ITALY: An Introduction to Life Sciences
Pharma: New “Sunshine Act” Legislation Enacted (Law 62/2022)
On 31 May 2022 Law 62/2022 (“Provisions on the transparency of relations between manufacturing companies, health care providers and health organisations”) was promulgated and is in force as from 26 June 2022.
Under the general purpose of health protection and in the framework of Article 117, paragraph 2, letter m), of the Constitution), this new law aims at promoting transparency, as well as preventing and combating corruption, through the establishment and enforcement of the right “to knowledge of relations, having economic significance or advantage, between companies producing drugs, instruments, equipment, goods and services, including non-health services, and subjects operating in the health sector or health organisations”.
The scope of application of this rule is extensive. From a subjective point of view it encompasses:
- as payor, any person or entity that plays any role in the production or marketing of goods or services (including non-health services) in the field of human or veterinary health, and/or is engaged in the organisation of conferences and congresses relating to the same objects;
- as payee, any person or entity belonging to the health and/or administrative area (“operating in the health sector”), patients' associations, hospital and healthcare companies, associations between health professionals, scientific societies or foundations, universities or research institutes or any other public or private organisation that provides health services or organises continuing education (CCE) activities (“health organisations”).
The Law fixes a “materiality threshold” for the disclosure obligation: agreements and disbursements in money, goods, services or other benefits made by a producing company in favour of (i) a subject operating in the health sector when they have a unit value of more than EUR100 or a total annual value of more than EUR1,000; (ii) a health organisation when they have a unit value of more than EUR1,000, or a total annual value of more than EUR 2,500 are subject to disclosure.
Agreements that produce direct or indirect benefits are also subject to the disclosure requirement. The Law calls for institution of a public electronic register on the website of the Ministry of Health on which the data will be freely available for consultation for a period of five years from their publication and fixes a legal presumption that consent to publicity and data processing are implied directly in the giving and acceptance of the utility by the beneficiary. Any payment must be notified by the payor to the payee.
A ministerial decree should provide the models for notification and could supply interpretation elements, also in view of the substantial penalties (up to EUR100,000) violations of the law entail. Implementation by the Ministry of Health has not been accomplished so far.
Modification of Medicines’ Distribution/Deposit Requirements
The most recent annual Italian competition law (Law No. 118/2022) has – among other things – reshaped the public service obligation imposed on wholesale distributors. Distributors used to be obliged to store at least 90% of the authorised medicines in order to be able to satisfy the needs of the geographic area covered by the wholesale authorisation. Following the new law, they must simply detain a range of medicines able “to satisfy the needs of the geographic area covered by the wholesale authorisation.” In practice, any specific threshold has been deleted.
Clinical Trials: Standard Contracts Enacted at the National Level
Transition of the EU regime from Directive 2001/20 to Regulation 536/2014 (“Regulation”) is (slowly) changing the overall regulation of clinical trial activities in Italy (much alike other EU countries, where implementation difficulties in fact keep existing, nevertheless). Particularly, the adaptation of the Italian legislation to the new European environment led to the approval before Parliament of law 3/2018, fixing a number of principles for a thorough revision of existing domestic regulations and practices, implementation being delegated to the government through legislative or ministerial decrees, followed by administrative action of the Ministry of Health (MoH) or AIFA (the agency competent for medicines only). Through various political changes and with the full application of the regulation right around the corner, several provisions are now coming into force.
An important innovation was the approval of national standard contracts for the carrying out of clinical trial (sponsored, IIS, with medical devices without or with CE marking): such standard contracts must replace the local formats, not always consistent, applied de facto by individual sites. 40 Territorial Ethics Committees (IECs), no longer dependent from sites but appointed by the 19+2 regional/provincial institutions (plus three National IECs respectively competent for paediatric studies advanced therapies and public research institutions), coordinated at the national level, will monitor the carrying out of trial activities with extended intervention powers. The identification of the 40 territorial IECs and appointment by the regions of their members is due in the first half of 2023, the three National IECs have been designated.
Clinical Trials: Investigator-initiated Clinical Trials/Studies (“IIS”) – Transferability of Data and Results
In the framework of the general legislative revision mentioned above, a new regulation of IISs was enacted effective 6 March 2022 through a MoH Decree (dated 30 November 2021, the “DM”), superseding a prior one dated 17 December 2004, which regulated the matter only partially, conditioning certain favourable treatment to (i) the finalisation of IISs to the improvement of clinical practice, as a part of the National Health Service’s (“SSN”, universal, free and taxpayer-funded), and (ii) the legal impossibility to utilise the data or results of IISs for industrial or commercial (registration), thus substantially confining them to academic or secondary uses (they were in fact, and still largely are, qualified as “no profit” rather than “non-profit”).
Law 3/2018 first provided for replacement of the 2004 decree and transferability of data/results of IISs to pharma Companies (also) for registration purposes, provided that (i) all direct and indirect costs borne by the SSN for the carrying out of the study be reimbursed and a consideration of the value of public research should be part of the price assessment. Implementation of law 3/2018 took long but was eventually carried out through the DM.
