European Union: New EU Regulation Extends Financial Penalties To Entities Beyond The Marketing Authorization Holder And Updates The Legal Framework For Medicinal Products For Human Use

Last Updated: 4 February 2019
Article by Geneviève Michaux and Luca Salernitano

Regulation (EU) 2019/5, which was published a few days ago in the Official Journal of the European Union, amends the EU pharmaceutical legal framework by firstly complementing new Regulation 2019/6 on veterinary products that repeals Directive 2001/82/EC on veterinary medicinal products and incorporating the provisions on veterinary products contained in Regulation 726/2004 (in particular, Articles 30 to 45), thereby creating a legal framework specific to veterinary products. Regulation 2019/5 also amends the rules on veterinary products. The new provisions will apply from 28 January 2022, when Regulation 2019/6 will effectively replace Directive 2001/82. On that date, veterinary medicinal products will only be regulated by Regulation 2019/6.

And secondly, amending Regulation 726/2004, which is now entirely dedicated to medicinal products for human use, by (i) moving therein basic provisions ("core elements") on conditional marketing authorizations (MAs), variations, transfers of MA and financial penalties that are currently contained in Commission regulations and (ii) expanding the scope of Commission Regulation 658/2007 on Financial Penalties. The new provisions will become applicable from January 28, 2019, but the Commission regulations will remain applicable.

(Regulation 2019/5 also amends Directive 2001/83 and Regulation 1901/2006 (the "Paediatric Regulation"), but those changes are minimal.)

This Legal Update focuses on the changes to the legal regime for medicinal products for human use.

"Upgrade" of Certain Rules – Most of the amendments "upgrade" the legal status of certain provisions by moving them from a Commission regulation (i.e., a delegated act) to Regulation 726/2004. This move is not purely cosmetic: it also makes those rules more difficult to modify. Indeed, amending a regulation requires a co-decision procedure that involves the European Parliament and the Council and may take years while amending a delegated act only requires a Commission resolution to which the EU Parliament or the Council does not oppose.

Scope of Regulation 726/2004 – The scope of the regulation is now limited to (i) the authorization and supervision of medicinal products for human use and (ii) the composition and functioning of the European Medicines Agency (EMA), which, however, remains competent for veterinary medicinal products.

Definition of "Antimicrobial" – Regulation 726/2004 now contains a legal definition of "antimicrobial": "[A]ny substance with a direct action on micro-organisms used for treatment or prevention of infections or infectious diseases, including antibiotics, antivirals, antifungals and anti-protozoals." Moreover, the EMA is expressly given the task to report periodically on the sale and use of antimicrobials as well as antimicrobial resistance in the EU. This clearly shows that the EU has decided to pay more attention to and become more active in this field.

Conditional MA – Conditional MAs had been instituted by Article 14(7) of Regulation 726/2004, and the conditions and procedure for conditional MA were detailed in Commission Regulation (EC) 507/2006. The basic provisions of this implementing regulation have been moved to the new Article 14a of Regulation 726/2004.

Variations to MA – The current legal definition of "variation or variation to the terms of a marketing authorisation" has been inserted in Article 1 (26a) of Directive 2001/83. In addition, basic rules on variations have been moved from Commission Regulation 1234/2008 to new Article 16a of Regulation 726/2004 and new Article 23b of Directive 2001/83.

Transfer of MA – New Article 16b introduces the concept of transfers of MA and codifies the basic principles of the current practice. As for (most) other EU procedures, the application is to be submitted to the EMA and the decision has to be made by the Commission. The Commission will further detail the procedures, conditions, etc. in a delegated act.

Temporary Measures – In cases where the EU manufacturer or importer no longer fulfils its obligations or a member state/the Commission considers that a pharmacovigilance measure or sanction should be applied to a product, the Commission should ask an opinion from the EMA and adopt the necessary provisional measures final decision within six months.

