Fine draws attention to life sciences licensing requirements

Circle Health Group, previously known as BMI Healthcare, was fined £100,000 for illegally storing human tissue samples. The fine was handed down under section 25 of the Human Tissue Act 2004 (HTA) following a lengthy investigation by the Human Tissue Authority, West Mercia Police and West Midlands Police.

The investigation found that, over a period of 11 years, Edgbaston Hospital, part of the Circle Health Group, had incorrectly stored human tissue samples and allowed such samples to be taken from the hospital by a former staff member and stored illegally at an unlicensed private residence. It also found that hospital management had consistently failed to make reasonable enquiries as to whether appropriate licences were in place and to address failings when identified, and had further demonstrated a poor understanding and interpretation of the HTA.

Commenting on the case, detective inspector Mark Walters, senior investigating officer for West Mercia Police, said that prosecutions under the HTA are rare. He said the serious nature of the breach of licensing requirements over a prolonged period “undermines the trust placed in the hospital by patients and their families that their human tissue would be dealt with appropriately, ethically and in accordance with the law”.

The fine serves as a reminder for businesses in the health and life sciences sector of the importance of ensuring they and their employees understand their regulatory obligations.

It is a requirement of the HTA that any entity dealing, storing, transporting, or using "relevant material” – that being material taken from a human body – must be the holder of a valid licence. The Human Tissue Authority is the authority responsible for issuing licenses and monitoring compliance with the HTA more widely.

Non-compliance with the HTA can result in a fine, imprisonment for up to three years, or both. Under section 49 of the HTA, if these breaches are committed by a body corporate, any director or equivalent person of the company will be held equally responsible and can be charged as an individual. Senior management should therefore be familiar with which actions of their business may be subject to the HTA, the authorisations required to undertake those actions, and ensure they have sufficient oversight to monitor compliance.

Separately, breach of a licence can be a source of negative publicity for the business. This can impact customer engagement and put off potential collaborators or buyers from interacting with the business.

Businesses can also have their licences revoked. The Human Tissue Authority has the discretionary power to revoke a licence for a wide range of reasons. Revocation of a licence could have serious implications for a business as it may render it impossible for the business to carry out core activities legally.

Licensing requirements will be applicable to any business dealing with relevant material, from hospitals to any research and education centres.

As part of their due diligence, potential buyers will check for the existence of and compliance with any licenses to avoid taking on any potential liability. This is particularly the case where specialist legislation such as the HTA is involved.

According to the statement issued by West Mercia Police, senior management at Circle Health Group did not appear to have a clear understanding of their obligations under the HTA. Any business handling human tissue or operating in the health or life science sector is likely to be the subject of multiple regulatory requirements. This complexity can increase exponentially if the business operates over multiple jurisdictions. Specialist knowledge can be required to clearly identify what rules apply and when a business needs to ask for authorisation or take remedial action.

This case also highlights the importance of educating staff and having use policies in place. To minimise risk to a business, any individual who may interact with human tissue should be clear on how it can be handled. Businesses will also want to ensure they have appropriate disciplinary procedures in place should an employee take actions which may jeopardise a licence.

It is clear from the Circle Health Group example that requesting and compliance with licences is an ongoing obligation. If a licence is required; businesses should ensure:

• the licence adequately covers the activities the business seeks to engage in;
• renewal dates are noted;
• conditions are adhered to – for example, certain licences may have associated reporting obligations in order to remain valid;
• staff and contractors are aware of licensing requirements; and
• they review their licencing requirements.

The last point is particularly important to consider when a business has expanded or entered into a new area. Some licences are linked to specific premises so something as simple as a change of office could render the licence invalid. Alternatively, where a business has expanded its operations or merged with another it may, as a result, no longer benefit from an exemption and instead require a licence for its activities.

Licence requirements are a complex area of regulation which go to the heart of whether a business can operate legally. Senior management must be clear not only on their business’ regulatory obligations but also ensure methods are in place to share these with other relevant individuals within the organisation. The consequences for failing to do this can range from individual liability to a business no longer being able get crucial work done.

Co-written by Kate Pearson of Pinsent Masons.