The European Union’s new pharmaceutical legislation, the most significant reform of the EU medicines framework in over two decades, will have important implications for M&A, licensing, and other life sciences transactions. Notably, the reforms will reshape the regulatory rewards and incentives that often underpin pharmaceutical asset valuations by revising regulatory data protection, market protection, and orphan drug exclusivity, while also imposing additional obligations relating to supply and market access.
Although the legislation is expected to be finalized by the end of 2026 and apply to applications made after the end of 2028, decisions regarding products and development programs that will ultimately be subject to the new regime are being made now. The new regulatory framework should therefore be factored into ongoing and future negotiations. In-house teams may also want to consider whether existing contractual provisions remain appropriate for products that may be subject to the new regime.
These changes raise practical considerations for in-house legal teams responsible for negotiating and managing M&A deals, licensing and collaboration, manufacturing and supply, and commercialization agreements. We have prepared a LawFlash exploring these developments in greater detail, including the potential impact on transactions, key considerations for deal teams, and practical steps companies can take to prepare.
For our As Prescribed audience, some key takeaways from our LawFlash are as follows:
- Traditional assumptions regarding data and market protection that often form the baseline for negotiated milestone payments, royalty periods, and valuations will no longer be as predictable. While the proposed reforms retain the eight years of data protection, some of the market protection period will depend on satisfying specified regulatory requirements relating to the conduct of comparative clinical trials, whether those trials are conducted in the European Union, and the timing of the marketing authorization application. Deal teams may need to update contractual terms to define the protection period and its possible extensions and reductions.
- Companies may be required to make products available in individual EU member states upon requests from national authorities. Failure to comply could result in the loss of market protection or the extension to orphan exclusivity in those countries, potentially impacting traditional launch sequencing strategies and increasing compliance risk. These issues may be particularly complex in regional licensing arrangements where rights and commercialization responsibilities are divided among multiple parties and pricing decisions in one territory can affect pricing in others.
- New requirements relating to supply continuity, shortage prevention, and manufacturing arrangements mean that legal teams may need to prioritize these matters in negotiations.
- New wholesale distribution requirements could affect existing supply chain structures, licensing arrangements, or tax-driven operating models, particularly where products are owned outside the European Union but distributed through European affiliates.
- In-house legal teams should review not only pending transactions but also existing agreements to determine whether standard compliance-with-law provisions, diligence obligations, change-in-law clauses, and amendment mechanisms remain fit for purpose where regulatory protections and commercial incentives become more variable under the new framework.
For a more detailed discussion, please read our LawFlash The New EU Pharmaceutical Legislation: Key Points for Deal Teams.