The duty of fairness, and the responsibility of businesses - R (Roche Registration Ltd) v Secretary of State for Health

13 January 2016


Do the size, resources and degree of sophistication of a regulated business affect what a regulator is required to do in order to ensure that it is treated fairly? This was a key issue considered by the Court of Appeal in R (Roche Registration Ltd) v the Secretary of State for Health.

The case concerned whether the Secretary of State, acting by the Medicines and Healthcare Products Regulatory Agency (the MHRA), acted unlawfully when investigating Roche's activities. In particular, the MHRA disclosed information it had obtained during the investigation to the European Medicines Agency (the EMA) for its use in separate enforcement proceedings. But did it provide adequate warning to Roche that the information would be put to that use?

The Court of Appeal held that the MHRA had not breached its public law duty of fairness to Roche, in part because, as a sophisticated and well-resourced business, Roche was entitled to fewer warnings from its regulator than might otherwise have been the case.

Jump straight to our commentary on the case here.

Background

Roche Registration Ltd is the marketing authorisation holder for a number of medicinal products approved by the EMA. Companies such as Roche are required by EU law (in particular Directive 2001/83 and Regulation 726/2004) to have in place a pharmacovigilance system - a system for the detection, reporting, assessment, understanding and prevention of adverse effects of a medicine or any other medicine-related problem. Suspected adverse reactions must be monitored and then recorded and reported where they occur. The purpose of the regime is clear - to protect public health.

The MHRA, as the UK competent authority, conducts inspections of companies to check compliance with pharmacovigilance obligations. Where deficiencies are identified, the company is required to implement corrective and preventative actions and the MHRA may re-inspect at a later date to confirm that these actions have been properly implemented. Article 111 of Directive 2001/83 requires the MHRA to co-operate with the EMA in carrying out inspections and to share with the EMA information which is obtained.

In parallel with this, Regulation 658/2007 (the Penalties Regulation) allows proceedings to be taken by the EMA against companies which it considers may have breached various pharmacovigilance obligations. The proceedings are of a quasi-criminal nature and can lead (with the final decision being made by the European Commission) to a heavy financial penalty being imposed.

The Penalties Regulation contains procedural protections for companies involved, including the right to make representations and the right to be heard at an oral hearing. It also makes provision for the EMA to request information for the purpose of furthering infringement proceedings. In particular Article 8(2) allows for requests to be made to the MHRA (and other competent authorities) and Article 8(3) provides for requests to be made to 'any natural or legal person'. Such requests must state their legal basis and purpose.

Facts of the case

In 2012, having conducted some routine inspections, the MHRA concluded that Roche had breached its pharmacovigilance obligations, in particular relating to the processing of safety data.

The MHRA's inspection report was sent to the EMA. In October 2012, after a period of investigation and correspondence with Roche, the EMA notified the company that it was initiating an infringement procedure under the Penalties Regulation. This was, apparently, the first time that such a procedure had been initiated.

The MHRA provided assistance and advice to the EMA in relation to the infringement procedure, including responding to a number of formal information requests, which the EMA made under Article 8(3) of the Penalties Regulation.

In late 2013, the MHRA carried out a re-inspection. Shortly before the re-inspection, it had received further Article 8(3) requests from the EMA. After the re-inspection, some of the information that it had gathered was provided to the EMA.

Roche was not aware of these further requests at the time of the re-inspection. Its position was that it considered the re-inspection to be a routine inspection and so did not take any special precautions to protect its position. On the contrary, it co-operated fully and frankly with the MHRA, as it would expect to do in these circumstances.

While it was common ground that the MHRA mentioned in the re-inspection meetings that the findings would (or at the very least might) feed into the infringement procedure, Roche alleged that, in carrying out the re-inspection, the MHRA was knowingly gathering evidence for the purpose of that procedure. Had Roche properly understood the position, this would have affected the frankness and candour with which it would otherwise approach the re-inspection.

Roche brought judicial review proceedings against the MHRA, on the following grounds:

  • Unfairness - The MHRA failed to properly explain to Roche, at the time of the re-inspection, that the information was being obtained for use in a quasi-criminal investigation and that the MHRA would be making submissions to the EMA for that purpose. This was procedurally improper and unfair.
  • Unlawful information requests - The MHRA provided information to the EMA on the basis of requests made under Article 8(3) of the Penalties Regulation. But Article 8(3) requests could not lawfully be made to the MHRA (as only Article 8(2) requests were for this purpose). Since the requests were unlawful, the MHRA should not have complied with them.
  • Unlawful responses to the EMA - The MHRA's responses to the EMA's information requests contained a number of fundamental errors of law.

At first instance Carr J dismissed the claim and Roche appealed on each of the above grounds.

The decision

The appeal was dismissed unanimously on all grounds (with Sales LJ giving the leading judgment).

The fairness ground was the key ground in the case. The court noted that, if unfairness was found, it would be appropriate for relief to be granted (notwithstanding the procedural protections in the Penalties Regulation). However, the court agreed with Carr J that the MHRA did not take advantage of Roche or abuse the inspection process in the way it conducted the re-inspection. In particular, the need for and scope of the re-inspection were not affected by the Article 8(3) requests.

The court's core finding was that, under the legal and administrative system in place, Roche knew, or could reasonably have been expected to know, that the information from the re-inspection would be supplied to the EMA and that the EMA could use it for the purpose of the infringement procedure which was in progress. Roche therefore had a fair opportunity to know what was likely to happen and to decide what stance to take during the re-inspection. Fairness did not require the MHRA to take any additional steps to alert Roche to this.

