October 2020

“Q&A on the Amended Road Transportation Vehicle Act – Introduction of Vehicle Software Update Regulation”

Newsletter (October 2020) │  Legal

Introduction

As part of a series of legislative revisions to address the practical introduction of “Level 3”[1] automated driving, the Road Transportation Vehicle Act (the “Act”) will introduce a regulation for “specific modification” of vehicle software through updates using telecommunication methods. It is anticipated that update by wireless telecommunications called Over-The-Air (OTA) will be actively utilized in the future, and the introduction of this regulation will have a considerable impact on related businesses. Since it is approximately one month until the enforcement date (see A14) of the amended Act, this newsletter provides a comprehensive discussion, in a Q&A format, regarding the regulations based on, among others, the relevant Ministerial Ordinance, Notification, and Administrative Rules for Examination.

 

 

Q1         What is the purpose of the new regulations?

A1         With the advancement of automotive technology in recent years, it has become possible to easily make changes and additions to the performance and functions of the software of large fleets of vehicles by updates of software installed in electronic control devices using telecommunication methods (both wireless and wired) after the vehicle has been purchased by its owner. In light of this, in harmony with global discussions especially in the United Nations European Economic Commission (UN/ECE) “World Forum on Automotive Standards Harmonization” (“WP29”), the Government of Japan planned to create a legal system to ensure that appropriate software updates and cyber security are being implemented during the use of a vehicle.

 

Q2         What were the previous rules for updating vehicle software?

A2         The previous rules did not focus on vehicle modifications due to the alteration of vehicle software including upgrades using telecommunication during the use phase. Instead, such modifications were regulated as a part of the rules regarding modifications in general and examining compliance with safety standards applicable to vehicles (i.e., technological standards for safety, pollution prevention and other environmental protection stipulated by the government).

 

Q3         What is the new approval requirement for the specific modifications?       

A3         The new regulations will introduce an approval requirement (see A6) in which the Ministry of Land, Infrastructure, Transport and Tourism (MLIT) will examine whether the company’s organizational structure and processes related to its software updates and cyber security are compliant with prescribed standards. This approval will be required when a company’s software update falls under the category of a “specific modification” (see A5). Further, it imposes obligations, among others, to maintain such  organizational structure and processes even after receiving approval (see A12).

 

In addition to the compliance with safety standards for vehicles that was formerly required, the new regulations also require compliance with standards related to the organizational structure and processes. The regulations introduce a process approval in addition to vehicle type approval.

 

Further, an approval to specific modifications should, in principle, be obtained for each alteration in software.[2] In addition, it is necessary to obtain an approval for each vehicle that is modified by alteration of the software pertaining to the application, while it is also possible to obtain the approval for each vehicle type that has already been designated and approved.[3]

 

Q4         Are “Level 2” automated vehicles also subject to the approval regulations?

A4         In a series of recent legislative revisions, Autonomous Driving Devices (ADD)[4] that enable Level 3 autonomous driving was added as a device which is subject to the safety standards. However, with the new regulations, the modification of a vehicle by alteration of the software installed to a device other than an ADD would also be considered as a specific modification. Thus, the application of these regulations is not limited to Level 3 or higher autonomous vehicles, and even making a modification to vehicles with Advanced Driver Assistance System (ADAS) by software alteration that enable Level 2 autonomous driving would be covered by under the regulations and prior approval would be required. Provided, however, that a vehicle without ADD is less regulated in application of these regulation (Q7(2), Q12).

 

Q5         What are the specific modifications that would require an approval?

A5         The amended Act defines the following activities as specific modifications that require an approval.[5]

 

(i)      Modification of a vehicle due to alteration of software installed in an ADD or other device which is stipulated in the Ministerial Ordinance of MLIT where there is a risk that the vehicle will not comply with the security standards unless the software for the vehicle modification is appropriate in accordance with the method of using telecommunication lines and other methods stipulated by the Ministerial Ordinance of MLIT (“Direct Modification”).

(ii)     The activity of providing software for vehicle modification to a vehicle user or other person by the method of using a telecommunication line or by any other method specified by the Ministerial Ordinance of MLIT for the purpose of having such user perform the modification prescribed in item 1 above (“Indirect Modification”).

 

The activity mentioned in (i) above means the alteration of the vehicle software by means of telecommunication that changes the function of each device (engine, handle, brake, etc.) of which device is regulated by the safety standards in the Ministerial Ordinance; unless it is obvious that such vehicle after modification complies with the safety standards. Therefore, software updates aimed at enhancing “infotainment” functions, such as browsing services, will not apply unless there is a change in the function of each such device.

 

The activity mentioned in (ii) above means the activity of providing software by using telecommunications or distributing electronic recording media (CD-ROM, etc.) to users, Maintenance Repair and Overhaul (MRO) service providers, etc., for the purpose of causing them to perform the activity mentioned in (i) above.

 

Q6         What are the requirements to obtain an approval for a specific modification?

A6         The amended Act requires the applicant to comply with the following criteria to obtain approval (Article 99-3, para. 3).

 

(i)      The applicant must conform to the standards specified by MLIT with having sufficient “capability” and a “system” to properly implement the specific modification.

(ii)     The vehicle modified by the alteration of the software pertaining to the application must conform to the safety standards.

