What You Need to Know
- Key takeaway #1The Pharma Package proposes an “access conditionality” to ensure the equitable availability of medicinal products across all Member States. Whereas the Commission’s proposal tries to incentivize pharmaceutical companies with a “carrot” of two additional years of data exclusivity, the Parliament and Council propose a “stick” approach through financial penalties or loss of regulatory data protection in case of non-compliance.
- Key takeaway #2The Pharma Package categorizes shortages into three levels based on their impact and outlines specific reporting and monitoring obligations for each category. It emphasizes the need for marketing authorization holders to have shortage prevention plans and comply with notification obligations to address potential supply disruptions proactively. Notably, the Council suggests limiting the obligation of a shortage prevention plan to certain critical medicines identified by Member States or the Commission, as opposed to a general obligation for all marketing authorization holders under the Parliament’s and Commission’s proposals.
- Key takeaway #3The Pharma Package provides a legal basis for the “Union list of critical medicinal products”. This list, distinct from the “list of critical shortages of Union concern”, focuses on ensuring a stable supply of medicines that could cause serious harm to patients if unavailable, and prioritize the prevention of shortages. The list will coexist with national lists of critical medicines, reflecting ongoing competence overlaps between the EU and the Member States in managing shortages and security of supply.
In this seventh alert in our weekly series on the Pharma Package, we will discuss the increasing focus on shortages of medicinal products in the EU and the prevention and mitigation measures as proposed by the European Commission, the European Parliament and the Council of the EU.
Given the variety of measures that have been implemented in recent years with respect to shortages and security of supply – and those that are still being adopted – we will discuss the interplay with the Critical Medicines Act and other EU initiatives such as the Medicinal Countermeasures Strategy and the EU Stockpiling Strategy in the next alert.
No “shortage” of shortages
There have been growing concerns over shortages in the EU of several medicinal products over the past decade, which pose a severe threat to public health as well as the smooth functioning of the internal market. In recent years, the EU has been building a resilient “European Health Union”, in which all Member States collectively prepare and respond to health crises and coordinate efforts to ensure a stable supply chain for key medicinal products in the long term. These efforts were accelerated in the wake of the Covid-19 pandemic, the antibiotic shortages in the winter 2022-23 and recent geopolitical crises such as the war in Ukraine.
Shortage mitigation is a complex task as shortages are typically caused by a combination of different issues. The leading cause of shortages is manufacturing issues and supply chain disruptions, which is partially due to a lack of independent manufacturing capacity and the EU’s growing reliance on third-country suppliers for critical ingredients. Other causes include unexpected increased demand, distribution issues, and quality, regulatory or IP issues. Notably, unavailability of a medicinal product can be caused by a patent dispute between an originator and generic or biosimilar company. To avoid launch delays due to manifestly unjustified patent disputes, it might be worth considering for Member States to implement a compensation mechanism for such delays.
Furthermore, although a pharmaceutical company can opt for a centralized (EU-wide) marketing authorization (MA), this does not mean it has to launch its product in all 27 Member States. There are often commercial reasons why pharmaceutical companies do not offer their products in the entire EU, due to discrepancies in national pricing & reimbursement (P&R) frameworks and supply and demand in the various Member States – with Germany having the largest number of medicinal products available and the Baltic countries among the least.
The current pharmaceutical regulatory framework as set out in Directive 2001/83/EC and Regulation (EC) No 726/2004 only contains very limited, high-level wording regarding supply disruptions – not shortage mitigation as such. Specifically, (i) Article 23a of the Directive (and Article 13(4) of the Regulation) contains an obligation for the marketing authorization holder (MAH) to notify national competent authorities in case of a temporary or permanent withdrawal from the market (which can be due to supply disruptions) at the latest two months prior thereto; and (ii) Article 81 of the Directive obliges MAHs and distributors “within the limits of their responsibilities, [to] ensure appropriate and continued supplies of that medicinal product to pharmacies and persons authorised to supply medicinal products so that the needs of patients in the Member State in question are covered”.
The new Pharma Package includes several new measures to mitigate shortages and to improve EU-wide availability of medicinal products. Most of the proposed new measures are included in the proposed Regulation of the Pharma Package rather than in the proposed Directive, to ensure greater harmonization.
Access conditionality
“Access conditionality” refers to the proposal of the Commission to grant a regulatory data protection (RDP) incentive in the event an originator company launches within two years and thereafter continuously supplies a medicinal product in question in all Member States (see our first alert on RDP for more information). For SMEs, non-profits and smaller MAHs with maximum five centralized MAs, a three- instead of two-year period applies. The company must apply for the prolongation via a variation of its MA, which must include either a confirmation of supply or a waiver of the supply obligation from each of the Member States.
