EU Pharma Package: Access Conditionalities and Shortage Measures Compromise Proposal

In our seventh alert in this EU Pharma Package Series, we provided an analysis of the increasing focus on shortages of medicinal products in the EU and the prevention and mitigation measures as proposed by the EU institutions.

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. Shortage mitigation is a complex task as shortages are typically caused by a combination of different issues.

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. 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 Chapter X of the proposed Regulation to ensure greater harmonization.

Access Conditionality

“Access (or launch) conditionality” refers to the initial proposal of the Commission to grant an 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. 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.

However, in line with the Parliament’s and (mostly) Council’s proposals, the access conditionality in the compromise text has been transformed from a “carrot” to a “stick”. The — by now — notorious Article 56a of the proposed Directive allows Member States within one year from the MA grant to request the MAH to launch an originator product that is under RDP (or market exclusivity in case of an orphan drug) in that Member State and to supply it so that the needs of patients there are covered “as specified by the Member State”.

For that purpose, such Member State can require the MAH to carry out one or more of the following access-related duties: (i) submit a P&R application, (ii) meet specific requirements in public procurement procedures, and (iii) establish a roll-out plan — subject to agreement from the Member State — regarding supply of the originator drug over a given period in the Member State’s territory.

If the MAH does not “within the limits of its responsibilities” launch and continuously supply the product covering the needs of the patients in the requesting Member State within three years of the request, the penalty is a lapse in that Member State of the marketing protection for that medicinal product (or, for orphan drugs, only the extension of the market exclusivity). This means the generic, (bio)hybrid, or biosimilar product can be sold in that Member State, but not in another Member State where the protection still applies. Furthermore, where the generic, (bio)hybrid, or biosimilar product is intended for export to another Member State where the protection does not apply as a consequence of Article 56a, the wholesale distribution authorization holder must keep records of this available to the authorities for three years.

In addition, the MA application for generics and biosimilars ((bio)hybrids are not mentioned) can already be validated and assessed as from year six of data exclusivity, though the actual approval will be postponed until the data exclusivity period has fully expired. Overall, when combined with the lapse of market protection, this means that generics and biosimilars can already enter the market two years earlier.

The access conditionality will require detailed monitoring as it will lead to a country-by-country application of RDP for products for which the MAH did not comply with Article 56a. The inclusion in the compromise text of the Council’s proposal to require the national competent authorities and the European Medicines Agency (EMA) to publish information on the loss of RDP in a certain Member State is a positive development in this regard.

Notably, in addition to Article 56a of the Directive and as proposed by the Council, Article 5a of the proposed Regulation confirms that the same mechanism also applies to centrally authorized medicinal products that are still under RDP (or market exclusivity in case of an orphan drug) or under patent or SPC protection. Alternatively, a Member State may “independently” request an MAH to launch and supply the product, subject to an agreement between the MAH and the respective Member State. In the latter case, there is no limitation that such a request must be made within the first year after the MA grant. Only exceptional, unforeseeable, and unavoidable circumstances, including those related to disruptions of supply (i.e., force majeure), can justify non-compliance.

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.” The Commission will, however, review the mechanism four years after the date of entry into application to decide whether actual penalties should be included.

Finally, the access conditionality replaces the so-called sunset clause in the current regulatory framework, according to which an MA expires if the medicinal product is not placed on the market somewhere in the EU 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. The definitions of these three categories in the compromise text follow the Council’s proposal:

• • Shortage: supply does not meet demand in a Member State (whatever the cause).
  • Critical shortage in the Member State: requires that there is no appropriate alternative available in sufficient quantities on the market in that Member State and that shortage may result in a significant impact on the healthcare system or (risk of) harm to patients.
  • Critical shortage of Union concern: cannot be resolved at Member State level and coordinated action at EU level is necessary.

Depending on the authorization route of the medicinal product in question (centralized or national) and the applicable shortage category, either the EMA or the national competent authorities have the primary monitoring and reporting competence. This has not changed in the compromise text.

The obligations on MAHs (whether originator or generic/biosimilar) to prevent and mitigate shortages as described in the compromise text can be categorized as follows:

• • Notification obligations: the compromise text mostly retains the initial Commission proposal and requires notification, in the following scenarios:
    • 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).
    • Expected temporary supply disruption of more than two weeks (as soon as possible but no less than six months before start).

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 the reason for the shortage.

The Council’s proposal to require the MAH, 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, to publicly declare via a dedicated webpage on its website 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, was also accepted. The EMA will publish a list with hyperlinks to all the open offers.

• • Shortage prevention plans: Under the compromise text, MAHs must have in place and keep up to date a shortage prevention plan for (i) prescription drugs and (ii) certain critical medicines as identified by the Commission. The compromises text largely follows the Council’s proposal but does not include the extension of the requirement to critical medicines as identified by the Member States. In the compromise text this is limited to the Commission — presumably to maintain a harmonized approach.

The compromise text does not contain the Council’s proposal to include a three-month deadline to draw up the plan as from the moment a product is marked as critical. It is now unclear what the deadline for companies is to comply with this obligation. Presumably this will (or should) be stated in the delegated acts adopted by the Commission that mark certain products as critical.

