Why a Distributor Should Not Hold the Certificate: The Bargaining Trap

1. Key takeaways

It is technically permitted, but GRZAN does not recommend it. Allowing a distributor to hold the registration certificate pledges the product market access to the commercial counterparty and creates three distinct risks: changing channel requires moving the certificate first, the bargaining position becomes permanently asymmetric, and post-market responsibility and commercial interest end up in the same legal entity. Where there is no alternative, the agreement must lock in the handover obligation and a workable exit mechanism before signature.

• Legal position: nothing in the rules prevents a licensed distributor from being the MAH; the objection is structural, not legal.
• Control: the certificate is the switch that determines whether the product may lawfully be imported, sold or promoted.
• Conflict: a holder that also bears recall cost has an interest in how reportability is judged.
• Contagion: regulatory measures against the holder reach every certificate registered in its name, including unrelated product lines.

2. Legal basis

The certificate is issued to the applicant, the applicant must be a locally licensed entity, and the holder carries the vigilance obligation. Those three rules, read together, explain why the identity of the holder is a commercial decision with regulatory consequences.

3. Expert insights

First insight: whoever holds the certificate holds the switch on lawful sale. The legal effect of registration is straightforward. Without a valid certificate the product cannot be imported, cannot be sold and cannot be promoted. When that certificate is registered in the name of the distributor, the distributor controls the legality of the product in that market, regardless of who designed, manufactured and owns the technology. If the relationship deteriorates, the distributor does not need to act against the manufacturer. It only needs to decline to hand over the original certificate, and the transfer cannot be completed. The manufacturer then faces a counterparty whose cooperation it cannot compel through the regulatory system, only through a commercial dispute.

Second insight: binding responsibility and profit in one entity is the more subtle risk. AO No. 2025-0030 makes the MAH the entity responsible for vigilance. Where the MAH is also the distributor, a structural problem appears: in an event that may require a recall, the same party decides whether to report and bears the cost of the recall. The judgement of reportability is made by an entity with a direct financial interest in the outcome. That conflict distorts reporting decisions, and the distortion is precisely what the framework treats most severely, because deliberate non-reporting or deliberate concealment of information is expressly listed as an aggravating circumstance under AO 2025-0030. The risk is not that the distributor is dishonest by nature; it is that the structure rewards a particular reading of ambiguous facts.

Third insight: there is a knock-on risk that is routinely overlooked. The legal consequence of suspension or revocation of an MAH authorisation falls on the product, not only on the holding company. If a distributor is subject to regulatory measures because of a compliance problem on a different product line, every certificate registered in its name is affected. The manufacturer product is caught by association, even though its own dossier, manufacturing and labelling are in order. Manufacturers tend to assess the holder on the quality of their own product file. The relevant test is the conduct and overall portfolio of the holding company, not only the file in front of the reviewer.

Fourth insight: where the distributor already holds the certificate, there are three remedies, and the cost rises with each step. The first is contractual remedy: add a handover obligation by supplementary agreement, which is the cheapest but depends entirely on the counterparty willingness to cooperate. The second is transfer: satisfy the three preconditions and follow the variation procedure, at moderate cost and again dependent on cooperation. The third is fresh registration: the new holder applies independently, at the highest cost but without depending on the outgoing holder at all. During the current official fee suspension, the third route is often economically superior to the negotiation cost embedded in the first two, because the dominant expense in a re-registration is preparation and service work rather than government fees.

4. Practical recommendations

• Negotiate holding and distribution as separate questions before signing. Establish the principle that the holder is not the distributor, and keep the distributor in the channel role only.
• If a distributor must hold the certificate, the agreement must contain a handover clause. Require delivery of the original certificate, the registration file, the letter of authorisation and the technical documentation within a stated number of working days after termination, backed by a penalty.
• The manufacturer should retain a full copy of the file. Never place the only set of documents with the holder.
• Verify certificate status at fixed intervals. Check the FDA Verification Portal for annotations or status changes rather than relying on the holder to report them.
• Budget for re-registration in advance. Treat multiple registration as the fallback that keeps the exit option real rather than theoretical.

5. Verification checklist

• □ Agreement structure reviewed to confirm whether the holder is also the distributor
• □ Handover obligation clause reviewed, including deadline, document list and penalty
• □ Manufacturer archive holds a complete copy of the registration file
• □ Certificate status checked periodically at verification.fda.gov.ph
• □ Exit options costed, comparing transfer against fresh registration
• □ Independence of the vigilance function assessed for conflict of interest

How GRZAN can help. GRZAN provides medical device and IVD registration, quality system, authorised representative and local testing support across Southeast Asia, including the Philippines. Our team prepares CMDN/CMDR dossiers to ASEAN CSDT structure, manages submissions and deficiency responses with the FDA Philippines, and supports post-market vigilance obligations. Business enquiries: info@grzanglobal.com