Data, Liability, and Insurance: Key Legal Regulatory Frameworks for the EU Digital Health Market

Internet healthcare is rapidly reshaping the landscape of the medical market in China and around the world. Given that China has the largest number of mobile phone users globally, it is highly likely to become the second-largest internet healthcare market worldwide by 2017. Currently, there are thousands of internet healthcare applications available in the Chinese market. Most of these primarily offer customers online consultations, appointment scheduling, online medication purchases, and other general advisory services. The rapid rise of the internet healthcare industry has triggered a series of legal issues, particularly concerning quality and safety related to obtaining services or purchasing medications via mobile devices. Due to the current lack of legislation, these issues remain inadequately addressed.

The Chinese government is seeking to strengthen regulation of the online healthcare market through administrative measures. For instance, China’s Ministry of Health recently stipulated that only online consultations are permitted, while diagnoses or treatments via mobile devices such as smartphones are prohibited. However, some legal experts have questioned these administrative governance approaches, arguing that “consultation” and “diagnosis” are inherently difficult to delineate. Core issues surrounding internet-based medical applications and solutions, including safety and liability, remain unresolved to date.

Europe’s internet healthcare market is also in a phase of rapid development. To ensure the healthy growth of this market, the European Union released a public consultation on internet healthcare in April 2014, incorporating it as part of the EU Digital Agenda. The consultation invited input from stakeholders across various sectors involved in internet healthcare, including regional and national authorities such as ministries of health, medical experts, consumers, and insurance companies.

The final outcome of this consultation will be published in a “Green Paper,” which outlines the various legal risks associated with the internet healthcare market, aiming to break through its current bottlenecks. The author’s analysis of the Green Paper helps participants in China’s internet healthcare market understand which issues warrant attention and how the European Union addresses these challenges. Furthermore, the author particularly emphasizes the potential for developing internet healthcare within the public healthcare sector and advises Chinese investors to pay close attention to the investment opportunities in Europe’s public healthcare market.

Legal Risks in the Internet Healthcare Market: An EU Perspective

According to the EU definition, “mHealth” refers to “medical and public health practices supported by mobile devices, including mobile phones, patient monitoring devices, personal digital assistants, and other wireless devices.” Currently, mHealth applications are subject to a range of EU laws, particularly those concerning data protection. The Green Paper also lists data protection as a primary legal concern.

The Green Paper argues that the current legal framework for data protection in the European Union is insufficient to adequately safeguard the security of medical data. However, the forthcoming amended EU Data Protection Directive and the new General Data Protection Regulation (GDPR) may clarify core issues regarding internet-based medical data, specifically determining which information within such data should be classified as “medical information” and thus granted enhanced protection. In the context of big data, data mining and personal data processing must also comply with data protection regulations.

Secondly, the Green Paper also addresses the potential security risks associated with internet-based medical applications and solutions. In this regard, the Green Paper specifically highlights that current EU legislation lacks clarity in distinguishing between (1) lifestyle or health-related applications and (2) medical devices or in vitro diagnostic medical devices. Consequently, certain lifestyle or health-related applications may be mistakenly classified as non-medical devices, thereby falling outside the regulatory scope of relevant EU laws, such as the Medical Devices Directive and the In Vitro Diagnostic Medical Devices Directive.

Furthermore, the Green Paper addresses legal issues such as liability, interoperability, research and development (R&D), and reimbursement, as well as the role of internet-based healthcare within the overall healthcare system. However, given the significant influence of Europe’s public healthcare systems, discussions on internet-based healthcare cannot be divorced from this broader context. This article will subsequently explore how to further promote the prosperity of the internet-based healthcare market through public healthcare systems and insurance reimbursement mechanisms.

Internet Healthcare, Public Procurement, and Disease Funds

As proposed in the Green Paper, if the costs of internet healthcare solutions are reimbursable through health insurance, it will further encourage patients to choose internet healthcare options and incentivize public healthcare providers to offer such services. In this scenario, public healthcare institutions would need to enter into contracts with developers of internet healthcare applications.

Under European law, contracts between public healthcare institutions and private entities must be subject to public procurement regulations if they exceed certain thresholds. Failure to apply public procurement regulations renders such contracts void. Once the public procurement process is initiated, the contracting authority (such as a public sickness fund) must first define the procurement requirements as precisely as possible. This step is critical, as all future bidders will be evaluated against these same criteria, thereby ensuring adherence to the principles of non-discrimination and transparency in public procurement.

However, the inherent characteristics of internet healthcare applications and solutions, coupled with the fact that the market size remains small and evolves rapidly, may make it difficult to accurately define procurement requirements. Consequently, procuring entities may face lawsuits alleging discriminatory treatment, thereby exposing them to certain legal risks. Therefore, identifying viable approaches for public procurement in internet healthcare and mitigating legal risks are of significant importance.

Data protection issues in public procurement procedures are also of critical importance. On the one hand, laws impose requirements on data confidentiality and security; on the other hand, public procurement laws mandate procedural transparency and prohibit discriminatory treatment. These two sets of requirements may conflict to some extent. Therefore, both procuring entities and private parties must seek specific advice from legal experts to ensure the lawful and secure implementation of internet healthcare solutions in public procurement projects.

Nevertheless, there are ways to circumvent the aforementioned legal obstacles. First, the author recommends that procuring entities conduct thorough market research to define market demand as accurately as possible. It is crucial to include all competitors in this market research process.

Secondly, given the innovative nature of internet-based healthcare, so-called “R&D procurement” may be more appropriate than standard procurement procedures in certain circumstances. A hallmark of R&D procurement is that the final procurement contract stipulates that patent rights belong to the internet healthcare application or the developers of the solution, while the procuring entity retains the right to use the patent. Consequently, the price paid by the procuring entity (such as a disease fund) is often lower than what it would pay if negotiating directly with an exclusive rights holder. Furthermore, R&D procurement helps procuring entities make new market assessments and adjustments in the future.

The Development of Internet Healthcare in Germany's Public Healthcare Market

Notably, German statutory health insurance funds have already launched several digital health applications. For instance, a mobile app from Techniker Krankenkasse (TK) provides patients with information on clinics’ profiles and specialties. The DAK-Gesundheit fund offers an app called “DAK Fit-Check,” which helps users assess their physical condition; users can earn reward points upon achieving certain fitness goals. However, a large number of digital health applications available in the private healthcare market have not yet been adopted within the public healthcare sector, representing a significant opportunity for innovation.

Conclusion

Internet healthcare is regarded as a reformative force within China’s healthcare system. However, such innovation must be recognized, regulated, and protected by law. As China drafts its Personal Data Protection Law, it should pay particular attention to the legal issues raised in the European Union’s Green Paper. China’s public healthcare system will further drive innovation in internet healthcare. Meanwhile, the vast public healthcare markets in Germany and Europe offer equal competitive opportunities to all market participants with high-quality products, solutions, and services. While Chinese internet healthcare providers have achieved significant success in their domestic market, they should not overlook the opportunity to enter the German and European markets through public procurement.

(Authors: Dr. Alexander Csaki, Clarissa Junge-Gierse, Martin Conrads; Translator: Yang Juan)

Yang Juan: Chinese lawyer at the Düsseldorf office of the international law firm Bird & Bird LLP;

Bird & Bird LLP is an international law firm with a particular focus on intellectual property, regulatory, and technology-related legal issues in industries such as aviation, defense and security, automotive, aircraft manufacturing, banking and financial services, telecommunications, electronics, energy and utilities, food, healthcare, information technology, life sciences, media, and sports. Website:www.twobirds.com ）