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Revision of the EU pharmaceutical law regime – what does it mean for biotech companies?

This article is part of our Biotech Review of the Year - Issue 11 publication

In 2023, the European Commission (EC) proposed its most sweeping reform of the EU pharmaceutical law regime in 20 years. 


Few legislative proposals related to medicinal products have provoked such a reaction as that following the legislative package issued by the EC in April of last year. This reaction is understandably strong because of what is at stake: the changes proposed by the EC are profound, with the most criticised proposal relating to the reduction of the periods of regulatory data protection and market exclusivity for new medicines, and the most praised one relating to a new incentive to develop novel antibiotics to address antimicrobial resistance. However, the proposed reforms go well beyond these changes and also include proposals to regulate decentralised manufacturing, enhance obligations aimed at securing supplies of critical medicines and preventing shortages, and introduce regulatory sandboxes, to name a few.

The EC’s legislative proposals consist of a new directive replacing Directive 2001/83/EC (the primary EU piece of legislation for human medicines)1 and a new regulation replacing Regulation (EC) No 726/2004 (the EU piece of legislation establishing the centralised procedure and the EMA).2 The proposals will also incorporate and consolidate the legislation on orphan and paediatric medicines. 

In reality, however, everything is still very much up in the air, with the EC having different views to the European Parliament (EP)’s Committee on the Environment, Public Health and Food Safety (ENVI), as shown in its draft reports on this topic.3 A number of Member States have also been vocal about their concerns regarding some aspects of the proposals. 

In view of the uncertainty, and as the EC’s proposal passes through the EP and the Council, we have selected some of the most important envisaged changes for biotech companies and will explain what they may mean for them.

Cutting down incentives: goodbye to 8+2(+1) and orphan market exclusivity as we know them?

The well-established regime of 8 years of data protection plus 2 years of market protection, the latter being extendible to an additional year for new indications which are held to bring a significant clinical benefit compared to existing therapies, is under threat.

The EC proposes a new, more complex and variable regime: the 8+2 period would become a 6+2 period, with the possibility of topping-up the data protection period if certain criteria are met. In particular, the period of data protection could be extended beyond the standard baseline of 6 years if the MA holder launched the medicinal products in all Member States covered by the marketing authorisation (+2 years), if the medicine addressed unmet medical needs (+6 months), if comparative clinical trials were conducted (+6 months), or if an additional therapeutic indication is approved and held to be of significant clinical benefit (+1 year). The EC justifies these changes as a way of moving away from a one-size-fits-all system of incentives to “a modulated system of incentives that rewards companies that fulfil important public health objectives”.

There is consensus across stakeholders and industries (both innovative and generic and biosimilar) that the proposal from the EC creates an unpredictable system that would force companies to plan investments based on a de facto 6 years of regulatory data protection. Indeed, strong opposition to these changes has emerged from both the European Federation of Pharmaceutical Industries and Associations and Medicines for Europe. Larger EU Member States that have greater access to medicines have also made their concerns public.

The possibility of extending data protection by 2 years would be particularly challenging for biotech products. According to the EC’s proposal, 2 additional years would be granted if the MA holder was able to demonstrate that it has launched and “continuously supplied” a “sufficient quantity” of the medicine to cover the needs of patients in all of the Member States where the MA is valid within 2 years of the grant of the MA, or 3 years in the case of small- and medium-sized enterprises (SMEs), not-for-profit entities or “unexperienced” MA holders (those with no more than five centrally authorised MAs). It would be extremely difficult for big pharma to achieve this condition for the most straight-forward medicines, and virtually unattainable for biotech companies in relation to their complex medicines given the challenges with costs, market access and manufacturing.

Despite the EC’s proposal, in its draft report, the Rapporteur at the EP’s ENVI Committee is of the view that the level of regulatory data protection offered in the EU should be competitive with what is being offered in other markets, and that there should be certainty and long-term predictability regarding the level of regulatory data protection. For this reason, the ENVI proposes that a significant amount of the total regulatory data protection remains within the baseline, in particular 9 years instead of 6 years as proposed by the EC. It also proposes to get rid of the +2 years incentive for the launch of the product in all Member States, while extending the protection for unmet medical needs from 6 months to 1 year. 

As it can be seen, anything could happen at the ENVI vote that is expected to take place in March 2024, and similarly at the EP’s plenary vote indicatively scheduled for April 2024. The duration of orphan market exclusivity in the new regime is similarly uncertain: the EC proposes a duration of 9 years for standard orphan medicinal products, whereas in its draft report, the Rapporteur at the EP’s ENVI Committee reduces the duration by 1 year to 8 years. For orphan medicinal products addressing high unmet medical needs, the proposal is that orphan market exclusivity will last for 10 years. The possibility of extending these periods exists according to both proposals if certain criteria are met.

