Virtual and Digital Health Digest

This digest covers key virtual and digital health regulatory and public policy developments during April and early May 2024 from the United States, United Kingdom, and European Union.

In this issue, you will find the following:

U.S. News

• FDA Regulatory Updates
• Health Care Fraud and Abuse Updates
• Corporate Transactions Updates
• Provider Reimbursement Updates
• Policy Updates
• Privacy and AI Updates

U.S. Featured Content

The Federal Trade Commission (FTC) released final amendments to its Health Breach Notification Rule (the HBNR) broadening the inclusion of health apps and other digital health tools that collect personal health information, primarily from consumers, as vendors of personal health records (PHRs). Moreover, these amendments codify the FTC’s position that a “breach of security” under the HBNR means an unauthorized disclosure of identifiable health information regardless of whether the disclosure occurred as a result of a technological flaw, third-party intrusion, hacking, or other occurrence commonly understood as a “security breach.” 

EU and UK News

• Regulatory Updates
• Privacy Updates
• Reimbursement Updates
• IP Updates

EU/UK Featured Content

France has set out new pricing rates for innovative digital therapeutic medical devices under the accelerated market access pathway, known as PECAN. While the pathway was set out in February 2023, the lack of reimbursement rates means up-take has been low. The order of April 22, 2024 introduces the new pricing structure, with the maximum amount of financial compensation set at €780 per year, per patient. This is an important step in ensuring digital therapeutic products can be widely available in France while also ensuring that developers can obtain appropriate reimbursement.

U.S. News

FDA Regulatory Updates

FDA Exploring Potential Use of Algorithms To Predict Drug Shortages. On April 11, 2024, Food and Drug Administration (FDA) Commissioner Robert Califf testified before the House Oversight & Accountability Committee. As reported by InsideHealthPolicy, during his testimony Califf stated that enhanced manufacturer reporting requirements, which FDA has requested Congress establish as part of its fiscal year 2025 budget, could be used to create predictive algorithms that would increase FDA’s knowledge of the drug supply chain and help FDA anticipate shortages. Califf explained that manufacturers are required to report certain information to FDA but “they resist[] giving [FDA] some of the crucial information that [FDA] really need[s] … it’d be better if [FDA] had all the data [the agency] needed to put together predictive algorithms that would allow [FDA] to intervene preemptively much, much earlier and prevent the shortage.”

FDA Qualifies Apple AFib App for Data Collection in Certain Clinical Trials. On May 1, 2024, FDA qualified the Apple Atrial Fibrillation (AFib) History Feature, the first digital health technology qualified under the MDDT program. Apple’s AFib History Feature is a medical device that previously received 510(k) clearance as an over-the-counter software-only mobile medical application intended for users 22 years of age and over who have a diagnosis of AFib. The feature works by analyzing Apple Watch pulse rate data to identify episodes of irregular heart rhythms suggestive of AFib and provides the user with a retrospective estimate of AFib burden (a measure of the amount of time spent in AFib during past Apple Watch wear).

As qualified by FDA under the MDDT program, the AFib History Feature is intended to be used as a biomarker test to help evaluate estimates of AFib burden as a secondary effectiveness endpoint within clinical studies intended to evaluate the safety and effectiveness of cardiac ablation devices. Specifically, it may be used to compare weekly estimates of AFib burden before and after cardiac ablation treatment. However, data obtained from the device is not intended to replace the findings of any primary endpoints (i.e., it cannot alone be used to determine the safety and efficacy of cardiac ablation devices). The performance testing that FDA used to support qualification of the AFib History Feature as a biomarker test for the qualified context of use was derived from the evidence Apple submitted in support of the product’s 510(k) device clearance.

