Innovation and Market Exclusivity in the EU

The European Parliament announced in December 2025 that it has reached an agreement with the European Commission (EC) and the Council of the European Union to move ahead with revising the pharmaceutical policy framework in the EU (1). The European Medicines Agency (EMA) has stated that it is looking forward to using the changes to streamline procedures (2, 3).

But how will the revised legislation potential impact the industry, particularly for innovation and market exclusivity? PharmTech spoke with Jackie Mulryne, a partner at Morgan Lewis, to get her perspective on what the changes, and the process for putting them in place, will mean for pharmaceutical companies.

PharmTech: What do you see as the most significant change in the new agreed-upon revamped EU medicines policy?

Mulryne: The most highly contested and most discussed element of the reform has always been the regulatory protections for innovative medicinal products. Under the current “8 + 2 +1” system, a new product receives eight years of data protection, followed by two years of marketing protection, plus an additional year for the authorization of a new indication under certain conditions. Whether this represents the correct balance between incentivizing innovation and enabling generic/biosimilar entry has long been debated, and amending these rules was a key part of the Commission’s original proposal.

Under the agreement, the baseline period of protection will remain at eight years of data protection, but market protection will be a standard one-year period. However, this can be extended up to a maximum of three years (with 11 years of protection overall) if certain conditions are met, including if the product addresses an unmet medical need, is a new active substance fulfilling certain conditions, or if the company obtains an authorization for a new therapeutic indication.

Linked to this, the supply obligations have been controversial. The original proposal was focused on ensuring that medicines are available across all member states, and various mechanisms were proposed during the legislative process for how this should take place. Under the agreement, EU countries ‘have the power’ to ‘require’ companies to supply medicines benefiting from regulatory protection in sufficient quantities to meet patient needs, and if this does not happen, companies may lose market protection in the relevant member state.

How will the market exclusivity changes impact drug development and market competition?

The key issue will be the uncertain and variable protection periods introduced by the new regime. The agreement does seem to address some concerns raised by the industry and is more favorable than the initial proposal from the Commission. However, it does still mean a reduction to the current period of protection, although with the potential for extensions. A key question will be how these extensions operate, including what steps should be met and how companies can evidence each of the criteria. This adds complexity and uncertainty to the current regime, and it is unclear how many products will be able to benefit from the extensions available. Companies should factor this uncertainty into their development and investment plans, and the impact of that is not yet known.

Similarly, the access obligation will need to be reviewed in the final text to understand how this will work in practice and what this means for the supply of the product in member states where market protection is still in place. Enforcement of market protection is complex, and having different periods of protection in different member states will only add to the complexity.

While this regime has been presented by the EU institutions as a balance between the innovative and generic industries, this in fact leads to uncertainty for both. Generic-drug companies make development and launch plans a number of years before the expiry of the protection period for the reference product. Those plans might have to be amended if protection periods are reduced or extended.

How does the new policy on orphan drug exclusivity impact the development of innovative medicines for unmet needs?

For orphan protection, the current period of orphan exclusivity is 10 years. Under the agreement, the baseline period will be nine years, with 11 years of protection for a new class of ‘breakthrough’ products. Again, the EU institutions were keen to emphasize that this represents a balance between reduced base period of protection on the one hand, but rewarding innovation with a longer period of protection for ‘breakthrough’ products on the other. The definition will be crucial in understanding how attainable the additional years of protection will be and whether this operates as an incentive to develop products for unmet medical needs.

In addition, during the legislative process, all three EU institutions recommended extending the concept of the global marketing authorization to orphan products, so that an active substance only receives one period of protection that can be extended under certain conditions, rather than the current system where separate exclusivities apply for each orphan condition. In addition, generic applicants would be able to make applications two years before the expiry of orphan exclusivity. It is not clear from the press releases whether these proposals have been maintained, and if so, in what form. In practice, both of these proposals are likely to reduce the protection for innovative products, and so questions will remain about whether the agreed incentives are sufficient to support the development of products for unmet needs.

How will the EU changes impact how drug manufacturers submit products for market authorization?

The changes will lead to a lot of additional strategy planning for companies to consider how the new protection periods and procedures might impact development. Companies may need to revisit their filing strategies in light of the possibilities for extensions. For some products, it might be beneficial to speed up applications so they can be made under the current rules, while for others, it might be beneficial to delay applications to take advantage of the changes. Companies may also need to adjust launch sequencing to avoid the risk of a reduction in market protection. This will likely impact all companies, but in particular small and medium-sized companies that may not have operations in all countries.

The agreement also puts in place procedural and structural reforms intended to modernize the regulatory framework and foster innovation. These include a shorter assessment time (reduced from 210 to 180 days), streamlined EMA processes and structures, and the use of regulatory sandboxes to test innovative medicines that cannot be developed under current rules. The amendments will also provide additional ways for companies to engage with EMA, including extended scientific advice with health technology assessment bodies or medical device expert panels. All of these could be positive changes to EMA procedures, but until the full text is available, it is unclear whether these will impact how manufacturers approach development and interactions with EMA, and whether they lead to meaningful advances for patients.

References

1. European Parliament. Deal on Comprehensive Reform of EU Pharmaceutical Legislation. Press Release. Dec. 11, 2025. https://www.europarl.europa.eu/news/en/press-room/20251209IPR32110/deal-on-comprehensive-reform-of-eu-pharmaceutical-legislation
2. EMA. EMA Welcomes Political Agreement on New EU Pharmaceutical Legislation. Press Release. Dec. 11, 2025. https://www.ema.europa.eu/en/news/ema-welcomes-political-agreement-new-eu-pharmaceutical-legislation
3. EMA. Emer Cooke, EMA’s Executive Director: 2025 Achievements in Medicine Regulation. Press Release. Dec. 19, 2025. https://www.ema.europa.eu/en/news/emer-cooke-emas-executive-director-2025-achievements-medicine-regulation