The most important rules introduced by the DM are: (i) the dropping of the requirement of the improvement of clinical practice as part of the SSN; (ii) a specific regulation of the transfer of data and results of IISs to “profit” entities (supporters or not) for registration or industrial/commercial purposes. Under the renewed system, IISs remain regular trials/studies, defined by the initial absence of industrial/commercial (profit) purposes in them and following, accordingly, the regulation. The definitions and requirements contained in Art. 1 and 2 of the DM determine the application of the principles and rules contained therein, regardless of any other qualification the parties may give to contributions/services (schemes such as a donation appear not in line with the applicable provisions, with possible risks, inter alia, in terms of VAT application and tax liabilities).
Article 3 of the DM contains the most innovative provisions. Data and results of IISs can now become the subject matter of a transfer agreement from a non-profit sponsor to an industrial/commercial entity for registration or other “profit” purposes. The new provision has a twofold purpose: (i) protecting the nature and services of the SSN, financed by public funds out of taxpayer money; and (ii) promoting the development of independent research and its capability to generate scientific results capable of partly (self-)financing it. Transfer must be regulated by a formal contract (duly notified to AIFA, the competent IEC and the participating centres) and cover (i) full reimbursement to the SSN (through the regions) of direct and indirect costs related to the study and refund of all benefits the IIS enjoyed due to its non-profit qualification; (ii) payment by the transferee to the sponsor of any value associated with the data/results of the IIS (considering also profitability over time, ie, the industrial/commercial advantage the transferee may obtain from the transaction), as assessed in a sworn expertise. Art. 3 sets forth the procedure for the transfer, which can take place during, as well as upon conclusion of, study activities.
Transfer entails the end of any and all advantages connected with non-profit characteristics of the study (such as exemption from fee payment, charging to the SSN of costs, etc). Plurality of sponsors (not so frequent as one could imagine) is no exception: according to article 72.1 of the regulation, in the event of joint ownership of the study’s design (and ultimate liability for the protocol) the related provisions apply severally to each and all of them (unless arts. 72.2 or 74 apply). Clearly enough, data/results not transferred remain the property of the original non-profit sponsor, who may wish to retain the right to (re-)use all the data and results it has originated for academic research purposes, (which might suggest specifying in an agreement that such right (i) is in the form of a fully paid licence, and (ii) cannot be used in competition with the transferee’s products/activities).
An important consequence of the transfer concerns obligations and responsibility in respect of the personal data included in the study, the transferee being now a data controller to all effects. The DM provides that transfer occurs by virtue of law, rather than depend upon the consent of individuals (or their heirs, if patients are deceased) in consideration of (i) the pseudonymised nature of the data, raw data remaining with the research hospital for care purposes, (ii) the (presumable) lapse of time between the initial acquisition of the data and the transfer at or towards the end of a study), balancing individual rights and general community interest in health protection (a principle embodied in art. 32 of the Italian Constitution).
Medical Devices: Application in Italy of MDR
On 28 September 2022 Legislative Decree 137/2022 ("Decree") came into force, dictating “provisions aligning national legislation to EU Regulation 2017/745 on medical devices ("MDR").
The Decree is also aimed at regulating certain aspects of purely national competence particularly. It contains important provisions on advertising of medical devices.
After the entry into force of the MDR (26 May 2021), Legislative Decree 46/1997, implementing the (now repealed) Directive 93/42 continued to apply in the interim in accordance with a MoH Circular. Article 26 of the Decree identifies first of all the devices for which advertising is prohibited:
(a) custom-made devices referred to in Article 2(3) of MDR;
(b) devices for the use of which the assistance of a doctor or other health professional is mandatory;
(c) devices for the use of which, according to the manufacturer's indications, the assistance of a medical practitioner or other health professional is mandatory; or
(d) medical devices for which the sale is subject to prescription by a medical practitioner.
For all other medical devices, the need to request a specific advertising authorisation from the MoH has instead been confirmed. The procedure for such authorisation is that of Article 118, paragraphs 8, 9, 10, 11, 12, 13 of Legislative Decree No. 219/2006 (mutatis mutandis). It should be noted that, contrary to instructions and interpretations in force until now, information addressed to health professionals requires no authorisation. Pursuant to Article 27(5) of the Decree, violation of rules on advertising is punished by a fine from EUR2,600 to 15,600.
Simultaneously with the Decree, another Legislative Decree, no. 138/2022, was issued regarding application of EU Regulation 2017/746 governing in-vitro diagnostics (“IVDR”).
