The EC Sets an Ambitious Vision for Pharma’s Future

Will Industry Accept the Terms?

Maksim Zorich, PSM, Director

The Need for Reform – Why Now?

On April 26, 2023, the European Commission (EC) published two major legislative proposals that lay the groundwork for the largest reforms to the EU's pharmaceutical legislation since 2004. Through a comprehensive multi-stakeholder evaluation of its 2004 revisions, the EC determined that, while the legislation has generally achieved its two primary goals of protecting public health and harmonizing the internal market for medicines in the EU, six major deficiencies persist:

Prescient Perspectives: So why the push to reform now? The impetus arises from the EC’s recognition that, despite the transformative progress the pharmaceutical industry has witnessed over the past 20 years, significant barriers to innovation and access remain in the EU. A lack of incentives for small- and medium-sized enterprises (SMEs) to innovate has hindered the ability to treat areas of unmet medical need (UMN). Time-to-market – the period from a positive CHMP opinion to individual Member State pricing and reimbursement (P&R) approval for medicines – can vary wildly across the EU (from as little as four months to 29 months or more), and citizens in countries with tighter health system budgets (especially in Eastern and Southern Europe) are typically the last to receive access to innovative treatments. Despite the growing digitization of health systems, the expected improvements in harmonization at both regional and national levels have not materialized, while administrative requirements continue to impose significant burdens on developers, especially SMEs. Unprecedented medicine shortages resulting from the COVID-19 pandemic have highlighted the urgent need to enhance supply chain resiliency, while a recognition that previous attempts to regulate drug-related pollution have proven ineffective have led to calls for more robust environmental oversight.

Ultimately, to increase the competitiveness of the EU and shift drug developers’ focus away from what has traditionally been a US-first commercialization approach, the EC must propose bold changes to the pharmaceutical framework.

Addressing Systemic Deficiencies – Directives, Regulations and Key Objectives

The EC's proposed reforms are underpinned by two legal concepts: directives and regulations. While directives outline desired outcomes that must be achieved, they allow each Member State to independently determine how to incorporate them into national laws; meanwhile, regulations constitute a binding legal force that must be followed by all Member States. These concepts drive harmonization across EU Member States and, in this case, they are intended to address the deficiencies identified in the EC's evaluation and work towards its overarching goal of ensuring timely and equitable access to medicines for all patients across the EU. The pharmaceutical reform package comprises two primary pieces of legislation:

  1. The new directive, which repeals and replaces two existing directives (2001/83/EC and 2009/35/EC), and incorporates parts of the existing Paediatric Regulation (No 1901/2006).
  2. The new regulation, which repeals and replaces an existing regulation (No 726/2004), repeals and replaces the Orphan Regulation (No 141/2000) and repeals and incorporates relevant parts of the Paediatric Regulation (No 1901/2006).
In response to the deficiencies identified above, the directive, regulation, and their associated policy measures are built around five key objectives, as outlined by the EC:

Prescient Perspectives: The objectives set by the EC are ambitious, but will they be able to adequately address the deficiencies identified? The arguments presented by the EC are compelling, as they are backed by insights and extensive data gleaned from multi-stakeholder public consultations, retroactive analyses and budget impact assessments. For instance, the EC sets itself a broad mandate to strengthen the EU’s R&D sector and bolster the pipeline of innovative medicines by citing data showing that just 20% of drugs authorized in the EU originate there, and forecasts the number of innovative medicines that could be launched if incentives are offered. A core component of this mandate is the focus on the global threat of antimicrobial resistance (AMR), with the EC’s first real-world use case of transferable exclusivity vouchers (TEVs) representing a bold approach for driving innovation. Coupled with efforts to simplify, digitize and eliminate duplicative administrative processes, these objectives have the potential to lead to a surge of SMEs pursuing riskier innovative medicines in the EU.

Improving access and affordability is the most ambitious objectives, with the EC aiming to make sweeping, long-term behavioral changes to both industry and public players in the spirit of a level playing field. As a result, ignoring certain markets or abusing negotiating practices may become a very expensive business decision for drug developers if the EC has its say. The measures encompassed therein, which focus on amending exclusivity periods and subsequently strengthening the biosimilars/generics industry, are expected to be significant sources of debate between industry and regulators (more on that below).

Policy Measures Galore – The Agreeable and the Contentious

These objectives, and their associated policy measures, look to strike a balance between incentivizing innovation while addressing UMN, enhancing access and affordability, and better responding to an increasingly unpredictable global health environment. Before delving into the proposed measures, it is essential to understand the philosophy driving the EC's approach to their development. To determine the optimal approach to take for a given measure, the EC evaluated three distinct policy “Options”:

Option A builds on the status quo and achieves the objectives mainly through new incentives
Option B reaches the objectives through more obligations and oversight
Option C adopts a ‘quid pro quo’ approach – positive behavior is rewarded, and obligations are only used when there are no alternatives

The EC’s Impact Assessment Report provides thorough, multi-criteria impact analyses for some (but not all) of its proposed policy measures. The EC clearly states its preference for Option C, which it considers to be the most effective at addressing its objectives. Measures proposed via the Option C approach are highlighted as the most advantageous from a patient and public health perspective, and represent a fair balance between the originator and generic industries, along with public authorities and payers. As there is a high number of policy measures to consider here (more than 70!), highlighted below are just a handful that are likely to either garner industry support (agreeable), or kick off what will likely be the start of intense debate (contentious):

