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Trade obstacles for MedTech companies

Trade obstacles for MedTech companies due to the failed negotiations on the EU-Switzerland Institutional Agreement

Switzerland and the EU did not reach a consensus on the negotiations of the Institutional Framework Agreement. As a consequence, the Mutual Recognition Agreement (MRA) between the EU and Switzerland and related provisions for medical devices were not updated and, therefore, ceased to apply on 26 May 2021. With that, as of now Switzerland is considered as a ‘third country’ and Swiss MedTech companies lost their previously barrier-free access to the EU market and vice versa. The following article shows what companies selling medical devices need to consider when exporting to the EU or Switzerland.

Until 25 May 2021, all MedTech products that were admitted in Switzerland for sale could also be distributed in the EU and vice versa. However, starting from this date and in the absence of updating the MRA, Swiss established MedTech companies are not considered as part of the EU anymore when placing their medical devices in the EU. The same situation applies to EU companies wanting to distribute and sell their medical devices in the EU.
Also, the regulations relating to medical devices have been adapted in Switzerland as well as in the EU and all economic players have to meet increased requirements with regard to medical devices, whereby various transition periods apply. Among others, MedTech companies will have to appoint an Authorised Representative in order to be able to sell medical devices.

Under the EU Medical Device Regulation (MDR), companies placing medical devices on the EU market will need to appoint an Authorised Representative domiciled in the EU in order to be able to distribute their products, which additionally need to be certified by a conformity assessment body established within the EU. A group company, a third party or a distributor could be appointed as an Authorised Representative.
According to the Swiss Medical Device Ordinance (MedDO), these requirements also apply vice versa: if a manufacturer domiciled outside of Switzerland wants to place a product on the Swiss market, they must designate an Authorised Representative domiciled in Switzerland. However, and in contrast to the EU MDR, the Swiss MedDO includes a transitional period for EU/EEA medical device manufacturers that varies depending on the classification of the medical device.
The Authorised Representative must be stated in the labelling, meaning also that companies might need to amend the product labelling of medical devices.
Additionally, MedTech companies might need to appointment a new importer of record for regulatory purposes based in the nation where the medical devices are intended to be placed (EU or Switzerland) if the Authorised Representative is not acting as an importer for regulatory purposes.

What are the main tasks of the Authorised Representative?

The Authorised Representative becomes the manufacturer's representative in the respective market (Switzerland or EU). They are the contact person for the competent authority(ies) and bear responsibility together with the importer and the manufacturer. Important in this context is Article 47d Swiss Therapeutic Products Act and its counterpart in Article 11(5) EU MDR, according to which the Authorised Representative is jointly and severally liable with the manufacturer for defective devices.
Article 11(3) EU MDR, which is also referred to in Swiss law, stipulates certain minimum tasks that must be carried out by the representatives. For example, the Authorised Representative needs to verify that the EU declaration of conformity and technical documentation have been drawn up and keep available a copy of these documents. They also must comply with registration obligations. In addition, they perform tasks related to the authorities. This includes, among other things, providing the authority on request with all information and documentation of the device and cooperating with the authority in case of preventive or corrective actions.
According to Swiss and EU law, there’s a further requirement of having available a person who fulfils the minimum conditions of qualification, which should be similar to those for a manufacturer's person responsible for regulatory compliance.

When exporting products to the EU or Switzerland, MedTech companies need to appoint an Authorised Representative in Switzerland or in the EU if they want to distribute medical devices in such territories.

What needs to be considered from a regulatory and tax perspective?

Firstly, companies selling medical devices in the EU or Switzerland need to analyse their current set-up and strategy to evaluate the necessary changes to fulfil the new requirements – not only regarding the non-updated MRA, but also to comply with the existing and new Swiss and EU regulation.

Secondly, also from a tax perspective, companies will have to consider their current supply chain and preferred locations to determine the country where the Authorised Representative shall be located, whether this will be a third party or a group company and which type of agreement will enter in place (service agreement vs sales or distribution agreement).
The place where the Authorised Representative is located and how the agreements are concluded between the parties has a substantial impact on the invoicing flows, allocation of goods and respective turnover, and therefore imply important customs and tax consequences such as a potential VAT registration obligation, fixed establishment for VAT purposes or permanent establishment for corporate tax purposes either in Switzerland or in the country of choice.

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How can PwC support you?

Our interdisciplinary PwC team including experts in the area of tax, legal and compliance with recognised experience in the MedTech sector is able to analyse the new regulation with respect to your specific case and determine the necessary actions to take from either a Swiss or an EU perspective.
Particularly, PwC supports companies in adapting their procedures to be compliant with new regulations as well as outlining a tailored back-up scenario suiting the strategy of the company, including assisting in the analysis of the current and future supply chain to determine the VAT and regulatory implications, identifying potential opportunities and/or disadvantages as well as drafting and/or reviewing the respective agreement between your company and the Authorised Representative.
 

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Contact us

Dr. Sandra Ragaz-Fumia

Dr. Sandra Ragaz-Fumia

Partner Tax & Legal Services | Leader Pharma & Life Science VAT Switzerland, PwC Switzerland

Tel: +41 58 792 44 69

David Bundi

David Bundi

Director, Head of Compliance, RegTech & LegalTech, Legal, PwC Switzerland

Tel: +41 79 625 58 20

Seraina Gut

Seraina Gut

Compliance, RegTech & LegalTech Team, PwC Switzerland

Tel: +41 58 792 28 26