Following our summary in March 2015, we have again summarized the main compliance benchmarking surveys which have been published over the past 12 months and summarized their results.

Boston Scientific Medizintechnik GmbH v AOK Sachsen-Anhalt – Die Gesundheitskasse. Joined Cases C-503/13 and C-504/13 This is a rare example of a major product liability dispute being referred to the European Court of Justice (“ECJ”). The two issues to be decided by the ECJ were: a) Whether a medical device implanted in someone’s body is defective if the same product group or production series has a significantly increased risk of failure, but no defect has been proven in the specific device; and b) If the answer to a) is yes, whether the operation to remove the defective product and implant a new one constitutes personal injury, and therefore recoverable damage. The ECJ held that it was possible for a product to be “defective” under EC Directive 85/374 (the “Product Liability Directive”) without the need to establish that the particular product had a defect. A product is defective if it does not provide the safety that a person is entitled to expect, taking all circumstances into account. In this case the function of the products and vulnerability of the users meant that this standard was particularly high. The increased risk of failure of the product group was enough that the required level of safety had not been provided, without needing to prove the particular product was defective. On damages, the ECJ held that the cost of an operation could be considered to be recoverable as damage caused by personal injury. The appropriate compensation is that necessary to eliminate harmful consequences and to restore the level of safety which a person is entitled to expect, and the ECJ held that this could include the cost of surgery. However the ECJ left the issue of whether an operation was actually required to overcome a defect to the national courts (in the case of the defibrillator it could have been deactivated without surgery). Background The German Bundesgerichtshof referred two cases to the ECJ for a preliminary ruling. Both cases concerned medical devices. The first concerned pacemakers with a risk of battery depletion leading to possible loss of telemetry. The second concerned cardioverter defibrillators with a potentially defective magnetic switch which could affect the life saving properties of the product. In the first case the producer implemented a recall and recommended physicians to consider whether the pacemakers should be replaced. In the second the producer recommended that the device be deactivated (which did not require surgery). However in the second case the defibrillator was removed prematurely. In both cases the compulsory health insurers of the German consumers operated on sought to recover the costs of the operations. The lower courts in Germany held that the producers were liable. In both cases the producer appealed on a point of law. Applicable law The relevant provisions of the Product Liability Directive are as follows:

  • Article 1 provides that:

The producer shall be liable for damage caused by a defect in his product.

  • Article 6(1) of provides that:

A product is defective when it does not provide the safety which a person is entitled to expect, taking all circumstances into account, including:

(a)  the presentation of the product;

(b)  the use to which it could reasonably be expected that the product would be put;

(c)  the time when the product was put into circulation.

  • The first paragraph of Article 9 provides that:

‘For the purpose of Article 1, “damage” means:

(a)  damage caused by death or by personal injuries;

(b)  damage to, or destruction of, any item of property other than the defective product itself

 Analysis The ECJ’s judgment that a product can be considered defective because of a risk in a product group or series is surprising to say the least. Whilst there is nothing in the Product Liability Directive which expressly confines “defect” to proven physical defect or design defect, most commentators have assumed that for liability to arise the specific product used by the consumer must be shown to be actually unsafe, not merely potentially so. This ruling therefore exposes producers to much greater liability than was previously thought. Although at first glance the implications of the judgment might appear limited by the reference to the particular use of these products and the vulnerability of these users, the same arguments can be made in respect of many products. Safety equipment, products to be used with hazardous or flammable materials and products to be used by children could be subject to a similar analysis, on the basis that a high level of care and safety is appropriate. Similarly, the judgment on damages also has the potential to be applied more broadly. While applied to medical devices in this case, if a product incorporated into, for example, a private building (e.g. fire prevention equipment) was found to be defective, this judgment could leave a producer liable for property damage i.e. the costs of removing all the potentially defective products, whether or not in fact defective. For producers faced with a potential product safety issue, this judgment has increased the risks and liabilities associated with conducting a product recall. While product recalls are primarily driven by concerns over consumer safety and regulatory compliance, the mitigation of civil liabilities is also a factor. However, this judgment could exacerbate civil liabilities as producers may now face claims for the costs of the removal and replacement of all the products in the relevant product group which might not previously have been possible. Recommendations

  • Take care in the definition of “product group or services” and seek to narrow the scope of any recall through robust risk assessment, including thorough root cause analysis and management of manufacturing processes, including the provenance of raw materials and components.
  • Focus on the adequacy of warnings and instructions for use in order to manage consumer expectations.
  • For life sciences manufacturers, consider whether to be more prescriptive as to remedial steps in “Dear Doctor” letters.
  • Consider whether it is appropriate to manage potential reimbursement claims by attempting to set financial and other conditions in advance.
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