 

Specifically, (i) requires the applicant to have the operational management capability necessary to ensure appropriate software updates and cyber security (“Capability Requirements”)[6] and also to have the organizational structure and processes necessary to properly implement the repair of any defects caused by software updates (“System Requirements”).[7] Also, the above (ii) requires that the software-updated vehicles comply with the safety standards conformity requirements (“SSCR”).[8] Further, MLIT may apply conditions and deadlines when granting an approval.[9]

 

Q7         What are the Capability Requirements? How will they be assessed?

A7         (1) Capability Requirements

The applicant must prepare a management system that complies with the technical standards of the Operation Management System for the Modification of Program (“SUMS Technical Standards”) and the technical standards for the Operation Management System for Cyber Security (“CSMS Technical Standards”) to establish an operation management system to ensure the appropriate management and reliability of modifications to the software and cyber security (Article 1, para.1 and Attachments 1 and 2 of the Notification which sets forth the details of the technical standards related to the approval for specific modification of vehicles (“Notification”)). However, the applicant who intends to engage in the activities stipulated in A5(ii) above does not need to satisfy the CSMS Technical Standards.

 

The content of these SUM Technical Standards, CSMS Technical Standards, and the preliminary certification system for Capability Requirements were taken from the respective UN Regulation adopted by WP29 on June 24 of this year.[10] Similar to the safety standards, these standards were introduced with the intention to harmonize with international standards.[11]

 

(2) Assessment

The applicant for the approval of a specific modification needs to be certified by MLIT in advance to satisfy their Capability Requirements.[12] MLIT grants certification of compliance to the standards to applicants who are deemed to satisfy their Capability Requirements, and such certificate is valid for three years.[13] When applying for an approval for a specific modification, the applicant needs to submit a copy of such certificate that is valid at that time to MLIT.[14]

 

MLIT has entrusted the role of assessing the certification of the Capability Requirements to the National Agency for Automobile and Land Transport Technology (“NALTEC”).[15] NALTEC determines whether the applicant’s operational management system complies with the SUM Technical Standards and CSMS Technical Standards based on the materials submitted by the applicant.[16] Assessment is conducted not only through the materials, but also by on-site inspections, and the period for the assessment is generally completed within eight weeks after the commencement of the review.[17]

 

Note that the Capability Requirements will not currently be assessed for vehicles that are not equipped with ADD.[18] Also, the CSMS Technical Standards will be partially exempt for vehicles equipped with ADD which are manufactured or type approved by 30 June, 2022.[19]

 

Q8         What are the System Requirements? How will they be examined?

A8         (1) System Requirements

The System Requirements are different from the Capability Requirements under which a company’s general organizational structure and processes are subject to review. Instead, the System Requirements of the applicant’s organizational structure and processes are reviewed for each individual software alteration and vehicle modification. Specifically, it is necessary to develop an organizational structure and processes in which the applicant oversees the management and improvement of the design and production of the software for vehicle modification, management and alteration of the vehicle software, cyber security of the vehicle that is modified by such alteration of the software (only for Direct Modifications), and process of rectifying any defects that occurred in the vehicle related to the modification in connection with the specific modification.[20]

 

(2) Examination

When applying for an approval, the applicant must attach to the application form a document certifying that the above structure and processes which satisfies the System Requirements are in place, including providing a quality assurance system chart.[21] Unlike the Capability Requirements and SSCR, MLIT will conduct the examination of the System Requirements.

 

Q9         What are the SSCR? How will they be examined?

A9         (1) Safety Standard Conformity Requirements

The SSCR are the requirements for vehicles to be modified upon each software alteration. Specifically, the structure, device and function of the part of the vehicle modified by the alteration of the software pertaining to the application must comply with the safety standards for each item of Article 40 of the Act and each of the devices listed in each item of Article 41, para.1 of the Act.[22]

 

For example, in the case of a vehicle equipped with an ADD of which software installed is to be updated to have the function of keeping the vehicle in a highway lane where the maximum speed during operation of the ADD is 60km/h or less, it is necessary to comply with Appendix 122 “Technical Standards for Automobiles Equipped with Low-Speed ADD on Expressways”.[23] Further, if such alteration modifies, among others, the function of the approved vehicle type and the applicant applies for an approval of the specific modification for each vehicle type (see A3), the applicant is also required to submit a document which certifies that it has received approval of the modified vehicle type.

 

(2) Examination

When applying for an approval, the applicant must submit a document certifying that the part of the vehicle that has been modified by the applied alteration of the software complies with the safety standards.[24] NALTEC will determine the conformity to the safety standards based on the materials submitted by the applicant and the vehicles presented. Generally, the period for examination is completed within six weeks after the commencement of the review.[25]

 

Q10       Who should apply for an approval for a specific modification?

A10       The party who intends to make the specific modification (see A5) (i.e., the party who alters the vehicle software directly by telecommunication), or the party who provides the software to a third party to make such alteration, will be the applicant for the approval for a specific modification. If there are multiple parties involved with the software update, there may be issues as to who should be the applicant as illustrated below.

