The EU Overhauls Pharma Laws: What You Need To Know

By Maarten Meulenbelt, Sidley Austin LLP

On September 18, 2026, the Council of the EU published the almost-final text of a major overhaul of the EU pharmaceutical laws: the General Pharma Legislation (GPL), consisting of a new Pharmaceutical Directive and a new Pharmaceutical Regulation. The final binding text is expected to be published in the coming weeks, triggering a two-year implementation period. This commentary looks at the potential implications of the GPL for U.S. companies considering investing in or developing new products for and in the EU, including the key questions whether EU Member States could force U.S. companies to launch and expose those companies to U.S. Most Favored Nation (MFN) pricing and the extent to which IP rights can be eroded or circumvented. One thing is certain: the GPL implementation process will need to be followed closely.

The EU’s Six Objectives For General Pharma Legislation

From its inception in 2016-2017, one of the main goals of the GPL has been to improve patient access, in particular in smaller EU Member State markets where new drugs are often launched much later than in the larger markets or not launched at all. Affordability (pricing) of medicines has been mentioned as a concern, as well. By 2023, the European Commission had distilled the overall goals for the GPL into “Three As” (access, availability, and affordability) and “Three Cs” (competitiveness, compliance [including environmental sustainability], and combating antimicrobial resistance). These are wide-ranging goals, which are not easy to reconcile.

While these objectives have not been abandoned, recent geopolitical events have made the EU legislators increasingly aware of the crucial role that innovative pharmaceutical and biotech companies play in research, innovation, and employment and, generally, in the global competitiveness of the EU. It remains to be seen how this awareness will be applied to the 100+ implementing measures now being prepared at EU level, and the implementation measures to be taken in all 27 EU Member States during the two-year implementation period of the GPL.

Positive Aspects Of The GPL

The GPL has a number of positive elements. One of its aims is to streamline decision-making within the European Medicines Agency (EMA), by, for example, reducing the number of EMA committees and tightening some of the timelines for review. A major upside could be the possibility to design a Pediatric Investigation Plan (PIP) in an evolutionary manner, rather than in a detailed plan that subsequently needs to be amended. Whether this will be a net positive depends on the scope of additional burdens caused by new powers of the EMA to impose “mechanism of action” PIPs, obliging companies to conduct pediatric investigations in diseases different from the adult indications pursued by the applicant. Another potential upside is a transferable exclusivity voucher for new antimicrobials (although there are concerns about the feasibility and scale of the reward). Last but not least, in the last round of negotiations between the EU institutions, the wording was improved in several respects. New recitals were added to emphasize the need to maintain an “attractive environment” for R&D in the EU. A safeguard was added to the “Bolar” exemption to prevent premature tender bids (discussed below), and the launch obligations (also discussed below) are now clearly focused on “best efforts,” which should mitigate some of the MFN risks.

The GPL is not the only legislative initiative that can improve the EU’s competitiveness. Following reports from prominent EU advisors (the Letta Report and the Draghi Report) on the need to enhance the competitiveness of the EU, the Commission has been pursuing several initiatives to strengthen the EU ecosystem beyond the scope of the GPL. These initiatives, which were also launched in light of U.S. trade policy initiatives, include:

• the Critical Medicines Act, which could provide support for manufacturing in the EU (in addition to potential joint purchasing arrangements); and
• the Biotech Act, the first parts of which were unveiled late last year, which might result in positive measures such as simplifying and streamlining the clinical trial rules and an extension of Supplementary Protection Certificates (SPCs).

However, since the exact scope of these forthcoming measures is not yet known, it remains important to assess the GPL on its own. 

Modulation Of IP Rights

If the GPL would result in speeding up the process to obtain an EU marketing authorization (MA), that would of course be a net positive. However, the business case for developing products for the EU (the net present value [NPV]) or risk-adjusted NPV [rNPV]) depends on several factors, including the time period available for generating revenues before the loss of IP rights and regulatory exclusivities.