Health Care Fraud and Abuse Updates

DOJ Continues To Pursue Durable Medical Equipment Cases. The U.S. Department of Justice’s (DOJ) focus on durable medical equipment (DME) schemes continued to persist in the month of April. On April 26, 2024, Manishkumar Patel pleaded guilty for his role in a US$50 million health care fraud and kickback scheme. This scheme concerned the sale of fraudulent prescriptions and doctors’ orders for DME, laboratory tests, and pharmaceuticals (scripts) between 2019 and 2022. DME and supplies were allegedly furnished to suppliers, laboratories, and pharmacies that obtained payment for the fraudulent prescriptions from Medicare. Patel allegedly acquired the scripts from call centers that contacted Medicare beneficiaries to ask them questions designed to justify a script reimbursable by Medicare. Patel turned the information from these calls into scripts, arranging cursory telemedicine appointments with Medicare beneficiaries. Patel engaged in “doctor chasing,” where information was sent to doctors to sign scripts despite the doctors often being unaware of what they were signing, and signing the scripts without actually seeing the patient. Patel would then sell the forged scripts to Medicare providers that filled the orders and billed Medicare.

Further, on April 4, 2024, Steven Richardson, the owner of Expansion Media and Hybrid Management Group, pleaded guilty in connection with a telemedicine fraud scheme involving medically unnecessary durable medical equipment, including orthotics such as back and knee braces, resulting in the billing of US$110 million in fraudulent Medicare claims. See the March 2024 digest for an overview of the charges in this case.

Corporate Transactions Updates

A Snapshot of Digital Health During Q1 2024. U.S. Digital health funding had a 48% quarter-over-quarter jump in Q1 2024, with a total of US$2.7 billion invested across 133 deals, averaging a deal size of US$20.6 million. This growth in funding is tempered by the fact that Q4 2023 was the lowest funding quarter in over three years, and the significant deployment of funds can be largely attributed to a handful of mega-funding-rounds.

Digital health “winners’’ in Q1 2024 include Abridge, an AI-enabled clinician scribe software company that raised US$150 million in Series C funding on February 23, 2024, and DecisionRx, a medication management digital health company that secured US$100 million in funding in the form of a debt facility from investment firm Carlyle on January 11, 2024. However, not all fared as well, with UnitedHealth Group announcing it was ending its telehealth offerings, and telehealth company Amwell facing a potential boot from the New York Stock Exchange for its stock price trading below the minimum standard for listing.

Notable transactions in the beginning of Q2 include Nuvo Group Ltd, a remote pregnancy monitoring company that combined its business assets through a special purpose acquisition company with LAMF Global Ventures Corp. on May 1, 2024, and Transcarent, an AI-focused digital health startup that received a US$126 million series D round on May 2, 2024.

Provider Reimbursement Updates

CMS Releases Fiscal Year 2025 IPPS Proposed Rule. On May 2, 2024, Centers for Medicare & Medicaid Services (CMS) published its proposed rule on the Medicare Inpatient Prospective Payment System (IPPS) for fiscal year 2025.¹ Among other updates, CMS proposed a new mandatory episode-based alternative payment model for selected acute care hospitals that would coordinate care for beneficiaries that undergo certain surgical procedures, including coronary artery bypass, lower extremity joint replacement, and spinal fusion. Under the proposed model, hospitals would assume responsibility for the cost and quality of care from surgery through the first 30 days after discharge.²

CMS anticipates the episode-based payment model, titled the Transforming Episode Accountability Model (TEAM), would lead to greater interest among hospitals in using telehealth for post-discharge care.³ Accordingly, CMS has proposed to waive certain statutory telehealth restrictions for services provided to TEAM beneficiaries. Specifically, CMS would waive the geographic restriction that limits telehealth services to rural, underserved areas and originating site restriction to allow TEAM beneficiaries to receive telehealth services in their homes or places of residence. CMS stated such waivers would be “essential to maximize the opportunity to improve the quality of care and efficiency for episodes of care in TEAM.”⁴ CMS proposes that all other Medicare coverage and payment criteria would apply and no additional payment would be made to cover set-up costs, technology purchases, training, or other associated costs. Additionally, the facility fee ordinarily paid by Medicare to an originating site for telehealth services would be waived if the service originates from the beneficiary’s home.⁵ CMS also proposes to create a set of codes to describe evaluation and management services furnished to TEAM beneficiaries in their homes via telehealth and develop associated payment rates.⁶

As we covered in the November 2023 digest, CMS waived the above and other restrictions on telehealth services during the COVID-19 Public Health Emergency. Those flexibilities are set to expire at the end of the year, absent action by Congress.