 

(i) Various activities could be considered a specific modification, such as (a) where a vehicle manufacturer makes an alteration using software provided by an external vendor (such as a software vendor or a component manufacturer which component includes software) (“Vendor”), or (b) where a vehicle manufacturer provides software to an MRO service provider and such MRO service provider makes an alteration in accordance with the manufacturer’s instructions.  For these activities, either the vehicle manufacturer, the Vendor or the MRO service provider could be considered as a party who made a specific modification and could be an applicant for approval.

 

However, as the applicant will modify the software in cooperation with contracted suppliers, service providers and/or suborganizations of the applicant, MLIT will be satisfied if the applicant takes its own responsibility to alter the software by fulfilling the above licensing requirements and also securing the compliance of the obligations of all the relevant parties to be involved with the alteration. Therefore, for example, it would not be necessary for Vendors or MRO service providers to obtain a further approval for software alterations if the vehicle manufacturers could obtain approvals by establishing their internal or external system organizations including entering into any required agreements  with such Vendors or MRO service providers.

 

Whether the vehicle manufacturer who makes the MRO service provider alter the software will apply for a Direct Modification or an Indirect Modification may differ depending on the relationship between them, the responsibilities of each other, etc., but generally, the vehicle manufacturer would be considered applying for a Direct Modification as there would be less reason for not applying under the CSMS Technical Standards (see A7(1)).

 

(ii) Similar issues arise when an importer alters software provided by a foreign vehicle manufacturer. Similar to (i) above, the foreign manufacturer may become the applicant, but it may be difficult for it to communicate in a timely and proper manner with MLIT and/or NALTEC.[26] Also, as the applicant must comply with certain obligations after obtaining an approval (see A12), there is an issue with enforceability of such regulations to foreign manufacturers. Therefore, in fact, it would often be the case where the importer, not the foreign manufacturer, would be required to become the applicant. Note that to obtain the approval, the importer will be obliged to record and retain certain information of the software at its own facilities.[27] This means that, the importer will need to take the necessary measures to manage the information that it previously did not record and retain on its own (see A13(i)).

 

(iii) In addition, for Vendors who are applying for an approval, if they alter the software directly and not through the manufacturers or importers, they are required to submit a document certifying that consent has been obtained from the manufacturer or the importer and a document describing the details of such consent (including the scope of the vehicles to be modified by the alteration of the software and the implementation conditions of the specific modification pertaining to the application) together with the documents to be submitted for examination of the System Requirements (see A8(2)). The amendment to the Act also allows Vendors to apply for type designation (Article 2 of Vehicle Type Designation Rules) in order for them to apply for an approval for each vehicle type after obtaining the modified type approval.

 

Q11       Is it required to obtain an approval for specific modifications for alterations to software that have been handled through the recall process?

A11       Recall is conducted under Article 63-3 of the Act that requires notice to MLIT in advance to take the necessary improvement measures if the structure, device, or function of a vehicle under an approved type is or may be in compliance with safety standards, and whether the cause of such non-compliance is in the design or production process. Under this recall process, measures should be taken to reinstate the vehicle to the specifications of the designated type. If the scope of the planned software alterations remains within such scope, it would be sufficient to conduct such alteration under the recall process, and it would not be necessary to obtain a separate approval for the specific modification. On the other hand, when a software alteration is made during the recall process in a way that changes the specification of the vehicle for its designated type, an application for an approval for the specific modification may be required together with the prior notification for recall to MLIT.

 

Q12       What are the obligations to be imposed on the applicant?

A12       The applicant of the specific modification must be obliged to maintain compliance with standards related to the Capability Requirements and System Requirements and must comply with, among others, the following requirements:[28]

(i)           Notify MLIT of any change in the items described in the application form and its attachments for approval.

(ii)          Record the prescribed information concerning the applied alteration, such as the implementation status of the alteration of the software and retain said information at the facility of the applicant.

(iii)         Take measures to ensure the cyber security of vehicles subject to the alteration of the software pertaining to the approval including monitoring, detecting and responding to cyber security threats and vulnerabilities (applicable only to the Direct Modification).

(iv)         Providing the vehicle users with information on the purpose, contents, time required for the alteration and how to use the new function for the alteration of the software pertaining to the approval.

 

In addition, MLIT may collect reports or conduct on-site inspections of the applicant when MLIT finds it necessary in order to ensure the appropriate implementation of the specified modification by the applicant, and may issue an order to suspend the specified modification or revoke the approval when the applicant is found to have violated the above obligations.[29]

 

By imposing these obligations on applicants even after they are approved, it is aimed to ensure appropriate software updates and cyber security throughout the vehicle’s lifetime.

 

Currently, an applicant for a specified modification of a vehicle that does not equip the ADD will not be liable for the obligations described in (ii) to (iv) above.[30]

 

Q13       What is the applicant’s liability for any damages caused by updating the vehicle’s software?

A13       The amended Act does not provide for liability for any damages incurred by users or third parties arising from the implementation of a specific modification. Therefore, the liability of the applicant is determined in accordance with existing laws such as criminal law and civil law (including the Product Liability Law, etc.). However, this amendment may affect the applicant’s liability as follows:

(i) As noted above (see A12(ii)), the applicant will be obliged to record and maintain at its own facility certain information about the software to be altered. Also, the applicant must provide the process where the applicant is able to make such information available to MLIT and NALTEC.[31] For this reason, it will be required to provide certain information concerning the software for an audit by the authorities such as MLIT and such information can become the basis for criminal or administrative liability. Also, in some cases, it will be used as evidence by another party to a lawsuit to claim for product liability based on defects in the design of the software.

