

Such fines may only be imposed where the infringement either:

• may have significant public health implications in the EU; or
• where it takes place or has effect in more than one EU country or where interests of the EU are otherwise involved.

Only when a company fails to comply with specified obligations under EC Regulation 726/2004 can the Commission impose a fine. These include those that relate to:

• completeness and accuracy of particulars and documents contained in the MA application, and any other documents and data submitted to the European Medicines Agency (EMEA)
• compliance with any specific obligations set out in the MA and any conditions or restrictions included in the MA concerning the supply or use of the product, including its safe and effective use
• introduction of any necessary variations to the terms of the MA, to take account of technical and scientific progress and to enable medicinal products to be manufactured and checked by generally accepted
  scientific methods
• supply of new information which may require a variation to the terms of the MA, or impact the risk/benefit evaluation of the product
• placing of the relevant product on the market in accordance with the summary of product characteristics and the labelling and packaging leaflet, as contained in the MA
• notification to EMEA of the dates of actual marketing of the relevant product in each Member State and the date the product ceases to be on the market
• requirement for and obligations of an appropriately qualified person responsible for pharmacovigilance
• recording and reporting of suspected and unexpected adverse reactions, as well as suspected transmissions of infectious agents.

Payment amount

The EC has discretion to decide whether or not to impose a financial penalty and, if a company is fined, the amount that it is required to pay. The Commission is required to take into account a number of factors when making this decision. These include:

• the seriousness and effects of the infringement - especially in relation to patient safety and well-being, animal health and welfare and the possible effects on public health, animal health or the environment
• the good faith of the MA holder in its interpretation and fulfilment of the obligations connected with the MA, or conversely any evidence of wilful deceit by the MA holder
• the degree of diligence and cooperation shown by the MA holder in the detection of the infringement and application of corrective action - or, conversely, any obstruction by the MA holder in this regard and any non-compliance by the MA holder with requests made by regulatory authorities in applying the regulation
• the turnover of the relevant medicinal product
• the repetition, frequency or duration of the infringement by the company holding the MA and any prior sanctions - including penalties - the EC has imposed on it.

Further penalties

Fines of up to 0.5% of the MA holder's EU turnover in the preceding business year may be imposed if the company fails to cooperate with an inquiry by the Commission or supplies incorrect or misleading information in connection with an inquiry.

If the non-cooperation continues the Commission has the option to impose further periodic penalty payments per day. In these circumstances this can be up to 0.5 per cent of the company's average daily EU turnover in the preceding business year.

Summary

Pharmaceutical companies face heavy fines if they do not comply with Regulation 726/2004. It is now particularly important for centralised MA holders to ensure that they are aware of all the implications of current regulation.

Financial penalties may also be imposed if the MA holder does not remedy such non-compliance or fails to cooperate with an inquiry under the Fines Regulation.

The Author
Sarah Hanson and Alice deBats, CMS Cameron McKenna's international lifesciences practice regulation