Timely and equitable access to medication across all European Union member states. This is the main objective of the largest reform in pharmaceutical legislation in nearly two decades. It was presented on 26 April 2023 and will likely take another 3-5 years to be fully implemented. Although this seems like something to worry about later, nearly all pre-clinical and early-stage clinical biotech companies will go to market under this renewed legislation, underpinning the need to be informed now to avoid critical setbacks in the future.
The current regulatory landscape has shortcomings when it comes to the accessibility of medication. Whilst in Germany nearly 90% of all European approved drugs are available through the public healthcare system, less than 50% of these drugs are publicly available in the majority of EU member states. Equally, there is a significant disparity between member states when it comes to the time between market authorization and actual availability to patients. Often it takes one year from approval to patient, but in numerous member states it can take 2-3 years or more. The new pharma reform package aims to harmonize these concerning figures.
Grasping the full scope of the legislation is challenging in a single blog post so we will share an example to give some color to the new legislation. Modulated reward systems seem to be at the heart of the changes. These reward systems are intended to incentivize companies to work towards equality across member states. One example relates to regulatory data protection, which currently lasts eight years and is set to change to six years. To account for this cut, several routes to extension will be in place. An additional two years can be granted if a medicine is released and continuously supplied in sufficient quantities to meet demand in all 27 member states within three years of authorization. Additional months can be granted if an unmet medical need is addressed, significantly improved clinical outcomes are demonstrated, as well as through various other criteria. Similar constructs have been designed for (orphan) market exclusivity and generic/biosimilar entry.
The outset of this reform intends to harmonize accessibility and equality, which are important factors to strive for. Unwanted side-effects are unfortunately expected due to this shift in incentives, especially for biotech start-ups and scale-ups. To touch on one – effectively launching a drug in all member states within a certain time period will draw on a company’s resources, considering that reimbursement will need to be achieved in each country individually. It will likely also introduce certain pricing barriers. One might argue that such an endeavor is simply unachievable for a stand-alone biotech, leaving them to either sell to pharma or accept the shorter period of protection/exclusivity. Another example – concrete definitions of ‘unmet’ medical need and ‘significantly’ improved clinical outcomes are not given, leaving room for interpretation, debate, and ultimately legal proceedings. This adds another layer of risk to an industry already rife with risk. Risk that will likely translate into decreased investor appetite in Europe and in turn decreased valuations, hampering the entrepreneurial identity of Europe.
Looking beyond these points of concern, numerous other changes are proposed which are generally perceived as positive. New legislation aims to decrease EMA review timelines, prevent drug shortages, increase sustainability, create a favorable climate for new antimicrobial drugs through transferable exclusivity vouchers, and create a ‘sandbox’ environment in case of global health emergencies.
The pharma reform package has to perform a balancing act between two merits; accessibility of medication and the innovation thereof. Ultimately, we can only assess in retrospect which measures have a positive effect and which have a negative effect on the industry. Although the legislation is not yet set in stone and there are many debates ongoing with industry stakeholders, we suggest keeping a close eye on developments in the pharma reform package. Amidst uncertainty, it is important to be aware of the changes that are likely in the coming years and position your company accordingly.
Retaining the right advisors to shift your development and financial strategy as needed can give you an edge over competitors and comfort to your (new) shareholders. At F.INSTITUTE, we believe that a financial strategy can only be formed in the context of wider industry developments. We stay in close contact with experts on the pharma reform package and have a broad network of companies dealing with these changes.