(ii) In addition, as described above (see A12(iv)), applicant is obligated to provide users with information about software alterations. If such obligation is not performed correctly, product liability, in addition to criminal or administrative liability, based on defects in the instructions and warnings of the software could also be claimed.

 

Q14       When is the effective date of the amended Act?

A14       The amended Act will be implemented from November 23, 2020. However, prior acceptance of applications for an approval began on August 23 of the same year.

 

 

Concluding remarks

This amendment attempts to resolve a practical issue for the handling of vehicle software updates after a vehicle is purchased by a customer by introducing a prior approval requirement for each update which in harmony with global discussions regarding this issue. Companies which are involved with such software updates need to have an accurate understanding of the framework of this regulation, consider the division of roles with other companies if working together for such update, and prepare the internal and external organizational structure and processes necessary for obtaining an approval. Since the amended Act has not yet been implemented, there are many uncertainties in the handling of relevant practical issues. Also, it is anticipated that the Notification will be updated from time to time based on global discussions. Therefore, it is necessary to continue to closely monitor the situation of both the legal framework and regulatory practices going forward.

 

 

(Published October 27, 2020)

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Sonderhoff & Einsell Law and Patent Office routinely provides legal advice related to AI, automated driving, IoT, CASE and MaaS, including advice on automobile-related regulations such as the Road Transportation Vehicle Act, contract drafting and amendment, negotiations, litigation and arbitration, employee training, and response to authorities.

 

The information provided in this document is only general information and does not provide specific professional advice. The views expressed in this newsletter are a personal one of the author and do not constitute a legal opinion of the firm.  For inquiries, please contact Kengo Sakai, the author of this newsletter at: 

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Sonderhoff & Einsell Law Patent Office

100-0005 1-6-2 Marunouchi, Chiyoda-ku, Tokyo

Shin-Marunouchi Center Building 18th Floor

Telephone +81-3-5220-6500

Fax +81-3-5220-6556

http://se1910.com/

 

 

[1] As defined by the SAE International’s J3016 (September 2016) and its Japanese reference translation, JASO TP 18004 (February 2018).

[2] Statement of Mr. Okuda as a governmental expert in No. 9 of the Committee on Land, Infrastructure, Transport and Tourism (8 May, 2019) in No. 118 of the House of Representatives of the Government, “The details of modifications by alteration of software are different depending on the purpose of the modifications, and, in principle, it is necessary to confirm the appropriateness for each software. However, in the case of implementing multiple specific modifications under the same organizational structure and processes, it is not necessarily required to confirm the applicant’s organizational structure and processes individually for each software modification. Therefore, while we will strive to reduce the burden on the applicant by simplifying a portion of the related approvals, we would like to make every effort to maintain the  organizational structure and processes of the individual who makes specific modifications to the automobile by conducting an appropriate post-audit of the individual who received the approval.

[3]  Article 3, para. 1 of the Ministerial Ordinance.

[4] It is defined as follows: “A device which consists of a sensor to detect the conditions and surroundings at the time of operation of the vehicle and a computer and software which processes information transmitted from the sensor that is necessary to automatically operate a car based upon such software, has a function to substitute all of the abilities related to cognition, prediction, determination and operation of the person who operates the vehicle when it is used under the conditions determined by MLIT, and which is equipped with a device that records information necessary to confirm the operational state of the function” (Article 41, paragraph 2 of the Act)

[5] Article 99-3, para.1, items of the Act.

[6] Article 4, para. 1 of the Ministerial Ordinance.

[7] Article 4, para. 2 of the Ministerial Ordinance.

[8] Article 4, para.3 of the Ministerial Ordinance.

[9] Article 99-3, para. 2 of the Act.

[10] UN Regulation on SUMS Technical Standards:

https://undocs.org/ECE/TRANS/WP.29/2020/80

UN Regulation on CSMS Technical Standards:

http://www.unece.org/fileadmin/DAM/trans/doc/2020/wp29grva/ECE-TRANS-WP29-2020-079-Revised.pdf

[11] For SUMS technical standard, Section 7.1 of the relevant Regulation is directly translated, and for CSMS technical standard, Section 7.2 of the relevant Regulation and Table are directly translated, with a few adjustments to localize in Japan. For the prior certification system for capability requirement, Section 6 of the respective Regulation is introduced as Article 2 of the Ministerial Ordinance.

[12] Article 2, para.1 and 6 of the Ministerial Ordinance.

[13] Article 2, para. 5 of the Ministerial Ordinance.

[14] Article 3, para.3, of the Ministerial Ordinance.

[15] Article 99-3, para.8 of the Act.

[16] Article 2, para.3 of the Ministerial Ordinance.

[17] Administrative Rules for Examination Rules 2-5.

[18] Article 5 of the Notification, para.2 of the supplementary provisions of the Ministerial Ordinance.

[19] Article 2 of the supplementary provisions of Notification.

[20] Article 4, para.2 of the Ministerial Ordinance.

