NEWSFLASH: What happens if you purchase a marketing authorisation then revoked for serious non-compliances with the Good Clinical Practice?
27 January 2017
Transfer of a MA, its subsequent revocation and compensation for damages
What happens if you purchase a marketing authorisation and that is then revoked for serious non-compliances with the Good Clinical Practice (GCP)? This issue was brought to the attention of the Court of Milan by a manufacturer of generic products, claiming the invalidity of the sale and purchase agreement, the liability of the seller for the breach of contractual obligations relating to the compliance with the GCP, the restitution of the price and the compensation for the damages. The decision, delivered by the Court on December 21st, 2016, provides some useful guidance on an issue which does not appear to have been previously addressed by Italian courts.
What was the case about?
On March 2008, an international pharmaceutical company specialised in generic products ("Buyer") purchased from an Italian company ("Seller") a marketing authorisation for a generic medicinal product. The MA was granted by the Italian Medicines Agency ("AIFA") on the basis of bioequivalence data generated by an Italian trial site. The data were subsequently found to have been obtained further to a trial which AIFA held to be not compliant with the GCP. As a result, AIFA revoked the MA.
The Buyer brought proceedings against the Seller seeking a declaration that the transfer agreement was invalid on the ground that the decision of the Buyer to enter into the agreement was adversely affected by the wilful or at least negligent representation of the facts from the Seller. Were the agreement held valid, the Buyer alleged the Seller's breach of the representations and warranties as to the validity of the data contained in the regulatory dossier.
The Seller opposed not to have been aware of the GCP non-compliances at the moment of the transfer, so that no relevant information was intentionally or negligently concealed, and summoned in the proceedings the trial site, seeking the compensation for damages caused by its breach of the GCP.
The finding of the Court
The Court of Milan dismissed the Buyer's invalidity claim, noting that the Seller disclosed all the relevant information in his possession at the moment of the transfer.
This notwithstanding, the Court accepted the Buyer's contention that the Seller did not diligently fulfilled his obligations under the law. According to the Court, irrespective of the contractual warranties and representations provided by the Seller, the validity of the data contained in the regulatory dossier must be considered an essential quality of the MA, which the Seller is required to warrant to the Buyer.
The Court further dismissed the Seller's allegation that he was not responsible for the violations were committed by the trial site. As the trial site was appointed by the Seller, the Court observed that the latter is, in any event, ultimately responsible for any activity carried out further to the appointment, irrespective of any actual fault or negligence in the appointment or monitoring of the trial site.
As a consequence to the breach, the Court awarded damages to the Buyer, calculated on an equitable basis on account of the consideration paid by the Buyer for the MA. No damages for loss of profits were liquidated by the Court, since the Buyer did not provide the accounting documentation proving that a loss was actually suffered.
Coming to the claim raised by the Seller against the trial site, the Court partially accepted the Seller's claim of termination for cause and ordered the compensation for damages. The Court held that the trial was not conducted in compliance with the law, including the GCP, since several major and critical deviations were found by AIFA with regard to the design, organisation and conduction of the trial, and with regard to the recording, presentation, storing of the trial data and preparation of the trial report.
As to the compensation for damages, in the first place the Court ordered to the trial site the restitution of the consideration that had been paid by the Seller to the trial site for the conduction of the bioequivalence studies. The Court further awarded damages to the Seller, liquidated in a sum corresponding to the profit earned by the Seller from the sale of the MA, reduced of 1/3 on account of the concurring liability of the Seller in the causation of the damage. Indeed, the Court held that there was a specific obligation imposed by the law on the Seller as the sponsor of the trial to monitor its conduction and to check that the trial data validity. The Court found that the required monitoring and verification was not performed by the Seller.
It is worth noting that the Court of Milan decided the case on the basis of the warranties that must be provided by the seller to the buyer of a MA according to the law. Such legal warranties extend to the validity of the data contained in the authorisation dossier. This shows the importance of having a clear picture of the legal framework that may apply in addition to the contractual provisions (and, sometimes, in substitution, if any provision is held invalid or superseded by mandatory law).
Finally, the appointment of a trial site for the conduction of a bioequivalence study does not discharge the civil liabilities of the sponsor, which may derive from the invalidity of a MA based on data, which have not been obtained in compliance with the applicable regulation and the GCP. Hence, the importance that also bioequivalence trials are closely monitored by the sponsor and data are verified, to the extent feasible, prior to the submission.