Why have a contract with distributors and local authorised representatives?

For medical device manufacturers, having appropriate contracts in place with your distributors and in-country representatives has never been more important. Not having a written contract in place with business partners could expose you to unnecessary risks. And anyone signing a contract without really considering what they are committing to, could find themselves hostage to unwanted limitations or insufficient control.

Why does it matter?

Regulatory requirements

There is an increasing regulatory focus on the roles that different economic operators play in the supply chain. For example; under the EU MDR, there are specified obligations for distributors (Article 14) and importers (Article 13). Having a written contract means both sides know what’s expected of them.

Manufacturers based outside the EU require an Authorised Representative within the EU and, after Brexit, this is a new obligation for UK-based manufacturers too. Likewise, manufacturers outside the UK now need to have a UK Responsible Person appointed here. Where such representatives are required, details of this are needed when registering your organization; Eudamed requires a summary of the mandate and MHRA registration requires a letter of designation.

Also, for manufacturers seeking MDSAP certification, contracts with in-country representatives in MDSAP territories will be reviewed at audit. Annex 4 of the MDSAP Audit Approach indicates where a written agreement may be needed, to define relationships between an organisation and their supplier. 

Commercial considerations

Any contract will bind you into a commitment with your business partner and it can be tricky to amend the requirements after the fact. If you are committing to an exclusive relationship, you could lose the ability to take on more lucrative opportunities in future, so it’s important to pause and consider the significance of this.

Depending on local regulations, in-country licences may be held in the name of your business partner. If the relationship sours or your business partner does not perform, you may need to transfer that registration or resubmit it entirely. This can be costly and time-consuming and may lead to a gap in your sales.

It’s therefore important to make sure that you are clear and happy with any commitments you are making.

So, what should you do to protect your business?

Before you consider speaking to a solicitor about any such business partner contract, you should be clear on the nature of the relationship you want. Why not ask yourself these questions for starters;

1. What are your obligations?
2. How long are you committing to?
3. Is the relationship exclusive or non-exclusive?
4. Can you end the relationship if the other party is not meeting their requirements? Could they terminate the contract without sufficient notice?
5. By committing to this business partner, what will you gain, and what potential flexibility could you lose?
6. Are you happy with what your business partner is allowed to do on your behalf? How can you control this?
7. Have you considered regulatory responsibilities? Does this include pre-market submissions as well as post-market activities, such as complaint handling, vigilance and field corrective actions?

Of course, IMed can only make suggestions about the regulatory requirements for contracts – you’d obviously need a solicitor for proper legal advice. But, in these changing regulatory times, it’s important that each party in the supply chain is clear on their obligations. Then, the regulatory documents, which we prepare, will reflect the precise situation; with all the necessary parties’ roles and responsibilities clearly defined. As such, a well-drafted contract can achieve this clarity.

So, in reality ‘gentlemen’s agreements’ are simply no longer appropriate in the current regulatory landscape. You need to protect your business and ensure that you retain control of how your device is managed in all territories.

If IMed can help you to understand the global regulatory requirements for your device, then please contact us at hello@imedconsultancy.com