The New EU “Pharma Package”: The Debate on Fiscal Import in the Supply Chain

In our first alert in this weekly series on the EU Pharma Package, we provided some important background and general information about the status of the Pharma Package and how the trilogues work. In the second alert, we discussed the proposed changes to regulatory data protection. Our third alert delved into the different proposals of the European Commission, Parliament, and the Council regarding the transferable exclusivity voucher (TEV) for priority antimicrobials.

In this fourth alert, we are addressing the debate on fiscal import in the supply chain.

Alert 4: The debate on fiscal import in the supply chain

The new EU Pharma Package is set to address a longstanding but increasingly debated issue in the pharmaceutical supply chain: the alignment of physical and financial flows, specifically the question of “fiscal import”. Fiscal import involves the purchase or procurement “on paper” of medicines that have not left the territory of the European Union (EU) from an entity based outside the EU. These medicines are then considered to be “fiscally imported” to market them in the EU.

Background

Fiscal import structures—where legal title to EU-manufactured medicines is transferred to an entity outside the EU, even though the product never leaves the EU—have been used for years.

Many pharmaceutical companies have traditionally adopted operational models that distinguish between the physical movement of products and the transfer of legal ownership (title). This is typically done to address business objectives or comply with financial regulations. Commonly, this setup involves medicines manufactured within the EU but held in legal ownership by an affiliate located outside the EU (for example, in Switzerland or the UK). Under this arrangement, distribution within each EU member state is overseen by a local affiliate possessing the appropriate wholesale distribution authorization (WDA). A customer—such as an independent distributor, hospital, or pharmacy—places an order with the authorized local wholesale entity, which then coordinates the physical delivery of products from EU territory. The local entity invoices the customer after acquiring legal title to the products from the non-EU group affiliate.

Recently, conflicting interpretations have emerged across member states. For example, some countries (e.g., Belgium) now question whether a manufacturing and import authorization (MIA) is needed for such transactions, despite the absence of any physical import. Other countries, however, have accepted that a WDA is sufficient.

The new EU Pharma Package aims to address this issue in Article 166 of the proposed Directive, outlining the obligations for WDA holders.

What’s Changing?

Article 166 of the proposed new Directive states that “Member States shall ensure that wholesale distribution 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).” As a result, wholesalers may only procure medicinal products from entities holding a WDA in the EU or a MIA.

This creates stricter sourcing rules and highlights the need for greater scrutiny of the supply chain, aiming to ensure supply chain integrity and clear responsibility for product safety, especially when legal title is held by a non-EU entity. If the legislation were adopted, this would mean that, even if a product were manufactured and at all times remained physically in the EU, a MIA would be required if an EU entity “fiscally” purchased the product from a non-EU entity that held the legal title.

Since the initial proposal was published in April 2023, discussions have been held at EU level where amendments to Article 166 have been proposed, for instance, exempting intra-group financial transactions. However, neither Parliament nor the Council proposed any amendments to Article 166.

Key considerations

Despite concerns raised, there is no genuine liability gap within the current legal framework regardless of who holds the legal title of the products. Existing EU and national legislation, together with Good Distribution Practice (GDP) standards, already ensures a secure and closed supply chain. Comprehensive controls and pre-approvals are implemented at every stage, irrespective of the party holding legal title.

All product batches are certified prior to release, transfer of products occur exclusively between authorized actors, and every transaction is duly recorded and fully traceable. Legal obligations relating to product recalls and product safety apply uniformly to all participants in the supply chain, regardless of the underlying ownership structure.

What Does the New Legislation Mean?

If adopted, the Directive would require wholesalers to source medicinal products exclusively from suppliers or manufacturers holding a WDA in the EU or a manufacturing authorization. While this may affect existing fiscal import models (such as the need for an import authorization), it does not alter the fundamental responsibilities.

However, in our view, the ownership or legal title to the product should not be relevant for compliance with EU supply chain, product liability, or GDP/GMP rules. No actor can avoid responsibility by pointing to temporary changes in legal title. Hence, there is no need for the suggested amendment in Article 166 of the proposed new Directive.