Policy Updates

Congressman Buchanan Leads Letter on Artificial Intelligence Issues in U.S. Health Care Systems. On April 18, 2024, House Ways & Means Health Subcommittee Chairman Vern Buchanan (R-FL) led a letter to the Medicare Payment Advisory Commission (MedPAC) criticizing the commission’s latest recommendations related to coverage and reimbursement of digital health tools and prescription digital therapeutics. Congressman Buchanan thinks MedPAC has limited itself too much in scope as it relates to the utilization of artificial intelligence and urges MedPAC to “explore digital health’s role in improving outcomes and lowering costs in the face of an overwhelming evidence base demonstrating these tools’ ability to deliver value to Medicare beneficiaries and providers.” Congressman David Schweikert (R-AZ) and Congresswoman Michelle Steel (R-CA) also signed the letter.

Privacy and AI Updates

Federal Trade Commission Adopts Final Modifications to Health Breach Notification Rule. On April 26, 2024, the FTC released final amendments to its Health Breach Notification Rule, which were the subject of a notice of proposed rulemaking issued in June 2023 and reflect comments from numerous interested parties. The HBNR, which largely parallels the Health Insurance Portability and Accounting Act (HIPAA) breach notification regulations applicable to HIPAA “covered entities” and their “business associates,” requires “vendors” of “personal health records” that are not regulated by HIPAA to notify the FTC and affected individuals (and in some cases, the media) of a breach in the security of unsecured individually identifiable health information. For a decade after the HBNR was initially adopted in 2009, the rule got little attention, in part because there was a general understanding that the rule’s definition of “PHR vendor” was quite limited in scope. However, in 2020, the FTC revisited that definition in light of the proliferation of mobile apps and other direct-to-consumer health technologies, such as fitness trackers and wearable blood-pressure monitors. After requesting comments on whether such technologies were properly understood to be PHR vendors within the meaning of the HBNR, the FTC issued a policy statement in September 2021, in which it declared that health apps and other digital health tools that collect personal health information, primarily from consumers, are vendors of PHRs. The new amendments codify this interpretation, making a wide variety of digital health technologies clearly subject to the HBNR.

In addition to effecting this “clarification,” the new amendments codify the FTC’s position that a “breach of security” under the HBNR means an unauthorized disclosure of identifiable health information regardless of whether the disclosure occurred as a result of a technological flaw, third-party intrusion, hacking, or other occurrence commonly understood as a “security breach.” That is, under the new amendments, a “breach of security” includes, for example, a disclosure of individually identifiable health information by a PHR vendor in a manner inconsistent with representations made by the vendor about how it handles such information (which the FTC would also consider a deceptive practice actionable under Section 5 of the FTC Act). A “breach of security” also might include a disclosure of a consumer’s individually identifiable health information for purposes of targeted advertising if the consumer had not consented to such disclosure.

The impact of the new amendments for digital health technologies is significant, in part because the FTC’s enforcement tools under the HBNR are more extensive than the remedies the agency may seek under the FTC Act itself.

Colorado Legislature Adopts Bill To Regulate AI. On May 8, 2024, the Colorado legislature passed the Colorado Artificial Intelligence Act (SB 205), designed to protect consumers from the risks associated with the use of AI in making certain impactful decisions. If the bill is signed into law by Governor Jared Polis, it will be the first U.S. state law broadly regulating developers and deployers of AI systems.

SB 205 specifically targets developers and deployers of any “high-risk AI system,” which it defines as an “artificial intelligence system that, when deployed, makes, or is a substantial factor in making, a consequential decision.” A “consequential decision” in this context is “a decision that has a material legal or similarly significant effect on the provision or denial to any consumer of, or the cost or terms of, e.g., education and employment opportunities and financial services.” A “substantial factor” contributing to such a decision would include any “use of an AI system to generate any content, decision, prediction, or recommendation concerning a consumer that is used as a basis to make a consequential decision concerning the consumer.” To protect against misuse of high-risk AI systems in making “consequential decisions” about consumers, developers and deployers of such systems would be liable if they failed to use “reasonable care” to avoid algorithmic discrimination in such systems.