The aim is to increase the availability of medicinal products across the entire EU. Medicines are currently made available to patients at different times in different Member States. In some cases, they are never marketed in some Member States, resulting in unequal patient access.
The Parliament substantially reforms this access conditionality by (i) delinking this from the RDP incentive and (ii) replacing this with an obligation to apply for P&R upon request of a Member State that is made within one year from the MA grant and ensure continued supply in that Member State in case of a positive P&R decision. Non-compliance is made subject to financial penalties.
The Council‘s proposal builds upon the mechanism introduced by the Parliament but with some notable changes:
- Under Article 56a of the Directive in the Council’s proposal, within one year from the MA grant, a Member State can request an MAH to place a product which is still under RDP (or market exclusivity in case of an orphan drug) on the market in that Member State and to supply it in “sufficient quantities and presentations necessary to cover the needs of the patients”. For that purpose, such Member State can require the MAH to carry out any access-related duties, such as (i) submit a P&R application, (ii) meet specific requirements in public procurement procedures, and (iii) establish a roll-out plan.
- If the MAH does not comply with such request within four years after the grant of the MA, the penalty is not a financial penalty (as proposed by the Parliament), but the market protection for that medicinal product (or market exclusivity for orphan drugs) lapses in that Member State.
- In addition, the MA application for generics and biosimilars can already be validated and assessed as from year six of data exclusivity (so two years earlier), though the actual approval will be postponed until the data exclusivity period has fully expired. Combining this with the lapse of market protection, generics or biosimilars could be assessed after six years and already launch in that Member State eight years after the grant of the MA for the originator product (so again two years earlier).
In that sense, the Council reverses the proposal of the Commission by taking away two years of protection as a penalty for non-compliance with a supply request, instead of awarding an extension of two years in case of compliance. While the Council’s proposal is certainly more beneficial for the generics industry than the Commission’s proposal, detailed monitoring of the originator products will in any case be required as the access conditionality mechanism could lead to a country-by-country application of the RDP. The Council’s proposal explicitly includes a transparency requirement to ensure that the industry is aware of the loss of RDP in a Member State in case of non-compliance.
- Remarkably, in addition to Article 56a of the Directive, the Council proposes a second mechanism in Article 5a of the Regulation only for centrally authorized medicines which are still under RDP (or market exclusivity in case of an orphan drug) or now also under patent or SPC protection. For such medicines, Member States can invoke either Article 56a of the Directive or, alternatively, make a similar request of placing on the market and supplying in sufficient quantities and presentations under Article 5a of the Regulation. The mechanism in Article 5a provides very limited details or further criteria. The relevant Member State and MAH will enter into an agreement to specify the exact responsibilities of the MAH. There is no specific penalty determined yet, but there is a review clause foreseen whereby the Commission will review the mechanism four years after the entry into force to decide whether penalties should be included. For now, in case of non-compliance, the Commission will be notified and can require the MAH to “enter into negotiations with the relevant Member States in good faith and make best efforts to ensure supply.” It is unclear what “best efforts” means, but Recital 11a of the Regulation appears to imply that only reasons of financial unviability or external factors beyond the MAH’s control could justify non-supply. The added value of this second mechanism remains to be seen.
Finally, the access conditionality in the three proposals replaces the launch obligation under the so-called sunset clause in the current regulatory framework. All three EU institutions agree on abolishing the sunset clause, according to which an MA expires if the medicinal product is not placed on the market somewhere in the EU (it does not need to be the market of every Member State) – or the market of the relevant Member State in case of a national MA – within three years after the MA grant or is not marketed for a continuous period of three years.
Shortage prevention and mitigation
The Pharma Package sets out three categories of shortages of a medicinal product based on their impact, for which different reporting and monitoring obligations and oversight mechanisms are defined:
- “shortage”: supply does not meet demand in a Member State;
- “critical shortage in the Member State”: there is no appropriate alternative available on the market in that Member State and the shortage cannot be resolved. The Council has proposed several changes to this definition and requires that the shortage “may result in a significant impact on the healthcare system of a Member State or results in harm or risk of harm to patients” and that there is no appropriate alternative available in sufficient quantities; and
- “critical shortage [of Union concern]”: coordinated action at EU level is considered necessary.
Depending on the authorization route of the medicinal product in question (centralized or national) and the applicable shortage category, either the European Medicines Agency (EMA) or the national competent authorities have the primary monitoring and reporting competence. National competent authorities are also required to inform the EMA of any action they take to mitigate or resolve a “critical shortage in the Member State”.