As specified in Annex IV of the proposed Regulation, the plan must include, inter alia, measures on shortage prevention, a supply chain risk assessment, and shortage management measures. The shortage prevention plan must be kept to the disposal of the authorities, who can request to see it at any time, and provided within two days of receipt of the request.

The obligation to put in place shortage prevention plans will also apply to products already authorized before the entry into application of the new Pharma Package. There is no specific transitional period included, which means that the plans must be in place upon the date of entry into application of the new Pharma Package.

• • 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, (ii) a shortage mitigation plan in case of temporary disruption, and (iii) for medicinal products that do not have a shortage prevention plan, a regular risk assessment of potential supply chain risks and risk-mitigating measures.

This last point (iii) is new and appears to be a victory for the Commission and Parliament to require what is essentially a watered-down shortage prevention plan for every other medicinal product. This will have a significant impact on the pharmaceutical industry, who will have to ensure all such assessments are in place by the time the Pharma Package enters into application in approximately 2.5 years.

Similar to the shortage prevention plan, points (i) and (ii) are extensive dossiers for which the minimum requirements are set out in Annex IV of the Proposed Regulation.

The Pharma Package also includes information and cooperation obligations for the other supply chain actors. In particular, the compromise text includes the proposal from the Parliament and Council that a competent authority of a Member State may require wholesale distributors to report shortages and even extends this obligation to all supply chain actors.

Notably, the compromise text also includes the Council’s proposal that Member States can require a wholesale distributor (who is not the MAH) to notify an intention to conduct parallel trade of a medicinal product 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 — which is established and monitored by the EMA.

The Commission may impose financial penalties on MAHs for non-compliance with any of the above obligations.

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. A “critical medicinal product” is identified based on a common methodology considering (i) its therapeutic relevance (instead of “the seriousness of the targeted disease”), and (ii) the availability of suitable alternative medicines.

Critical medicinal products will be identified at different levels:

• • On the one hand, each of the Member States is required to prepare its own national list of critical medicinal products. These national lists will be consolidated by the Commission in a “Union long list” through an implementing act.
  • On the other hand, the Commission will also adopt a separate “Union list of critical medicinal products”, for which coordinated action at the EU level is necessary. The Executive Steering Group on Shortages and Safety of Medicinal Products (MSSG), which sits within the EMA, will conduct a so-called vulnerability evaluation of the supply chain for each of the medicinal products on this list. The list will be revised for the first time no later than one year after the entry into force of the Pharma Package. This list should not be confused with the abovementioned list of critical shortages of Union concern, established by the EMA (see our previous client alert on this topic for more information about the distinction between the two lists).

Notably, the Commission is tasked with taking the necessary actions “within the limits of its own powers” (e.g., the development of recommendations for national measures to improve the security of supply) and “fostering coordination of Member State measures” aimed at ensuring security of supply within their respective territories. These recommendations must, however, be limited to cases where the Commission identifies a highly likely disruption of the internal market that strongly and negatively affects the security of supply of critical medicinal products.

This is a far cry from the original Commission proposal where the Commission was allowed to adopt binding implementing acts, for example, imposing contingency stocks. Although the pharmaceutical industry has long been advocating for a more coordinated approach to national shortage measures such as contingency stocks due to heavy burden of the current fragmented landscape, the wording of the compromise text is not surprising. Both the Council and Parliament had pushed back on these explicit powers for the Commission in favor of the Member States. The tug of war between the Commission and the Member States in this respect has since long been an issue and has now seemingly been decided again in favor of the Member States.

Conclusion

The new Pharma Package marks a significant step toward strengthening the availability of medicinal products across the EU. It introduces a range of important mechanisms, 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.

That said, even the compromise text leaves several important interpretative questions unresolved. For example, with respect to the access conditionality, what is meant by “continuously”, “the needs of patients”, or “limits of its responsibilities”? What if the MAH submits a P&R request but there is a negative outcome of the pricing negotiations? Can the MAH then still be penalized for not launching its product?

MAHs and national competent authorities should expect further recommendations from the EMA and MSSG in the months and years to come, for example, on the common methodology to identify critical medicinal products, on measures to resolve or to mitigate critical shortages of Union concern, on the content of the shortage prevention plans, the risk assessments and the shortage mitigation plans, and on diversification of suppliers, inventory management, and other security of supply measures.

Notably, the application of the access conditionality under Article 56a – including the possibility of penalties – will begin earlier than the foreseen 24-month transition period for the proposed Directive into national law. Member States may already start applying the access conditionality and issue launch and supply requests to MAHs as from 12 months after the entry into force of the proposed Directive for medicinal products authorized after the date of entry into force in accordance with the current legislation.

The compromise text also confirms a broader political reality: once again, it is predominantly the Council’s position that has prevailed. This reflects the continued and effective push by Member States to preserve broad discretion to address shortages through national measures. For example, 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 product; and (iii) suspend the advertising of a medicinal product, in the event of a (risk of) shortage.

In our next alert, we will continue the discussion on shortages, with a particular focus on the current state of play of the proposed Critical Medicines Act.