Like many state privacy laws, SB 205 requires that regulated entities provide certain notices to consumers. Among other things, the bill requires deployers to notify consumers of, among other things, the purpose of the AI system and the nature of the consequential decision and, if applicable, the consumers’ right to opt out of the processing of personal data for profiling purposes under the Colorado Privacy Act. And, in addition to establishing specific standards for the use of “high-risk AI systems,” the bill requires deployers of such systems to complete impact assessments annually and within 90 days of any intentional or substantial modification to their high-risk AI systems.

If enacted, SB 205 will take effect on February 1, 2026. It will be enforceable by the Colorado attorney general only; it does not provide a private right of action.

EU and UK News

Regulatory Updates

EFPIA Statement on the Use of AI in Medicines Under the AI Act. On April 22, 2024, the European Federation of Pharmaceutical Industries and Associations (EFPIA), published a statement on the use of AI in the medicinal product lifecycle in the context of the EU Artificial Intelligence Regulation (AI Act).

EFPIA highlights the potential for AI to transform medicine development, enabling faster, safer, and more effective treatments. However, achieving this requires regulatory frameworks to be agile, globally aligned, and tailored to the pharmaceutical industry’s needs.

EFPIA outlines five key considerations for governing AI in medicine development:

1. The exception provided in the AI Act for scientific research and development should apply to AI-based development tools used in the research and development of medicines.

2. AI uses in medicine development cannot legally qualify as high risk under the AI Act as they do not meet the criteria for high-risk classification under the AI Act.

3. The existing legal framework for medicines is sufficiently flexible to create the right foundation to include AI uses in the development of medicines.

4. The European Medicine Agency’s upcoming guidance on AI in medicine development will complement existing regulatory frameworks, ensuring responsible AI governance. (You can read about the draft in our July 2023 blog post.)

5. The ultimate goal for AI governance is to establish fit-for-purpose, risk-based oversight that considers the specific context of AI use in medicine development, balancing innovation with safety and ethical principles. EFPIA expressed its commitment to collaborating with regulatory bodies, patient groups, and other stakeholders to leverage AI’s potential while upholding fundamental rights and safety standards.

Publication of the MHRA’s Strategic Approach To AI. On April 30, 2024, the Medicines and Healthcare products Regulatory Agency (MHRA) published its strategic approach to the regulation of AI. The publication is in response to the request from the Secretaries of State of the Department for Science, Innovation and Technology and the Department of Health and Social Care (DHSC) dated February 1, 2024, in which the MHRA was asked to provide details about what steps it is taking in accordance with the principles and expectations of the government’s pro-innovation approach as set out in the white paper published in 2023.

The MHRA considers the opportunities and risks of AI from three different perspectives as follows:

1. As a regulator of medical devices utilizing AI

• The MHRA is the co-chair of the International Medical Devices Regulators Forum working group on AI- and machine learning-enabled medical devices to ensure global regulatory harmonization.
• Many AI products that are currently classified as low risk (class 1) will be up-classified to protect users.
• A pilot of the MHRA’s AI-Airlock regulatory sandbox will launch in spring 2024. (This was launched on May 9, 2024, and will be discussed in our next digest; you can read more in our May 2024 blog post.)
• There will be “clear guidance” on cyber security for AI as a medical device (AIaMD) to be published in spring 2025.
• Existing guidance on applying human factors to medical devices will be supplemented by further detailed guidance specifically for AIaMD products in spring 2025.
• The new regulations will strengthen obligations on manufacturers, conformity assessment bodies, and the MHRA to ensure greater accountability and governance.
• Predetermined Change Control Plans will be introduced in the new regulations to better govern the full-life-cycle management of AIaMD products.
• Guidance has already been implemented, and there is new planned guidance including good machine learning practice for medical device development and best practice AIaMD development and deployment.