[21] Article 3, para.3, item 2 of the Ministerial Ordinance.

[22] Article 4, para.3 of the Ministerial Ordinance.

[23]  Article 48 of the safety standards, Article 72-2, No.14 of the Notification for Details of Safety Standards for Road Vehicles, etc.

[24] Ministerial Ordinance, Article 3, para.3, item 4.

[25] Administrative Rules for Examination 2-4.

[26] For example, the foreign vehicle manufacturer would be required to be capable of proper communications with MLIT and NALTEC under 3.1.1 and 3.1.12 of the SUMS technical standards. Also, it would need to be capable of responsive and proper communications with MLIT regarding remedying any defects that occurred in the automobile which must be managed by the applicant under the System Requirements.

[27]  Article 5, item 2 of the Ministerial Ordinance, Article 2 of the Notification, and A12.

[28]  Article 99-3, para.4 of the Act; para.5 of the Act, Article 5 of the Ministerial Ordinance.

[29]  Article 100, para.1, item 17, para.2, and Article 101 of the Act; Article 99-3, para 7 of the Act.

[30] Ministerial Ordinance, Article 5, para.2 of the supplementary provisions.

[31] SUMS Technical Standards 3.1.12.

Continue Reading

Publication of Amended Pharmaceuticals and Medical Devices Act – Draft Guidelines Regarding Legal Compliance by MAH and Manufactures

Newsletter (October 2020) │  Legal

Ⅰ. Introduction

On December 4, 2019, the “Act on Securing the Quality, Efficacy and Safety of Products Including Pharmaceuticals and Medical Devices (the “Act”)” was amended (“Amended Act”) to introduce restrictions on a company’s legal compliance system relating to pharmaceutical affairs (the “Pharmaceutical Compliance System”) conducted by the license holders (“License Holders”) who market, manufacture or sell pharmaceuticals, medical devices, regenerative medicine products, quasi-pharmaceutical products and cosmetics (collectively, the  “Healthcare Products”).[1]  On August 11, 2020, draft guidelines (“Draft Guidelines”) to the Amended Act were published and focused on restrictions regarding the legal compliance by marketing approval holders and licensed manufacturers of the Healthcare Products (collectively, the “MAH/Manufacturers”).  The Draft Guidelines were open for a public comment period which ended on September 9, 2020.[2]

 

The Draft Guidelines do not cover the restrictions on the Pharmaceutical Compliance System for all of the License Holders.  Specifically, the Draft Guidelines cover the restrictions only for the MAH/Manufacturers and do not cover the restrictions for: (i) pharmacies; (ii) store retailers, non-store retailers, and wholesale sellers of the Healthcare Products; (iii) blood drawing business operators; and (iv) sellers, lease operators and repairers of specially-controlled medical devices (although (i) to (iv) are also subject to the Amended Act).

 

Since the Draft Guidelines will be an important road map for the MAH/Manufacturers to establish their Pharmaceutical Compliance System in compliance with the Amended Act, we set out below the key items of the Draft Guidelines in the form of a Q&A.

 

 

Ⅱ. Contents of Draft Guidelines

Q1         When are the Guidelines expected to be formulated?

A1         The Guidelines are currently expected to be formulated in January 2021.[3]  Since the restrictions on the Pharmaceutical Compliance System under the Amended Act will be enforced on August 1, 2021, it is anticipated that the Guidelines will apply at the same time.

 

Q2       Should all MAH/Manufacturers make the same effort to establish the Pharmaceutical Compliance System?

A2         The Draft Guidelines expressly state that the concrete measures to establish the Pharmaceutical Compliance System are expected to be taken depending upon the category and scale of operations of each MAH/Manufacturer.  Therefore, each MAH/Manufacturer should determine their Pharmaceutical Compliance System based on the category and scale of its operations while referring to the Draft Guidelines.

 

Q3       What are the “pharmaceutical affairs-related laws and regulations” that MAH/Manufacturers should comply with? 

A3         The Draft Guidelines provide that the following laws and regulations are considered the “pharmaceutical affairs-related laws and regulations” (“Laws and Regulations”) that the MAH/Manufacturers should comply with:

 

Pharmaceutical Affairs-related Laws and Regulations
  • Pharmaceuticals and Medical Devices Law
  • Narcotics and Psychotropics Control Act
  • Poisonous and Deleterious Substances Control Act
  • Cannabis Control Act
  • Stimulants Control Act
  • Opium Act
  • Act on Securing of Stable Supply of Safe Blood Derivatives
  • Pharmacists Act
  • Act on Control of Household Products Containing Harmful Substances
  • Act on the Regulation of Manufacture and Evaluation of Chemical Substances
  • Act on Special Exceptions of Narcotics and Psychotropics Control Act to Prevent Act to Facilitate Fraudulent Act regarding Restricted Drugs under International Cooperation
  • Pharmaceuticals and Medical Devices Agency Act
  • Act on the Conservation and Sustainable Use of Biological Diversity through Regulations on the Use of Living Modified Organisms
  • Act on Securing of Safety of Regenerative Medicines
  • Clinical Research Act

 

Q4       What kind of penalties will be imposed for the failure of establishing the Pharmaceutical Compliance System?