Critical shortages of Union concern are monitored by the EMA, in coordination with national competent authorities. The EMA shall establish and maintain a list of such critical shortages which cannot be resolved without EU coordination.
The obligations on MAHs to prevent and mitigate shortages can be categorized as follows:
- Notification obligations: the Pharma Package builds on the limited notification obligations in the current Directive 2001/83/EC but (i) requires the notifications at a much earlier stage and (ii) adds additional situations which need to be notified by the MAH to the relevant competent authority (EMA or national):
- permanent cessation of marketing or permanent MA withdrawal (at the latest 12 months before the last supply);
- temporary suspension of marketing (at the latest six months before start); and
- expected temporary supply disruption of more than two weeks (as soon as possible but no less than six months before start – three months in the Council’s proposal).
Annex IV of the proposed Regulation specifies the minimum information that should be provided in each of these cases, which includes details on the product, available stock and shortage duration and reason.
In case of a permanent cessation of availability or MA withdrawal for priority antimicrobials (see our alert on the transferable exclusivity voucher for more information) or certain critical medicines, the Council proposes to add an obligation for the MAH to publicly declare its intention to offer the transfer of the MA or access to its data package for that product, and offer this on reasonable terms to an interested third party.
- Shortage prevention plans: Under the Commission’s and Parliament’s proposals, every MAH must have in place and keep up to date a shortage prevention plan for every medicinal product placed on the market. As specified in Annex IV of the proposed Regulation, the plan must include, inter alia, measures on shortage prevention and a supply chain risk assessment (e.g., alternative marketed medicinal products, a supply chain risk assessment analyzing potential vulnerabilities in the supply chain, shortage management measures (risk control strategy, process for the detection and notification of supply disruptions, record of root causes and mitigation measures taken for resolved shortages, etc.)). The Parliament clarifies that these shortage prevention plans must be put in place at the latest 18 months after the entry into force of the Pharma Package.
This places an incredibly heavy burden on the entire industry. The Council thankfully proposes limiting this obligation to only certain critical medicines as identified by the Member States or the Commission but introduces a three-month deadline to draw up the plan as from the moment the product is marked as critical. In addition, the Council also requires an estimated market share per Member State, an assessment of the patient impact and a final risk classification (low, medium, high) of shortage and public health impact as part of the shortage prevention plan.
The shortage prevention plan must be kept to the disposal of the authorities, who can request to see it at any time.
- Information and cooperation obligations: MAHs need to comply with several general information and cooperation obligations to enable competent authorities to monitor shortages. These obligations include, among others, the drawing up and submission of (i) a risk assessment of the impact of suspension, cessation or withdrawal, and (ii) a shortage mitigation plan in case of temporary disruption. Similar to the shortage prevention plan, these are extensive dossiers for which the minimum requirements are set out in Annex IV of the Proposed Regulation. Both should include an assessment of, inter alia, potential alternative medicinal products, the estimated market share per Member State, a supply forecast per month and per Member State, an overview of the manufacturing capacity globally per manufacturing site, the impact on the supply of other medicinal products and/or the impact on the consumption or demand of other medicinal products, as well as a description of any risk-mitigating measures by the MAH.
The Pharma Package also introduces information obligations on the other supply chain actors, notably the wholesale distributors. The Parliament requires wholesale distributors to report a shortage, including product availability per warehouse and the level of order fulfilment. In the proposals of the Commission and the Council, such shortage reporting is still optional (“may” report), but the Council permits Member States to make it a requirement on a national level.
Notably, the Council includes a specific provision for shortages in the context of parallel trade, which concerns the practice of sourcing medicinal products in one (often cheaper) Member State and reselling them in another (often more expensive) Member State. While parallel trade is a generally accepted practice as it facilitates the free movement of goods, as confirmed by the Court of Justice of the EU, under the Council’s proposal, Member States may introduce a notification requirement for parallel trade to the competent authority in the source Member State. The source Member State may then take restrictive measures to prevent or mitigate shortage if justified on public health grounds.
These information and cooperation obligations are further strengthened in case and as long as the MAH’s product is included in the list of critical shortages of Union concern.
Security of supply for critical medicines
Similar information and cooperation obligations apply for MAHs and other supply chain actors for so-called critical medicinal products. The Commission shall adopt a “Union list of critical medicinal products”.
This list should not be confused with the abovementioned list of critical shortages of Union concern, established by the EMA. Inclusion in the Union list of critical medicines focuses on proactive security of supply and does not mean that the medicines are likely to experience a shortage. It means that the prevention of shortages of such products is considered a priority, as a shortage could cause serious harm to patients. A critical shortage may occur for any medicine and the shortage of a critical medicine may or may not be a critical shortage under the Pharma Package.