2. As a public service organization that can use AI to improve the efficiency of regulatory services

• The MHRA is exploring the use of supervised machine learning to conduct an initial quality assessment of applications and provide a score for each criterion.
• The MHRA is also developing an MHRA data strategy to use AI safely within its regulatory services, including the application of generative AI and large language models to real world data to understand the relationship between exposure to medical products and clinical outcomes, and the use of these methods in vigilance systems.
• The MHRA is developing a Medicines Website Checking tool for the public to report the advertisement of suspected illegal medicinal products.

3. As an organization that makes evidence-based decisions in relation to products and companies using AI to undertake their activities and generate evidence

The MHRA is collaborating with the pharmaceutical industry to understand their use of AI for vigilance purposes and to develop best practices for the use of AI. The MHRA anticipates that new medicines will be developed faster at lower costs and that clinical trial design will change, but is confident its regulatory pathways are “sufficiently agile and robust” to respond to such changes. You can read more in our May 2024 blog post.

Continued Global Collaboration on AI Safety. The UK government continues to lead global efforts in ensuring AI is safe and trustworthy. On April 2, 2024, the UK and U.S. governments announced signing a Memorandum of Understanding whereby the AI Safety Institutes of the two countries will collaborate on technical research in relation to AI safety, develop safety model evaluations, and share guidance for AI safety with other governments on international standards for AI safety testing. On April 12, 2024, the UK and Republic of Korea announced that planning was underway for the next global meeting on the safe development of AI at the AI Seoul Summit on May 21-22, 2024. The AI Seoul Summit follows the AI Safety Summit held in November 2023 at Bletchley Park in the UK. Industry is expected to provide updates on how they are fulfilling commitments made at Bletchley Park to ensure the safety of AI technologies, and the first iteration of the International Scientific Report on Advanced AI Safety is expected to be released. Along with safety, the AI Seoul Summit will also cover how the benefits and opportunities of AI can be shared more fairly and how innovation can be further advanced.

UK Government Seeks To Use AI in the NHS To Improve Patient Care and Efficiency. On April 25, 2024, it was announced that the National Health Service of England (NHS) and the Incubator for Artificial Intelligence (i.AI) signed a partnership to support the use of AI in the NHS. i.AI is a UK government organization made up of technical experts, which was established under the direction of the Prime Minister to progress AI capabilities within government. One of its main focuses is to improve public services through AI applications. The new partnership aims to identify opportunities where AI can improve patient care and the speed of treatment and operational efficiency within the NHS. This will be done through non-clinical AI solutions, rather than through the development of new AI-based medical devices.

Update to the UK Government’s Medtech Strategy and an Innovation Classification Framework. On April 9, 2024, the DHSC published a report reflecting on its achievements over the last year towards meeting the goals set out in the medical technology (medtech) strategy launched in February 2023 and the next steps in boosting the adoption of medtech within the NHS. The report is structured into the four stages of the innovation pathway, which the government is seeking to streamline:

1. Entry point, noting the launch of the Innovative Devices Access Pathway pilot in September 2023 aimed at bringing innovative technologies to the NHS where there is an unmet medical need (discussed in our September 2023 blog post) and the government’s intentions in relation to an international recognition pathway.

2. Approvals, noting expanded UK approved body capacity from four to nine and continued work to reform the medical devices regulatory framework in accordance with its roadmap published in January 2024.

3. Funding and commercial, noting a £30 million Health Technology Adoption and Acceleration Fund launched in October 2023 to enable the NHS to invest in and implement medtech.

4. Adoption, noting that to address health inequalities and variation in the availability of effective medtech across different NHS Trusts, the government has mandated NHS Trusts to submit certain data by March 2024, which will be expanded later in the year.