With the exception of the abovementioned transferable exclusivity voucher for new antimicrobials, there are no IP gains in the GPL. Baseline regulatory protections will be reduced across the board. The current 10-year basic regulatory protection, consisting of eight years of regulatory data protection (RDP) and two years of regulatory market protection (RMP), will be reduced to nine years (eight years of RDP and one year of RMP), with options to recoup the loss, e.g., by proving that the product addresses an unmet medical need or, for products containing a new active substance, by conducting trials in more than one EU Member State. For orphan drugs, Orphan Market Exclusivity (OME) will be effectively reduced from about 11 years to nine years, except for a narrow category of “breakthrough” orphan drugs, which will have 11-year OME. Moreover, new orphan indications will no longer be rewarded with stand-alone OME (for the first two additional orphan indications, one year of OME can be added to the initial OME).

Best Efforts Obligations To Launch

A key question is whether EU Member States will be able to force U.S. companies to launch their products on national markets exposed to the risk of U.S. MFN benchmarking. During the legislative process, proposals to include obligations to launch were made by the Parliament and in the Council. For example, the Parliament proposed to impose an obligation to launch where a Member State had issued a “positive” reimbursement decision (without specifying whether that decision would also have to be positive from the company’s perspective). Fortunately, the main provision now published (Article 59 of the new Pharmaceutical Directive) only contains “best efforts” obligations to engage in pricing and reimbursement procedures and launch new products, without hard obligations to launch the products if the price is unfeasible. Article 59 also provides that a Member State may seek to disapply RMP, RDP, and (extended) OME at national level if the MA holder has not “within the limits of its responsibilities” launched the product within three years from a request to launch. Vigilance will be needed on both these points: Member States may seek to impose stricter obligations either by stretching the wording of Article 59 or by separate national legislation or policies.

The case law of the Court of Justice of the EU (CJEU) provides a degree of protection against Member States seeking to impose obligations to launch at a loss-making price. However, there is no consensus on the benchmark to be applied to determine what a loss-making price would be. For example, if the benchmark for selling at a loss is based on a “cost-plus” approach, without properly accounting for the risks of product development, the negative rNPV impact could be severe. As calculated by a European consultancy (here), out-of-pocket R&D costs for products that make it to market (“success costs”) amount to only 7% of the overall cost of drug development. The majority of costs are represented by financing costs (53%) and by out-of-pocket “failure costs” (40%). Furthermore, depending on the implementation of the MFN policy initiatives of the U.S. government, an obligation to launch in an EU Member State qualifying for MFN benchmarking could lead – indirectly – to a price reduction in the U.S., a much larger market. These risks underscore the need to monitor the measures taken by Member States during and after the two-year period to implement the GPL.

How Robust And Durable Will IP And Regulatory Rights Be?

An important factor determining the (r)NPV for developing products for the EU is the duration of IP rights and exclusivities. As noted above, baseline protections will be reduced for most products. The GPL provides several options to recoup lost protections. For example, the one-year RMP loss can be recouped by demonstrating that the product addresses unmet medical needs or by conducting (comparative) trials for a new active substance in more than one Member State. However, the rNPV impact of such incentives depends on whether they are achievable. If the uncertainty for a particular incentive is too high, companies cannot count on it in calculating their rNPV. There may be secondary effects, as well. For example, increasing RMP for developing products for unmet medical needs could be a helpful incentive if the criteria are clear, predictable at the time of submitting the MA application, and achievable. However, a negative secondary effect may occur if the EMA — when assessing an MA application — must declare whether or not a product addresses unmet medical needs. A negative declaration can have a negative impact on national pricing and reimbursement negotiations.

The impact of IP incentives on (r)NPV will also depend on the time period during which IP and regulatory rights can be effectively enforced and the expected timing and effects of generic or biosimilar market entry. The GPL aims to ensure that generic and biosimilar launches can take place at a so-called “Day 1” after loss of exclusivity (without providing a mechanism for determining Day 1 at this stage).

