EU Pharma Package: Fiscal Imports in the Supply Chain Compromise Proposal

Background

In our fourth alert in this EU Pharma Package Series, we provided an analysis of the long-standing but increasingly debated issue of fiscal imports in the pharmaceutical supply chain and the EU’s evolving approach to this issue.

Fiscal import structures are a widely adopted operational model among multinational pharmaceutical companies. These structures separate the physical movement of products from the transfer of legal ownership (i.e., title), enabling the legal title to EU-manufactured medicines to be transferred to affiliates located outside the EU (for example, in Switzerland or the UK), while the product remains physically within the EU.

The central question concerns whether a purely financial transaction between an EU-based company and a related group company outside the EU — where no physical transfer occurs — should be classified as “wholesale trade”. This determines the type of authorization required for each of the companies involved.

To date, the European Commission has not provided explicit guidance, and neither the European Court of Justice nor EU legislation have offered clear direction. Despite this, fiscal import structures continue to be a focal point of legal disputes within the EU, with several high-profile litigations between pharmaceutical companies and national authorities. Conflicting court decisions, both across the EU and within Member States, have led to significant uncertainty.

 Mandatory MIA for Fiscal Imports

The EU Pharma Package now explicitly addresses this issue in Article 166 of the proposed Directive, outlining the obligations of a WDA holder, which states that:

“Member States shall ensure that wholesale distribution^[1] authorization holders shall […]

(c) procure, including by financial transactions, their supplies of medicinal products only from persons who are themselves in possession of a wholesale distribution authorization in the Union or a manufacturing authorization referred to in Article 163(3).”

Other than the inclusion of this explicit reference, the wording does not differ much from the current legislation (Directive 2001/83/EC).

However, as a result, going forward, wholesalers may only source medicinal products from either (i) other EU WDA holders or (ii) manufacturers with a MIA — with the explicit prohibition to circumvent this via fiscal import structures. Crucially, non-EU companies cannot obtain a WDA or MIA from an EU authority. A Swiss affiliate, for instance, may only hold a corresponding authorization from Swiss authorities, which does not confer the same status within the EU regulatory framework.

Despite significant lobbying, the trilogue negotiations did not lead to a change in the wording originally proposed by the Commission. Notably, the EU did not include a definition of “financial transactions” or further explanation on the scope of this provision either in Article 4 (definitions) or the Recitals of the proposed Directive.

The Recitals only contain general considerations, such as the fact that “it is necessary to exercise control over the entire chain of distribution of medicinal products, from their manufacture or import into the Union through to supply to the public, so as to guarantee that such products are stored, transported and handled in suitable conditions” (Recital 120) and that “any person involved in the wholesale distribution of medicinal products should be in possession of a special authorisation” (Recital 121). This has arguably never been an issue, as the fiscally imported product never leaves the EU. The question therefore remains: what is the exact reason for the new wording, and did the European legislator intend to dispense with the current supply chain setup used by many European pharmaceutical companies?

Conclusion

Once the Pharma Package is formally adopted, the new Article 166 might require pharmaceutical companies to review their supply chain structures and look into either restructuring their fiscal import model or secure a MIA for their local distributors. This will increase the regulatory burden for such entities as a WDA holder needs to comply with Good Distribution Practices (GDP) requirements under supervision of a Responsible Person, while a MIA holder needs to comply with Good Manufacturing Practices (GMP) requirements under supervision of a Qualified Person.