Also on April 9, 2024, the DHSC published a medical technology innovation classification framework, which has been developed in consultation with stakeholders across the medtech sector. This guidance aims to provide assistance and clarity to industry on how innovation is described and defined. The overarching definition for a device to be described as an innovation is: “[the device] should demonstrate an incremental improvement, be a novel application or is a novel device that meets an unmet clinical need or provides improvements upon existing technology or models of care. The device can be scaled with the end-goal of benefiting the system, patients and/or care providers.” It provides criteria to assess whether a medical technology is incremental, transformative, or disruptive, with example case studies, as well as guidance, on how to explain the innovative aspect of a device compared to what is already available on the market. Annex A of the framework provides a useful flowchart to assist industry in classifying their innovation.

MHRA Provides Updates on Regulatory Reform for Medical Device Legislation in the UK. On April 25, 2024, the MHRA published an update on various steps being taken to reform the regulation of medical devices in the UK.

First, a meeting of the new International Medical Device Regulators Forum in March progressed discussions on leveraging the international recognition of assessments of devices made by the competent authorities of countries with robust regulatory regimes to improve patient access. At the meeting, it was agreed that the Artificial Intelligence/Machine Learning-enabled working group, which is co-chaired by the MHRA and FDA, will develop a document on AI lifecycle management. The MHRA will also co-chair a working group focused on updating the documents on clinical evidence for In Vitro Diagnostics (IVDs).

Second, the MHRA has continued to develop its own international recognition framework and published a statement of policy intent on May 21, 2024. To assist, the MHRA has been collaborating with four multinational companies who have products approved by the FDA, but not regulators in the UK or EU. The MHRA has called for smaller companies with products encompassing software as a medical device or IVDs and are interested in accessing the UK market after first launching in another country to come forward. (This will be discussed in our next digest; you can read more in our May 2024 blog post).

Finally, the MHRA notes that it remains on track to meet the milestones set out in its roadmap for the future regulatory framework for medical devices. In keeping with the milestones, the new regulations for post-market surveillance will be brought before Parliament soon, the stakeholder engagement for the sessions for the future core regulations will be held in June and July, and the AI Airlock (the regulatory sandbox for AI medical devices) will be launched in the coming weeks. (This has now been launched, and will be discussed in our next digest; you can read more in our May 2024 blog post.)

Privacy Updates

European Parliament Formally Adopts Agreement on the EHDS Regulation. On April 24, 2024, the plenary of the European Parliament formally adopted the agreement reached on March 15, 2024 with the European Council on the regulation creating a European Health Data Space (EHDS) Regulation (EHDS Regulation). As we have discussed in previous digests, the EHDS will create a framework that will provide governance and infrastructure for the use of electronic health data. On the same date, the European Commission published a Questions & Answers document on the EHDS Regulation, where it stresses the importance for the industry to use the health data contained in the EHDS to foster innovation that will improve disease prevention, diagnosis, and treatment.

The agreement on the EHDS Regulation now needs to be adopted by the European Council, which is expected to be published in the EU Official Journal in autumn, and the EHDS is expected to become operational in 2028.

New Guidance From the ICO on Transparency in Relation to Health and Social Data. On April 15, 2024, the Information Commissioner’s Office (ICO) published new guidance to assist health and social care organizations, as well as private organizations that use health and social care information, be transparent with patients about how and why their personal health information is being used. The guidance sets out what data protection transparency means in relation to Article 5(1) of the UK General Data Protection Regulation and provides a helpful checklist on how to assess if an organization is being transparent. Compliance with the checklist should be reviewed at regular intervals. Practical steps are also set out to assist organizations in the development of effective transparency, for example suggesting ways to demonstrate that the organization is being open and honest, providing a choice to patients on how their data is used, and engaging with patient groups to better understand if the proposals sufficiently address concerns. The guidance also sets out factors to consider in effectively informing patients about steps taken to ensure transparency, for example the directness of the communication, communication methods, and presenting information in an easily accessible manner that avoids “information overload.” The guidance supplements other ICO guidance on the principle of transparency and the right to be informed.