In coming to this conclusion, the court adopted a number of reasons which had been given by Carr J. In particular:

  • Roche is a highly sophisticated and resourced commercial organisation, with personnel expert in the field of pharmacovigilance. It can be taken to have known the relevant legislative background as well as the relevant guidance.
  • The infringement procedure which was underway had been notified to Roche. The ultimate sanction at the end of such a procedure was potentially very significant.
  • Roche was aware that the MHRA had been working closely with the EMA for the purpose of investigations into Roche's activities.
  • Roche was told in terms at the outset of the re-inspection that information obtained would (or at the very least might) be used for the infringement procedure.
  • The infringement procedure itself carries with it safeguards to ensure that any sanction is arrived at fairly.

The court considered that the content of the legislative framework itself was the most important factor, together with the scope of the investigation being unchanged following the Article 8(3) requests. The notification given by the MHRA during the re-inspection was not a critical point, but further supported the conclusion that there had been no breach of the public law duty of fairness.

On both of the other grounds, the court considered that Roche was ultimately asking it to give an advisory opinion on a hypothetical question:

  • On the information requests, whether or not the EMA's article 8(3) requests were unlawful, the MHRA could (and should) have provided the vast majority of the information to the EMA under Article 111 of Directive 2001/83. Article 8 was therefore irrelevant. (As an aside, the court agreed with the MHRA that, in any case, the EMA was lawfully entitled to make article 8(3) requests to competent authorities, such as the MHRA, and not only Article 8(2) requests).
  • On the MHRA's responses to the EMA, the MHRA had accepted that the points of EU law raised by Roche could be viewed as arguable. However, the responses were not public statements of the MHRA's view, but merely reports on the re-inspection. Neither the EMA nor the Commission would be bound by the MHRA's report, and each would need to come to its own view on the particular points as part of the infringement procedure.

The court held that it should not grant relief to give such advisory opinions.

Similarly, it would not be appropriate to grant Roche's alternative request to refer the relevant questions of EU law to be determined by the Court of Justice of the European Union (CJEU). On both grounds, the court agreed with Carr J that it would be undesirable to pre-empt the acts of EU institutions (the EMA and the Commission). To the extent that the claim was actually directed towards those institutions (in relation to steps they had taken or may take in the future), Roche had an alternative remedy - the EU courts would be able to give a determinative answer at a later date. A reference at this stage would be premature.

Commentary

This case highlights the uncomfortable risk of overlap between routine interactions with a regulator, which regulated businesses may choose to approach on a co-operative and open basis (furthering a productive regulatory relationship and promoting compliance), and enforcement proceedings, where the company may properly take a more legalistic stance in order to protect its position and minimise the risk of sanction.

The court did not accept Roche's argument that it should have been expressly warned of the EMA's information requests to the MHRA, to allow it to adopt the latter approach, rather than the former. This was on the basis that Roche should have understood the ramifications of the re-inspection and be in a position to decide which approach to take from the outset.

The court made no criticism of companies choosing to take a legalistic approach with their regulator where (as here) information obtained during a routine inspection may feed into a parallel enforcement process. However, it did not consider that the public law duty of fairness required the MHRA actively to draw this option to Roche's attention.

It is well-understood that the demands placed on a public authority by the duty of fairness depend on all the circumstances of the case. The duty is mutable - '[w]hat fairness demands is dependent on the context of the decision, and this is to be taken into account in all its aspects' (R (Doody) v Secretary of State for the Home Department [1994] 1 AC 531).

Therefore, slight differences in circumstances may mean that fairness requires different steps to be taken. For an example of this in a life sciences context, see the different outcomes in the similar cases of R (Eisai Ltd) v NICE [2008] EWCA Civ 438 and R (Bristol-Myers Squibb Pharmaceuticals Ltd) v NICE [2009] EWHC 2722 (Admin) (on whether fairness required the National Institute for Health and Care Excellence to disclose a fully executable version of a model it had used to inform a decision).

One of the variables which the court took into account in this case was that the size, resources and sophistication of Roche as a commercial organisation supported the conclusion that there had been no unfairness (impliedly because it impacted on what Roche could reasonably be expected to know). The emphasis on this may have been in part because Roche had argued that those present at the re-inspection did not understand the full significance of the link between the re-inspection and the infringement procedure; an argument with which the court did not agree on the evidence.

However, the finding that the relative sophistication of a business is relevant to what is required of the regulator to ensure that the business is treated fairly is an important one.

For regulated businesses this means that the more substantial and well-resourced the business is the less it can expect by way of legal and procedural assistance from its regulator. To put this in other terms, a business of this nature is expected to assume greater responsibility, and the requirements on the regulator are scaled down accordingly.

Conversely, it follows that regulators should take greater care to ensure that smaller and less well-resourced or sophisticated businesses are aware of relevant matters of procedure. If the requirements of the duty of fairness scale down to some extent for larger regulated entities, they must also logically be greater in the case of smaller businesses.

In the life sciences sector, the majority of companies which have medicinal products approved by the EMA are likely to be relatively sophisticated, but this is not the case for all pharmaceutical companies and is certainly not the case for all businesses in many other regulated sectors. There will be some flex in the regulator's responsibilities, depending upon the circumstances of the company in question.

As to the outcome of the case, there must be a wider policy risk that, if companies do not expect to be warned clearly of how information in an investigation will be used, they will exercise greater caution as a default position and be less open and frank with the regulator than they might otherwise have been. That could be detrimental to the purposes of good regulation.

As well as considering their public law duty of fairness in any given case, regulators might therefore also consider whether going beyond that duty may ultimately be to the advantage of their regulatory regime as a whole.


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