Select Policies in Focus – A Closer Look

Prescient Perspectives  The Agreeable: The EC’s drive to push the EMA into the 21st century by drastically reducing administrative burden and increasing flexibility is likely to be met with widespread support from the industry. Streamlining and simplifying operations will make it easier for drug developers of all sizes to ensure business predictability. Clearer evidence requirements, coupled with a revamped pediatric investigation plan (PIP) framework that promises to be more flexible and less burdensome, will reduce uncertainty and investment risk. New product planning and R&D teams in particular will benefit from an increase in earlier, more frequent scientific and regulatory support and a pharmaceutical framework that can evolve alongside their own clinical development plans. A bonus from the streamlining efforts is the EMA’s commitment to reduce the CHMP’s standard (non-accelerated) MAA review time from 210 days to 180 days (excluding clock stops), and the EC’s time-to-decision from 67 days to 46 days, aligning the EMA more closely with the FDA’s recent efforts in improving review times.

Among the numerous measures aimed at reducing AMR, the EC’s proposal of offering a TEV to developers of priority antimicrobials (AMs) is likely to be the most lobbied for by originator developers, but spurned by generics players. If a developer is awarded a TEV after meeting the EC’s criteria, it can use it on either another (non-AM) product in its portfolio, or sell it to another developer. SMEs already developing priority AMs can quickly benefit from such a scheme, both from a market exclusivity and venture capital perspective. Further, linking the reward to a product other than the AM can be particularly lucrative to developers that have blockbuster drugs that are nearing patent expiry. Despite the concept being much debated and untested in the real world, the significant costs to healthcare systems due to the ‘silent pandemic’ of AMR are compelling the EC to propose this approach to drive innovation.

Prescient Perspectives – The Contentious: The measures aimed at modulating data exclusivity periods have already been dismissed by industry groups, which have labeled them a threat to the innovation and competitiveness of the EU, but is this really the case? In the simplest terms, at approval, non-orphan drugs would have their total regulatory protection (RP) reduced from the current 10 years to a new eight-year baseline, while orphan drugs’ RP would be reduced from 10 to nine years. Through its ‘quid pro quo’ approach, the EC offers developers incentives to win back those precious years of RP in exchange for certain criteria being met. Orphan drugs could claim a maximum of 12 years’ RP, while non-orphan drugs could claim 13; these maximums are, however, theoretical unless all incentive criteria are met.

Of the various exclusivity incentives, the access conditionality incentive is the most contentious. A first-of-its-kind policy measure, it is central to helping the EC achieve its vision of equal access to medicines for all EU citizens. The EC makes its table stakes clear – failure to comply within the two-year period will result in earlier market entry for generics and biosimilars. Industry stakeholders working in market access roles know that no two Member State health technology assessment (HTA) bodies are equal. Varying capabilities, duplicative evidence requirements and sub-optimal harmonization at national and EU levels are key factors contributing to the EU’s access issue. These factors often influence industry decisions that hinder the launch of new medicines in specific markets, particularly for SMEs that lack the capacity and resources to coordinate reimbursement and commercial launch activities across multiple markets.

One of the ways the EC intends to reassure industry is through a separate but parallel HTA Regulation (2021/2282), going into effect in 2025 via a rolling phase through 2028. This regulation aims to significantly improve harmonization between Member States’ HTA operations and reduce duplicative requirements for the industry. If the EC can demonstrate to the industry that tangible improvements to national-level HTA processes are being made, then perhaps this measure can stand. At present, it is hard to imagine industry conceding its upper hand to public authorities, and two years of RP, without a fight.

What to Expect in the Years to Come

As with any legislation aiming to bring significant reforms to the status quo, the proposal will certainly undergo revisions before final ratification. As detailed above, intense debate is expected across several areas, and the upcoming EC elections in 2024 are sure to add an additional layer of uncertainty. Taken together, adoption is not expected until late 2025 at the earliest. Industry stakeholders must keep their eyes fixed on how this legislation evolves over the coming years, and consider all scenarios that may affect the development and commercialization of their products. To secure a favorable position in the post-reform landscape, it is crucial for R&D, clinical, pre-commercial, brand and access teams to maintain a high level of cross-functional communication and adaptability, or else they risk falling behind the competition. The EC’s ‘quid pro quo’ philosophy indicates a readiness to explore viable alternatives to its measures. It is imperative for the industry to adopt a similar mindset when approaching the negotiating table, as reform will come one way or another.


  1. Press release: European Health Union: Commission proposes pharmaceuticals reform for more accessible, affordable and innovative medicines:
  2. Frequently Asked Questions: Revision of the Pharmaceutical legislation:
  3. Proposal for a Directive of the European Parliament and of the Council on the Union code relating to medicinal products for human use, and repealing Directive 2001/83/EC and Directive 2009/35/EC:
  4. Proposal for a Regulation Of The European Parliament and of the Council laying down Union procedures for the authorisation and supervision of medicinal products for human use and establishing rules governing the European Medicines Agency, amending Regulation (EC) No 1394/2007 and Regulation (EU) No 536/2014 and repealing Regulation (EC) No 726/2004, Regulation (EC) No 141/2000 and Regulation (EC) No 1901/2006:
  5. Commission Staff Working Document Impact Assessment Report:
  6. Regulation (EU) 2021/2282 of the European Parliament and of the Council of 15 December 2021 on health technology assessment and amending Directive 2011/24/EU:
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