A4         Although the Amended Act does not provide any penalties against the violation of the provisions regarding the Pharmaceutical Compliance System, the Draft Guidelines provide that “if the measures for establishment of the Pharmaceutical Compliance System are considered to be insufficient, an order for improvement (under Article 72-2-2 of the Amended Act) shall apply”.  If such order applies, the MAH/Manufacturer would need to respond to the Ministry of Health, Labour and Welfare’s (MHLW) regarding compliance with such order, and there would also be a material impact on the MAH/Manufacturer’s reputation as such order is published on MHLW’s website.

 

Q5       What are the system requirements to ensure that the performance of MAH/Manufacturer’s operations complies with the Laws and Regulations

A5         The Draft Guidelines provide the following three items to ensure the compliance with the Act.

(i) Establishment of rules that should be complied with by the officers and employees

The Draft Guidelines provide that MAH/Manufacturer’s internal rules should expressly provide the measures that their officers and employees should comply with and further offered the following examples as measures that should be provided in the internal rules:

Measures that should be provided in the internal rules

Measures that should be provided in the internal rulesItems that should be clarified (Examples)
Measures regarding decision-making to duly perform the operations
  • Person who is authorized to make decisions
  • Scope of the above authority
  •  Judging criteria necessary for the decision-making
  • Internal procedures regarding the decision-making
Measures for each officer and employee to duly perform the operations in accordance with the decision made
  • Person who is authorized to give instructions and orders
  • Scope of the above authority
  • Method of instructions and orders
  • Procedures for operations

 

It is also provided that the MAH/Manufacturers should review their measures from time to time in accordance with the results of their supervision of operations and amendment to the Laws and Regulations.

(ii) Education, Training and Evaluation of Officers and Employees

The Draft Guidelines provide that the MAH/Manufacturers should inform their officers and employees of, and make sure that they comply with, the Laws and Regulations and their internal rules (together, the “Rules”) and confirm the following points:

  • Whether the officers and employees take training that is conducted in a calculated and continuous manner;
  • Whether the officers and employees take training that is conducted as a result of the company’s supervision of their operations or an amendment to the Laws and Regulations;
  • Whether any division or contact point is established where the officers and employees may consult with in relation to the contents or application of the Rules; and
  • Whether the MAH/Manufacturers evaluate their officers and employees on their compliance and understanding of the Rules to ensure that they are motivated to comply with the Rules.

(iii) Preparation, Management and Storage of Operational Records

The Draft Guidelines provide that the MAH/Manufacturers should establish a system where the contents of decision-making and performance of operations by the officers and employees are (a) reported appropriately within the company and (b) timely and accurately recorded so that the appropriateness of such decision-making and performance of operations may be later confirmed.  In particular, the following points should be confirmed:

  • Whether internal rules are provided in relation to document management such as the preparation, management, and storage of operational records;
  • Whether the above internal rules are appropriately implemented; and
  • Whether the appropriate informational security measures are taken such that the system does not allow for after-the-fact alteration of records.

 

Q6       What is required for the system to supervise the operations of MAH/Manufacturer’s officers and employees?

A6         The Draft Guidelines provide that the MAH/Manufacturers should establish and operate a supervising system which enables them to confirm whether the decision-making and operations by the officers and employees are in compliance with the Rules and to take improvement measures where appropriate.  For that purpose, the following points would be important for such system:

  • Whether the internal audit division that is independent from the operations division (a) conducts the internal audit according to the internal audit plan that is made in consideration of the legal compliance risk and (b) reports to the responsible officer;
  • Whether an effective whistle-blowing system is established by clarifying the whistle-blowing procedures and the protection of the whistle-blower;
  • Whether information is collected by statutory auditors sufficiently and the audit’s effectiveness is ensured; and
  • Whether the supervision of operations and addressing of opinions are appropriately conducted by the marketing director (“Marketing Director”), manufacturing controller, and responsible engineer who may most effectively know the issues from the viewpoint of legal compliance regarding the manufacturing control, quality control, and post-marketing safety control (together, the “Marketing Director/Controller”).

 

Q7         What other actions are required to ensure the MAH/Manufacturer’s appropriate operations other than A6?

A7         The Draft Guidelines further require the MAH/Manufacturers to consider the following actions:

  • Appoint a responsible officer (Chief Compliance Officer) who will be in charge of compliance with the Laws and Regulations of the entire operation of MAH/Manufacturers;
  • Deploy a person at the departmental level who will play a central role in ensuring compliance with the Laws and Regulations based on the unique characteristics of each division;
  • If the scale of the MAH/Manufacturers require company-wide efforts for legal compliance, establish a compliance supervision division which would lead the company-wide legal compliance under the supervision of the Chief Compliance Officer; and
  • If an external director is appointed,
    • Encourage the external director to understand the Pharmaceutical Compliance System; and
    • Establish a system where the employees and each division reports to the external director regarding legal compliance issues.

Q8         What is required to clarify the Marketing Director/Controller’s authority?

A8         The Amended Act requires clarification of the Marketing Director/Controller’s authority.  In particular, the Draft Guidelines provide that the MAH should clarify the scope of the following authority of the Marketing Director and share its contents within the company.

