On December 10, 2008, the European Commission adopted a Communication and three legislative proposals with the overarching objective of ensuring that European citizens are increasingly able to benefit from a competitive industry that generates safe, innovative and accessible medicines, the so-called “Pharmaceutical Package.”1

One of the proposals2 in the Pharmaceutical Package, the Anti-Counterfeiting Directive, aims to strengthen EU legislation to better protect EU citizens from the threats posed by fake medicines. The overall principle of the Directive is to protect the legal distribution chain from the infiltration of fake medicines to safeguard the confidence of distributors, health care professionals and patients in the medicinal products they trade, prescribe and purchase in the legal supply chain.

This GT Client Advisory addresses one specific aspect of the proposed Directive: its consequences for intra-group activities of pharmaceutical companies. One of the aims of the proposed Directive is to impose controls on all actors in the distribution chain of medicinal products. Presently, EU pharmaceutical law regulates only those actors that actually have the medicinal products in their possession, e.g., distributors that hold, store and handle medicinal products. The draft Directive proposes to also control all actors that are involved in transactions without actually handling products. This has consequences for pharmaceutical companies that use different legal entities in their groups for transactions without handling products, e.g., for tax planning reasons. If the proposed Directive is adopted, those entities will be regulated under EU pharmaceutical law because of “trading of medicinal products.” It is anticipated that the following obligations will apply to the trading company:

  • the company will have a duty to ensure that the medicinal product is covered by a marketing authorization;
  • the company must notify the competent authority of its activity;
  • the company must have an emergency plan that ensures effective implementation of any recall from the market ordered by the competent authorities or carried out in cooperation with the manufacturer or marketing authorization holder for the medicinal product concerned;
  • the company must keep records about the transactions with the medicinal product;
  • the company must keep the records referred to in the previous bullet point so that they are available for inspection by the competent authorities for a period of five years;
  • the company must comply with the principles and guidelines of good distribution practices for medicinal products (GDP) under Directive 2001/83; and
  • the company must maintain a quality system setting out responsibilities, processes and risk management.

The Proposal is currently in first reading stage and the European Parliament has made a number of amendments in its report,3 which include:

  • the obligation to obtain supplies only from companies in possession of distribution authorisation;
  • the obligation to supply only to companies in possession of distribution authorisation or entitled to supply medicinal products to the public;
  • adding extra requirements that a trader must meet, such as an obligation to check whether medicinal products they have purchased are not falsified by authentication of safety feature on the outer packaging;
  • an additional definition of “brokering” to capture activities perhaps not covered by “trading”;
  • a clarification that transporters are considered companies handling medicinal products within the scope of the Directive; and
  • a significant enlargement of the scope of the Directive by including, in addition to finished medicinal products, ingredients for these (active pharmaceutical ingredients and excipients).

Pharmaceutical companies of which group companies have activities that fall within the scope of the proposed Directive will need to plan for implementing these additional obligations of control on their intra-group activities, as well as closely monitor what obligations will be imposed in the Directive as it is adopted.

Since the Proposal concerns a Directive, the member states will need to amend their national laws to bring them in conformity with the Directive within a period that is currently anticipated to be 18 months after publication of the adopted text of the Directive in the EU Official Journal. The current plan calls for the proposed amendments to be adopted in the relevant parliamentary committee by end of April 2010, followed by discussion in the Parliament’s plenary session by end of May 2010. The timing of the Proposal’s adoption, as amended by the Parliament, will depend on whether the Council agrees with the amendments.