Will there be regulatory sandboxes? 

A novel tool proposed by the EC consists of so-called “regulatory sandboxes”, a concept derived from the field of software development. While there is no universally accepted definition, a regulatory sandbox is a tool consisting of a controlled environment in which companies can explore and experiment with new products and services under the supervision of a regulator during a limited time period. At the same time, a regulatory sandbox enables the regulator to better understand the technology used in the context of the regulatory sandbox to be able to legislate appropriately and provide guidelines. Regulatory sandboxes are also included in the EC’s proposal for an Artificial Intelligence Act as a tool to support innovation. 

Recital 133 of the proposal for a new Regulation sets out the concept: 

“Regulatory sandboxes can provide the opportunity for advancing regulation through proactive regulatory learning, enabling regulators to gain better regulatory knowledge and to find the best means to regulate innovations based on real-world evidence, especially at a very early stage of development of a medicinal product, which can be particularly important in the face of high uncertainty and disruptive challenges, as well as when preparing new policies.”

The EC’s proposal fails to specify what technologies in particular would benefit from this tool but it envisages the regulatory sandbox as a time-limited environment in which innovative technologies, products, services or approaches, especially in the context of digitalisation or the use of AI and machine learning in the life cycle of medicinal products, might be tested in a “real world environment,” subject to appropriate safeguards. The proposal makes it clear, though, that they are not a substitute for marketing authorisations.

Given the vague terms in which the draft legislation refers to the regulatory sandbox, it is no surprise that the ENVI’s draft report removes the regulatory sandbox proposal in its entirety. The Rapporteur is “dubious” of the EC’s proposal because it is “vague in nature and has not been satisfied with explanations or examples of which types of products could be eligible for such a regulatory sandbox.” Industry stakeholders have also shown reluctance regarding the introduction of another parallel regulatory framework, especially given the breadth of the EC’s proposal; there is concern that such a sandbox could provide a way of circumventing rules laid down elsewhere in the legislation.

Addressing antimicrobial resistance

The EC has bravely come up with a proposal to address antimicrobial resistance which has been welcomed by the innovative industry: a new incentive consisting of a transferable data protection voucher for developing “priority antimicrobials”, a type of antimicrobial with clinical data that underpins a significant benefit with respect to antimicrobial resistance. The proposed voucher involves a transferrable right to 1 year of data protection for one centrally authorised medicinal product to be used within the first 4 years of data protection of that product. 

The EC proposes that the voucher can be sold once, but the sale price and the parties involved in the transaction must be made public. The one criticism that can be made to the proposal is that it is initially limited to a maximum of 10 vouchers over a 15-year period. Given the years needed to develop an innovative antimicrobial and the uncertainty about whether the initial number of vouchers would be extended, limits imposed on this proposal may well slow down the development of these medicines.

The ENVI’s draft report proposes to get rid of this voucher. The reason: the Rapporteur “expresses severe scepticism” towards the voucher, which it sees as “an indirect and non-transparent form pricing which will cost national health budgets in an unpredictable manner and delay the entry of generic medicines to the market, to the detriment of patients”. Instead, it proposes the creation of the European Medicines Facility as a Union Agency, which would have, as one of its missions, the establishment of a portfolio of priority pharmaceutical R&D projects addressing, among other things, the development of priority antimicrobials. This proposal is rather disappointing as it is likely to be highly ineffective in tackling antimicrobial resistance, one of the three biggest threats to human health according to the Health Emergency Preparedness and Response Authority.

Final considerations

Profound change and uncertainty are the words that would best describe the EU pharmaceutical law reform. Having said that, the EC proposes some welcome changes aimed at simplifying some regulatory procedures and reducing red tape. For example, the reduction of the assessment procedure at the EMA from 210 days to 180, after which the EC will have 46 days, instead of 67, to grant approvals. Some criticise that the EC has not been brave enough to remove the need for the EC to approve medicines, but at least the proposed changes would help to somewhat reduce the average time from submission to approval of medicines.

The new legislation is unlikely be adopted before late 2025 or 2026, and we must not forget about the added complication of the EP elections in 2024, so the uncertainty about the future of the EU pharma law regime will exist for a while. Once adopted, transitional and implementation periods are then likely to be generous (18 months if the EC’s proposal is adopted).






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