  • Authority regarding the instructions and supervision of the operations for: (i) quality; (ii) domestic quality operations; and (iii) safety control and any other person engaged in other manufacturing control, quality control and post-marketing safety control (collectively, the “Manufacturing/Quality/Safety Control”);
  • Authority regarding the decisions and implementation of the: (i) abandonment, collection and suspension of sale of Healthcare Products; (ii) revision of attached documents; (iii) provision of information to medical professionals; (iv) reports to MHLW; and (v) other measures regarding quality control and post-marketing safety control;
  • Authority regarding the management and supervision of manufacturers in order to secure the appropriate and smooth implementation of manufacturing and quality control of the Healthcare Products; and
  • Other authority regarding the Manufacturing/Quality/Safety Control.

Similarly, Manufacturers are required to clarify the scope of authority of the person in charge of manufacturing control or the responsible engineer and to share its contents within the company.

 

Q9         What measures are required in order to comply with the GQP Ministerial Ordinance?

A9         The Amended Act requires that MAH/Manufacturers (i) grant the authority required for the implementation of quality control and post-marketing safety control to, and (ii) supervise the operation of, the Marketing Director/Controller.  The Draft Guidelines further provide as follows:

(i) Grant of Necessary Authority to the Marketing Director/Controller

The GQP ministerial ordinance, GVP ministerial ordinance, QMS ministerial ordinance, GMP ministerial ordinance and GCTP ministerial ordinance (collectively, the “GQP Ministerial Ordinances”) provide the details regarding the operations that the Marketing Director/Controller and other responsible persons should perform.  MAH/Manufacturers need to confirm the following points so that these operations are performed appropriately.

  • Whether the authority that is necessary for the Marketing Director/Controller and other responsible persons to perform the relevant operations is granted and whether the scope of such authority is expressly shared within the company; and
  • Whether consideration has been given as to what kind of authority needs to be granted to each responsible person in order to avoid the situation where the authority granted to the Marketing Director/Controller and other responsible persons is insufficient, and therefore, the Manufacturing/Quality/Safety Control has been compromised and a violation of law or regulation occurs.

(ii) Supervision of Operations by the Marketing Director/Controller

The following actions must be taken by the MAH/Manufacturers so that they can supervise the Marketing Director/Controller’s operations:

  • Confirm whether the Marketing Director/Controller has duly exercised their authority and performed the operations appropriately regarding Manufacturing/Quality/Safety Control; and
  • Take any improvement measures where necessary.

 

Q10       What is required as “other necessary measures for the proper performance of the MAH/Manufacturer’s operations”?

A10       The Amended Act requires a company to take measures necessary for the appropriate performance of the MAH/Manufacturer’s operations.  In addition to the foregoing, the Draft Guidelines provide that it is important to take the following measures:

  1. Measures to avoid the marketing of Healthcare Products inconsistent with their approvals
    • To monitor the discrepancy between the Healthcare Product’s approval and the actual state of manufacturing and other operations in relation to the method of manufacturing and examination of the Healthcare Products and other matters that could affect the quality of the Healthcare Products;
    • In the case of any discrepancies, to adjust the manufacturing and operations in line with the Healthcare Product’s approval; and
    • To take the necessary measures, including obtaining any necessary approvals of the Healthcare Products.
  2. Measures to duly report any side effects
    • To collect, consider, and report safety control information in accordance with the GVP Ministerial Ordinance by:
      • Ensuring sufficient personnel,
      • Arranging for the appropriate system,
      • Supervising operations, and
      • Implementing other necessary measures.
  1. Measures to duly provide information regarding the Healthcare Products
    • Supervision of operations to ensure that accurate information regarding the Healthcare Products is provided based on scientific and objective grounds and that no advertisement violates the advertisement restrictions under the Act; and
    • Other measures.

 

Q11       Please explain the responsible officer’s responsibility.

A11       Under the Amended Act, the “officer who is responsible for the operations regarding pharmaceutical affairs” is regarded as the responsible officer under the Act.  The responsible officer is obliged to act proactively to ensure that MAH/Manufacturers comply with the Laws and Regulations, which includes the establishment and operation of the Pharmaceutical Compliance System.  If an MAH/Manufacturer violates the Laws or Regulations due to a failure by the responsible officer, such responsible officer will be responsible for such violation.

 

Q12       Please explain who would be considered a “responsible officer”.

A12       In the Draft Guidelines, a responsible officer is provided as below.  An executive officer would not be considered a responsible officer under the Act.

 

Category of CompanyResponsible Officer
Joint Stock Company (except for the company with nomination committee, etc.)
  • Director representing the company; and
  • Director in charge of operations on the Laws and Regulations[4]
Joint Stock Company (company with nomination committee, etc.)
  • Representative Executive Officer; and
  • Executive Officer in charge of operations on the Laws and Regulations
Membership Company
  • Member representing the company; and
  • Member in charge of operations on the Laws and Regulations
Other CorporationsPerson similar to the foregoing

*

 

Q13       Please explain the appointment of the Marketing Director/Controller.

A13       The Amended Act provides that the Marketing Director/Controller must have the capability and experience that are necessary to comply with the Laws and Regulations.