A “critical medicine” is identified based on a common methodology taking into account (i) the seriousness of the targeted disease, and (ii) the availability of suitable alternative medicines.
Note that such Union list of critical medicinal products already exists today – albeit not as source for binding obligations. It was published by the Commission, the EMA and the Heads of Medicines Agencies of the Member States in December 2023, and reviewed in December 2024. The list currently includes over 270 active substances, covering a wide range of therapeutic areas such as infections, cardiovascular diseases, mental health conditions and cancer. This includes both innovative medicines and generic medicines for human use – such as vaccines and orphan medicines.
The Union list will coexist with national lists of critical medicines – again highlighting the tug of war between the EU and the Member States in this area.
Impact of the UWWTD
One could wonder whether the objective of the Pharma Package to reduce medicinal product shortages could be undermined by the obligations introduced under Directive (EU) 2024/3019 concerning urban wastewater treatment (UWWTD). The requirements for extended producer responsibility (EPR) and the mandatory allocation of costs for quaternary treatment – namely, the process for reducing a broad spectrum of micropollutants in urban wastewater – to producers of medicinal and cosmetic products pose a significant risk. In particular, there is a concern that these financial and operational burdens may lead to the discontinuation of production of certain medicinal products, including critical, lifesaving products.
Many companies within the pharmaceutical and cosmetic industry, including their associations, have voiced concerns. Medicines for Europe has for instance stated in its press release regarding the UWWTD: “The EPR scheme imposes a discriminatory and disproportionate cost burden on the generic pharmaceutical industry, which would threaten patient access to critical and essential medicines”. For instance Amoxicillin, a first-line antibiotic medicine and included in the Union list of critical medicines, would see costs rise by up to 368%. The concerns are also related to the fact that the cost allocation would be based on completely flawed data. The pharmaceutical and cosmetic industry are currently challenging the UWWTD with annulment actions before the General Court of the EU (Cases T-156/25 to T-171/25). They are joined by Member State Poland who is challenging the UWWTD before the Court of Justice of the EU (C-193/25). Poland argues that the UWWTD breaches the ‘polluter pays’ principle outlined in Article 191(2) of the Treaty on the Functioning of the European Union (TFEU). It claims the UWWTD unfairly singles out certain industries while excluding other polluters from bearing similar burdens.
Conclusion
This alert underscores the complexity of shortage mitigation due to its multifaceted nature and the overlapping competences of the EU and the Member States. The new Pharma Package introduces several measures aimed at improving the availability of medicinal products across the EU, including an “access conditionality”, enhanced obligations for MAHs to prevent and manage shortages, and enhanced powers for the competent authorities to monitor shortages and implement additional measures.
As a general observation, we see that in particular the Council and the Parliament are highly sensitive to the division of competence between the EU and the Member States with respect to shortages. In their respective proposals, they (i) have made several changes to provisions that might disrupt the balance of power between the EU and the Member States, and (ii) have clarified several additional rights for Member States to take their own actions to combat shortages if justified based on public health grounds.
For example, in the Council’s proposal, it is explicitly stated that Member States can temporarily (i) exclude medicinal products from having to comply with regulatory obligations where the purpose of the medicinal products is to mitigate or resolve a shortage in that Member State; (ii) amend the prescription status of a medicinal products; and (iii) suspend the advertising of a medicinal product, in the event of a (risk of) shortage.
In addition, both the Council and Parliament limit the power of the Commission to interfere at a national level to mere guidelines and recommendations on national initiatives such as stockpiling requirements – while explicitly reiterating the power of the Member States to adopt or maintain legislation “ensuring a higher degree of protection against shortages”.
At the same time, the implementation of the UWWTD introduces additional complexity for shortage mitigation. The extended producer responsibility and mandatory cost allocation for quaternary treatment risk imposing significant financial and operational burdens on producers of medicinal (and cosmetic) products. This could, in turn, jeopardize the continued production of certain essential and lifesaving medicines, potentially undermining the objectives of the Pharma Package. The ongoing legal challenges and industry concerns regarding the UWWTD further highlight the need for a balanced approach that safeguards both environmental objectives and patient access to critical treatments.
The issues with “hoarding” practices of the Member States and the interplay between the regulatory obligations proposed in the Pharma Package and other policy initiatives – past and future – will be further discussed in our next alert on shortages.
For further information, please contact:
Kristof Roox, Partner, Crowell & Moring
kroox@crowell.com