Medical Devices: the “Payback” System Enacted (and Contested) in Italy
Rules governing public funding of the health sector include actions aimed at adapting expenditure for medical devices to the level of financial resources available. Over the years, several measures have been introduced in this respect, the “payback” (actually, a clawback) system being probably the most relevant one and the latest to be applied. In 2011, certain spending ceilings were established for the purchase of medical devices, at both national and regional levels, to be regulated by special inter-ministerial decrees. In 2015 it was then decided that, in the event of a region’s exceeding its ceiling, a portion (equal to 40% in 2015, 45% in 2016 and 50% as of 2017) of the excess expenditure had to be reimbursed by the supplying companies on a pro-rata basis, on the basis of the percentage incidence of their turnover on the total expenditure in the relevant region.
The 2019 Budget Law changed the procedure to detect spending excesses. Particularly, it provided that the MoH, in agreement with the Ministry of Economy and Finance, must issue annually a Decree (currently by 30 April of the following year), certifying the excesses versus the relevant ceilings (national and regional) for the calendar year of reference, calculated on the basis of the turnover of each company, including VAT, resulting from electronic invoicing.
Despite its early introduction, parallel to the one for medicines (see below), payback on medical devices had remained unused for years in the sector. It was started in 2022 (retroactively): in September a joint MoH/Finance Ministry certified the spending overrun for medical devices at a national and regional level for the years 2015 - 2018 (approximately EUR2 billion). In October 2022 another decree adopted the guidelines for the issuance of regional and provincial payback measures. From December 2022 regions and autonomous provinces published lists of companies subject to the payback for each year and initiated procedures aimed at imposing payments within 30 days of assessment. In the absence of payment, the regions may offset the amounts so due from considerations accrued in supply contracts with local health authorities. Said term was later postponed by the government, issuing a dedicated Law Decree, to the end of April 2023.
Most of the medical device companies operating in Italy have challenged these measures before the administrative courts, seeking injunctive relief: a massive litigation is still in course – the total cancellation of the payback remaining perhaps unlikely, the amounts claimed are extremely high for most operators.
Pharma: the “Payback” System in the Pharmaceutical Sector (cont’d)
As reported in the 2022 Overview, payback on medicines was introduced in 2008 to (re)cover excess expenditure in retail distribution, and in 2013 for excess expenditure by hospitals: rules were modified several times over the years.
The current basis is the maximum annual overall limit for medicines at the charge of SSN: a mandatory payback. Should such limit be exceeded in any given year, MAHs must cover 50% of the deficit by making a payback to the regions. Until 2018 the payback due by MAHs was calculated on the basis of a budget previously set by AIFA and assigned to any company, since in 2019 it was calculated “proportionately to the respective market share,” determined on the basis of their turnover. The system envisages special safeguards for MAHs with a turnover below EUR3 million, a separate budget for medicinal gases and special measures/funds for innovative and orphan drugs. Should the companies not meet their payback obligations, the regions may offset the amounts due from considerations accrued in supply contracts with local health authorities.
While the “spesa convenzionata” is under control and always has been, it is never exceeding the limit; on the contrary, the “spesa diretta” has shown a constant upward trend. The limit of expenditure was 7.85% of the national healthcare fund for medicines distributed through the retail channel (“spesa convenzionata”), and 7% for medicines purchased by hospitals (“spesa diretta”) n 2021. It was then decided to increase the limit for the “spesa diretta” to 8% in 2022, 8,15% in 2023 and 8,3% in 2024, but only MAHs in order with payback duties for 2019 and 2020 may benefit from said increases: other MAHs are at risk of losing reimbursement from the SSN.
The payback for “spesa diretta” has been constantly and strongly challenged before administrative courts by most pharma companies operating in Italy: the Government and Parliament have proposed/imposed a sort of a settlement, reducing the overall amount requested as payback. In spite of recent repeals of most court cases by the supreme administrative Court (Consiglio di Stato), confirming the general legitimacy of the system, litigation (and negotiations) is still ongoing predominantly on the definition of amounts.
Sanctions to Russia
The regulations issued in 2022 to supplement the existing "Sanctions to Russia" system (Reg. EU 269/2014 for subjective profiles and Reg. EU 833/2014 for objective profiles) may impact also the Life Sciences industry and requires all players to adopt compliance policies in order to prevent violations of the system, which provide for both civil (eg, nullity of the agreements) and criminal consequences (in the Italian legal system). Firstly, EU players will have to verify whether Russian counterparties are included in the lists of sanctioned entities (Reg. EU 269/2014 and certain annexes of Reg. EU 833/2014) with which business relations cannot be substantially entertained. Secondly, the compliance rules should concern the products and services provided to the Russian counterparts with reference to medicines and their substances and components as well as with reference to medical devices and related components, which should be examined mainly in light of the provisions on dual-use (Regulation EU 833/2014, Article 2), taking into account that, with reference to the export of several medical-pharmaceutical products, the "Sanctions to Russia" system provides that specific authorisations must be sought from the competent authorities for export purposes. Finally, particular attention must be paid to the sector of design and construction of plants and production lines in Russia in the Pharma and Medical Devices sector, which may also fall under the purview of the "Sanctions to Russia" system.