Further to Regulation 2019/5, the Commission may take temporary measures at any time and only has to consult with the EMA. Moreover, the Commission should adopt a final decision "without undue delay."

Financial Penalties – Financial penalties primarily had been regulated by Commission Regulation 658/2007, which implements Article 84 of Regulation 726/2004. The basic provisions of Commission Regulation 658/2007 have been moved in new Article 84a of Regulation 726/2004, and a new Annex II has been added to Regulation 726/2004 that lists the obligations whose violation may trigger financial penalties. Those obligations are the same as those currently listed in Commission Regulation 658/2007.

More importantly, new Article 84a(2) grants the Commission the power to impose financial penalties on legal entities that (i) are part of the same economic entity as the marketing authorization holder (MAH), (ii) exert a decisive influence over the MAH or (iii) are involved in, or could have addressed, the non-compliance. The objective is to prevent imposing the penalty on the "wrong" legal entity. This specification brings the system closer to that of competition law.

It is worth noting that the infringement procedure has only been applied once since the adoption of Commission Regulation 658/2007 (a pharmacovigilance case against Roche).

EMA Funding – Regulation 2019/5 aligns the provisions on the financing of the EMA with the various applicable implementing regulations on the types and levels of fees for the EMA's scientific services. By 2019, the Commission must review the regulatory framework for the fees payable to the EMA and file a legislative proposal to update it.

Implementing Acts – Article 87 is amended to partially implement the changes to the comitology procedure brought by the Lisbon Treaty. Amended Article 87 specifies that the Standing Committee is a committee under Regulation 182/2011, and that references to Article 87(2) mean that Article 5 of Regulation 182/2011 applies.

Article 5 of Regulation 182/2011 institutes the "examination procedure," which ensures that the executive acts adopted by the Commission are supported by a qualified majority of a Standing Committee (composed of representatives of the member states). If the Standing Committee gives a negative opinion on the Commission's proposal, the Commission may (i) submit an amended proposal within two months; or (ii) appeal the opinion before a new committee. In the latter case, the positive/negative opinion is definitive. If the Standing Committee does not provide an opinion, the Commission can adopt the implementing act, as in the case of a favorable opinion.

Delegated Acts – Regulation 2019/5 gives the Commission the power to adopt delegated acts with regard to the definition of the situations requiring post-authorization efficacy studies (PAES), conditional MAs, variations, transfers of MA and financial penalties.

This power is granted for five years from January 28, 2019. This period is automatically renewed unless the Council or the European Parliament opposes the renewal. Either body may also revoke the delegation of powers at any time.

Regulation 2019/5 adds a new requirement that the Commission must consult experts designated by each member state (in accordance with the Inter-institutional Agreement of April 13, 2016 on Better Law Making) before adopting a delegated act.

Amended Article 87b of Regulation 726/2004 subjects the entry into force of delegated acts to the EU Parliament or the Council not objecting thereto within three (or six) months of the notification of their adoption. Before, the timeline was two (or four) months.

Technical amendments – Finally, Regulation 2019/05 introduces a series of minor technical amendments relating to the terminology (for example, "Community" is replaced by "Union") and updates the references to other EU legislative acts contained in Regulation 726/2004.

While Regulation 2019/5 updates Regulation 726/2004, it does not significantly amend it; hence, one may wonder about the rationale for "upgrading" certain rules on conditional MAs, variations, transfers of MA and financial penalties. Clearly, amendments to those rules would have triggered more debate than a simple switch from one legislative act to another. Yet, why that upgrade and what is its significance? Currently, the pharmaceutical industry and other stakeholders are wondering whether the next Commission will launch a broad revision of the pharmaceutical legislation. Is Regulation 2019/5 a sign that the rules are being reorganized in anticipation of a revision?

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This Mayer Brown article provides information and comments on legal issues and developments of interest. The foregoing is not a comprehensive treatment of the subject matter covered and is not intended to provide legal advice. Readers should seek specific legal advice before taking any action with respect to the matters discussed herein.

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