• With regard to regulatory exclusivities, generic and biosimilar applicants will be permitted to submit MA applications up to two years before the expiry of market protection (RMP and OME).
• With regard to patent and SPC rights, the GPL will introduce an extended “Bolar” provision, which will oblige Member States not to enforce patent/SPC rights against generic and biosimilar companies going through MA procedures, health technology assessments (HTA), pricing and reimbursement (“P&R”) procedures, and registering for tender procedures, with a safeguard against premature bids (“submitting an application on procurement tenders … to the extent that it does not entail the sale or offering for sale or marketing of the product during the protection period”). The Bolar exception also covers Member State HTA, P&R and applicable tender decisions. There is a risk that some Member States will seek to stretch national laws beyond these limits by tolerating commercial activities prior to patent/SPC expiry (e.g., premature negotiations in P&R procedures, or premature tender bids with deliveries commencing after expiry).

Some of these erosions of IP rights appear incompatible with EU law (the fundamental right to property set out in Article 17 of the Charter of Fundamental Rights and the need for proper safeguards set out in Article 52 thereof) and the obligations of the EU and its Member States under the WTO’s Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS); see our article on the TRIPS compatibility of the Bolar here. To mitigate unwarranted erosion of IP rights, much attention will need to be given to the implementation of the extended Bolar provisions at Member State level. Specifically, mechanisms and clarifications will need to be in place to determine “Day 1”; to maintain opportunities for patent/SPC holders to enforce their rights before national courts or the Unified Patent Court before generic/biosimilar launches would create a fait accompli; and to ensure proper limits to participation in tender procedures.

Circumvention Concerns

Finally, the (r)NPV impact of the GPL will depend on whether IP and regulatory rights – and the MA system in general – can be circumvented by the production or preparation of drugs in pharmacies and hospitals. The current exceptions to the MA system (e.g., “formula magistralis” and “formula officinalis” pharmacy preparations and the “hospital exemption” for advanced therapy medicinal products [ATMPs] for non-routine use) are already being invoked in some Member States to supply larger patient populations with non-authorized drugs.

The scope of the pharmacy compounding provisions will be reduced in one respect (ATMPs and products developed by biotechnological processes will be excluded from the compounding exception) but will expand the possibilities of pharmacies to supply hospitals, and, in some situations, to produce formula magistralis preparations in advance.

The scope of these exemptions to the MA system remains uncertain. For hospital exemption products, the degree of circumvention of the MA system will depend on the adoption of proper safeguards against routine preparation of ATMPs. For pharmacy preparations, much will depend on the application and enforcement of the European Pharmacopoeia rules, in particular General Monograph 07/2025:2619, which confirms that the MA system is the rule, and compounding is the exception. Pharmacists are required to make an ethical assessment to justify compounding (e.g., where no authorized alternative is available to meet the patient’s needs). These rules are not uniformly enforced by the Member States today. A final factor is whether the Commission will enforce EU state aid rules against Member State subsidies to bypass the MA system. For example, in one Member State, 100 million euros have been spent to switch half of the patient population from an authorized CAR-T treatment to locally produced CAR T cells, without notification of that subsidy to the Commission.

Conclusion

For now, all eyes are on the many implementation measures at the EU and national levels. There is hope that the overall new framework that is now emerging (GPL, Critical Medicines Act, and Biotech Act) will create a clear and predictable framework permitting continued investment into new treatments and building on the EU’s world-class R&D hubs. However, enforcing and strengthening safeguards against circumvention of IP, regulatory rights, the MA system, and state aid rules will be key to achieving a positive outcome.

About The Author:

Maarten Meulenbelt is a partner in Sidley’s Brussels office and head of the firm’s Global Life Sciences practice in Europe. He focuses his practice on EU regulatory affairs, litigation, and competition law issues affecting the life sciences sector in Europe, covering the full range of the product life cycle. He advises companies and industry associations regarding new EU laws and has extensive experience before the EU Courts, national courts and competition authorities, the European Commission, European Medicines Agency committees, national medicines agencies, and pricing and reimbursement authorities across EU Member States.