Reimbursement Updates

Publication of New Pricing Structure for the Reimbursement of Digital Medical Devices in France. In early 2023, and as discussed in our March 2023 digest, France created an accelerated market access pathway for innovative digital therapeutic medical devices, known as PECAN. Manufacturers can use the PECAN scheme for digital medical devices for therapeutic purposes which are not yet eligible for reimbursement, but which are presumed to be innovative in terms of clinical benefit or progress in the organization of care. Companies, therefore, can use this one-year scheme while finalizing their application for reimbursement under the regular scheme, provided a doctor prescribes the digital medical device to the patient.

Companies eligible to apply for this scheme must:

• Have a valid CE marking
• Be presumed to be innovative and be able to provide data supporting clinical benefits
• Comply with interoperability and security frameworks established by the Digital Health Agency to guarantee the exchange, sharing, security, and confidentiality of patient health data

Following submission of the application, the Digital Health Agency and the French National Authority for Health will assess the application and the relevant decision will be taken.

Up to now, the reimbursement rate for digital technologies (rather than remote monitoring products) has not been set, meaning up-take has been low. The Order of April 22, 2024 introduces the new pricing structure for PECAN, setting out the reimbursement amounts for companies making available digital medical devices for therapeutic purposes. These amounts are:

• An initial lump sum of €435 including tax, per patient, for a period not exceeding three months
• A monthly rate of €38.3 including tax, per patient
• A maximum amount of financial compensation of €780 including tax per year, per patient

This is an important step in ensuring digital therapeutic products can be widely available in France and ensuring developers can obtain reimbursement for these products.

IP Updates

Inadvertent IP Infringement Via Online Targeting to UK Customers. A recent UK Supreme Court judgment (Lifestyle Equities v. Amazon) and a subsequent High Court judgment (Merck v. MSD) have highlighted the potential risk of incidental trademark infringement through online targeting to UK customers. This is relevant to readers of this digest because the provision of virtual health services and the online sales of digital health products could inadvertently be deemed an act of targeting to UK customers and amount to an infringement of trademark rights.

Whether online activities are targeted at the UK needs to be viewed objectively from the perspective of the average consumer of the relevant goods or services who is deemed to be reasonably well-informed and reasonably observant and circumspect. A business “should be treated as having used a mark in the UK if it has itself ‘pushed’ its business and mark into the UK, not if it has been ‘pulled’ into the UK by (for example) its customers abroad, even though they may be based in the UK.” The inquiry on targeting is highly fact sensitive. The judge’s approach in Merck v. MSD shows that targeting should take into account the entirety of a website (or other online media) and the impact it has on the consumer.

In Merck v. MSD, the judge’s systematic approach of reviewing evidence relating to each alleged incident of infringement provides helpful guidance. One example of infringing use related to tweets sent by MSD containing “MERCK” in an “MSD” branded environment. Such tweets were considered to convey a message to UK consumers that MSD was entitled to use “MERCK” in connection with its goods and services in the UK.

The decision confirms that use of signs on digital platforms, while not designed exclusively for a UK audience, can still lead to parties falling foul of UK trademark law if the overall message tells consumers the relevant entity is entitled to use the mark in relation to their goods and services, even if used in a promotional capacity.

*The following individuals contributed to this Newsletter:

Amanda Cassidy is employed as a senior health policy advisor at Arnold & Porter’s Washington, D.C. office. Amanda is not admitted to the practice of law.
Eugenia Pierson is employed as a senior health policy advisor at Arnold & Porter’s Washington, D.C. office. Eugenia is not admitted to the practice of law.
Sonja Nesbit is employed as a senior policy advisor at Arnold & Porter’s Washington, D.C. office. Sonja is not admitted to the practice of law.
Mickayla Stogsdill is employed as a senior policy specialist at Arnold & Porter’s Washington, D.C. office. Mickayla is not admitted to the practice of law.
Katie Brown is employed as a policy advisor at Arnold & Porter’s Washington, D.C. office. Katie is not admitted to the practice of law.
We also acknowledge former Arnold & Porter associate Alison Peters’ contributions to this issue. 

© Arnold & Porter Kaye Scholer LLP 2024 All Rights Reserved. This Newsletter is intended to be a general summary of the law and does not constitute legal advice. You should consult with counsel to determine applicable legal requirements in a specific fact situation.