The Guidelines provide that the Marketing Director/Controller should be appointed in consideration of the following matters:

  • Upon appointment, the following steps should be implemented: (a) consider what kind of authority should be given to the Marketing Director/Controller based on the matters that the Marketing Director/Controller should comply with and the matters that should be conducted by the Marketing Director/Controller under the Act and GQP Ministerial Ordinance; (b) clarify the scope of such authority; and (c) make an objective judgement as to whether a candidate has (i) knowledge, (ii) experience, (iii) comprehension ability and (iv) judgment ability to perform the operations regarding such authority;
  • Whether a candidate has the leadership to give effective instructions to and supervise the responsible person and person in charge of the relevant division in close coordination with each division regarding Manufacturing/Quality/Safety Control; and
  • Whether a candidate’s position within the company enables him/her to state his/her opinion without hesitation to the responsible officer.

 

Q14       Please explain the Marketing Director/Controller’s obligations to express their opinion.

A14       The Amended Act provides that if it is necessary for the Marketing Director/Controller to fairly and duly conduct Manufacturing/Quality/Safety Control, they are obliged to express their opinions in writing to the MAH/Manufacturers.  In response to this, the Draft Guidelines require the Marketing Director/Controller to perform the following actions:

  • To make endeavors to determine the legal compliance issues proactively and positively;
  • To try to have close coordination with the related divisions and the responsible person and person in charge at such division so that the legal compliance issues may be determined on a broad basis in relation to Manufacturing/Quality/Safety Control;
  • Expressly indicate their opinion to MAH/Manufacturers; and
  • Express opinions in writing so that the fact that the opinion was expressed may be recorded.

For your information, the report on urgent matters may primarily be made orally and not in writing.

 

Q15       Please explain an MAH/Manufacturer’s obligation to respect the opinions of the Marketing Director/Controller and to take measures accordingly.

A15       The Amended Act provides that MAH/Manufacturers must respect the opinions of the Marketing Director/Controller and consider whether it is necessary to take any measures for legal compliance, and if necessary, take the relevant measures.  Also, MAH/Manufacturers must retain records of the contents of the measures taken and store such records.  If the opinion was addressed by the Marketing Director/Controller, but no measures were taken, the MAH/Manufacturers must retain the records of the fact that no measures were taken, the reasons why no measures were taken, and store such records.

 

In response to such provision, the Draft Guidelines provide that it is necessary for MAH/Manufacturers to expressly establish the following system/methods:

  • A system which respects the opinions of the Marketing Director/Controller and allows the responsible officers and committee to receive such opinions and consider whether it is necessary to take any measures based on such opinions;
  • Express indication of the responsible officers that take relevant measures;
  • Methods of expressing the opinions by the Marketing Director/Controller; and
  • System in which the necessary measures are taken by MAH/Manufacturers.

 

Ⅲ. Conclusion

The Draft Guidelines are an important road map for the Pharmaceutical Compliance System that is required by the Amended Act, therefore, it would be useful to closely examine the Draft Guidelines and begin determining if there are any deficiencies in your company’s own Pharmaceutical Compliance System.  Many companies would need to implement or consider actions in order to comply with the Amended Act, which would include changing the organization, establishment of and/or amendment to their internal rules.  As such, in anticipation of the establishment of the Guidelines, it would be important to organize an internal team and provide input to the management.  It would also be necessary to continue to follow and address the issues brought forth in the public comments and responses to such public comments.

(12 August 2020)

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Sonderhoff & Einsel Law and Patent Office regularly provide the advice regarding healthcare-related restrictions including the Act on Securing Quality, Efficacy and Safety of Products Including Pharmaceuticals and Medical Devices and related legal advice such as dealing with public comments, dealing with compliance, preparation of, negotiations on and amendment to, contracts, training, dealing with authorities and dispute litigation.

 

The information provided herein is provided for general purposes and is not designed to provide concrete, professional advice.  For detailed advice, please contact Ms. Ayuko Nemoto), our responsible partner, who will deal with the case individually.

 

Sonderhoff & Einsel Law and Patent Office

Shin Marunouchi Center Bldg. 18th Floor

1-6-2 Marunouchi, Chiyoda-ku, Tokyo 100-0005

Telephone:        +81-3-5220-6500

Facsimile:          +81-3-5220-6556

http://se1910.com/

[1] For the outline of the Amended Act, please refer to our newsletter entitled “Draft Amendment to Pharmaceuticals and Medical Devices Law 2019 and Its Influence to Companies” (https://se1910.com/ja/newsletters-ja/newsletter-november-2019-law-practice-2/)

[2] https://search.e-gov.go.jp/servlet/Public?CLASSNAME=PCMMSTDETAIL&id=495200176&Mode=0

[3] https://search.e-gov.go.jp/servlet/PcmFileDownload?seqNo=0000205324

[4] The operations on the Laws and Regulations in the table above means the: (i) operations regarding matters that are subject to restriction under the Act such as applications for approval, marketing, Manufacturing/Quality/Safety Control, and advertisement of Healthcare Products; and (ii) operations regarding matters that are subject to restriction under other Laws and Regulations.  It must also include the operations regarding the compliance with the Laws and Regulations.  Operations also includes the operations on advertisements and compliance with the Laws and Regulations other than the Act.  In addition, an officer of an MAH/Manufacturer who is not in charge of the operations on the Laws and Regulations would not be considered a responsible officer under the Act.

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