The EU Pharma Package Is a Done Deal: a Holiday Gift, or Not?

Yes, a deal has been struck. After more than two years after the European Commission put forward its highly controversial proposal for a complete rehaul of the EU pharma legislation package. Now it's just a question of wrapping up the formalities. 

Welcoming the deal, Sophie Løhde, Danish Minister for the Interior and for Health on behalf of the Danish Presidency of the EU, stated:

"I am pleased we have reached an agreement with the European Parliament on a new legislative framework for pharmaceuticals. The deal demonstrates the EU's commitment to both innovation and to ensuring that patients in Europe have access to the medicines they need. We are strengthening incentives for priority antibiotics, reducing red tape for the life science industry, and safeguarding the availability of essential medicines. The package marks a crucial step towards making a more resilient and dynamic life science sector in Europe, and it shows that Europe is able to make the necessary decision to protect European interests."

Now, is it good or bad news? Most will say it's both. Put it this way: It could have been much worse for industry (and patients alike). But that does not really matter anymore. Time will tell if this was the right move to incentivize innovation by a pharmaceutical industry that has already moved a lot of its research outside of Europe and is increasingly challenged, not least on the pricing and reimbursement front. (See our recent Newsletter article, "Most Favored Nation Drug Pricing and Manufacturer Agreements.")

What matters is we now need to start understanding the rules and, most importantly, prepare for their application. It will move quickly, so fasten seat belts and let's get going.

Key Changes

Here is a summary of the key changes from the rules of the past 20 years. 

• Regulatory and market protection revisited: The part of the package that is least appealing to industry is the framework for regulatory protection, which now is shortened and subject to more stringent conditions. Eight years of standard data protection remains the baseline for new medicines, during which generic/biosimilar competitors cannot rely on the originator's clinical and pre-clinical data.
  
  However, instead of the current two years of standard market protection creating a total of 10 years of regulatory protection against generic/biosimilar competition, companies will now obtain only one standard year of market protection (resulting in nine years of "standard" regulatory protection) but can obtain an additional two years (resulting in a maximum of 11 years of regulatory protection) if specific conditions are met. For example, if a new medicine addresses an unmet medical need, a new indication with significant benefit is obtained after the first indication, or certain comparative trial/early filing requirements are met.
  
  The above rules are a compromise against the initial proposal of the European Commission, where the baseline regulatory protection was six+two years and the additional regulatory protection (up to 12 years) was subject to conditions that were widely considered unrealistic and practically unattainable, and therefore became one of the hot topics in the reform.

• Orphan protection: Orphan medicines continue to receive extended exclusivity. However, standard orphan protection runs now for nine years (from the current 10 years), while "breakthrough" orphan medicines addressing diseases with no existing treatments can now benefit from up to 11 years of market exclusivity.
• Supply and shortage prevention obligations: Marketing authorization holders will have new obligations to ensure continuous and adequate supply, share information regarding disruptions, and prepare shortage prevention plans for both prescription and identified critical medicines. National authorities and the European Medicines Agency ("EMA") will monitor shortages, develop lists of critical products, and can invoke a voluntary solidarity mechanism across Member States to respond to critical shortages. This is a COVID legacy, and also a move towards better coordination to manage stocks of medicines across Europe.
• Bolar exemption clarified: The Bolar exemption, which exempts certain activities carried out during regulatory protection from being deemed patent infringing, and therefore also aims to facilitate generics/biosimilar market entry, is clarified. Under the current framework, the exemption is drafted in open-ended terms ("conducting the necessary studies and trials … and the consequential practical requirements"), which has left significant room for interpretation by Member States resulting in an unhelpful patchwork. The new rules set out a more specific and exhaustive list of activities covered—including all steps needed for marketing authorization (and variations), HTA, pricing and reimbursement, related practical requirements, and procurement tender submissions. No sales or marketing are permitted during the protection period. 
• Transferability voucher for antimicrobial resistance ("AMR") incentives: A new exclusivity voucher rewarding the development of priority antibiotics by granting one extra year of market protection has been introduced in the proposed legislation. A unique feature of this regulatory mechanism is its transferability—indeed the voucher can be used either on the antibiotic itself or it can be transferred to another EU-centrally authorized product of the marketing authorization holder's choice, subject to certain safeguards. This is an exciting new regulatory model that truly aims to stimulate innovation in AMR.
• Marketing authorization timelines: In an effort to streamline and accelerate the pace of regulatory approval to match that of scientific research, the EMA review timeline for marketing authorization applications is now shortened from 210 days to 180 days. Electronic submission formats will be standardized to streamline the application process. New measures are aimed at improving transparency on public funding for R&D, requiring MAHs to disclose direct financial support from public or philanthropic bodies.
• Environmental requirements: The environmental risk assessments ("ERA") will be strengthened, including assessments related to production, use, and disposal. The marketing authorization will be refused if the ERA is incomplete or insufficiently substantiated or if the identified risks have not been sufficiently addressed. 

Next Steps

The provisional political deal must now be formally endorsed by both the European Parliament and the Council of the EU before the revised rules are adopted and published in the EU Official Journal, a pre-condition for their entering into force and application.

United States Perspective

This rebalancing of innovation incentives with earlier access to medicines is also occurring in the United States which shares the EU's goals of improving market access to needed medicines. Both the United States and EU are focused on addressing gaps in unmet medical needs, particularly for rare diseases and preventing drug shortages. However, the approach taken in America differs somewhat from the EU Pharma Package in terms of how those innovation incentives are being impacted. Rather than compressing the exclusivity protections, the United States is currently pushing for the onshoring of pharmaceutical manufacturing (while lowering drug prices to achieve market access goals, a pressure Europe has also seen now for a while). Simultaneously, the FDA also is streamlining biosimilar development by reducing the clinical burden required for approval as a means to incentivize biosimilar competition. 

Pairing the compression in exclusivity protections in the EU package with the downward financial pressures and potential for earlier biosimilar competition in the United States, the calculus companies apply in strategic planning for pharmaceutical pipelines across global markets is likely to shift: The weight given to drug pricing strategies may begin to rival the importance of timing and launch sequence for those products.