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EU pharmaceutical reform
Your EU distribution model might be impacted. Are you ready?
Summary
Regulatory alignment imperative: Article 166 from the new EU pharmaceutical Directive would bring financial transactions explicitly within WDA requirements. For companies with non-EU principals, compliant product flows may no longer be enough—the underlying buying, selling and invoicing model may also need to change.
Cross-functional complexity: establishing a compliant model could affect legal entities, licences, contracts, tax and transfer pricing, supply chain, systems, and quality. The right model must balance compliance, tax efficiency, operational complexity and long-term resilience.
Urgency and lead time: If the legislation enters into force in late 2026 as anticipated, the requirements are expected to apply in late 2028. With licences, entity changes and system implementation requiring significant lead time, companies should assess their exposure now.
The proposed EU Directive on pharmaceutical products may require companies with non-EU principals or financing entities to reassess how medicinal products are bought, sold and invoiced across the EU.
The revised EU pharmaceutical package is expected to enter into force in December 2026, with a 24-month implementation period. Article 166 forms part of the final compromise text endorsed by the Parliament’s responsible committee. Therefore, a substantive change is considered unlikely.
What is changing?
Proposed Article 166 introduces a stricter alignment of physical and financial flows. It would require EU Wholesale Distribution Authorisation (WDA) holders to:
procure medicinal products – including through financial transactions – only from EU WDA or Manufacturing Authorisation holders; and
supply medicinal products – including through financial transactions – only to other EU WDA holders or entities authorised to supply the public.
This applies not only to physical movement of products but also to transactions that amount to legal or financial transfers of ownership or title.
Groups using a Swiss or other non-EU entity as the commercial principal may no longer be able to retain that entity as the direct legal buyer and seller of medicines distributed within the EU. Changes may therefore be required across the legal entity footprint, licences, contracts, invoicing and payment flows, VAT registrations and ERP set-up, the transfer pricing model, as well the Quality and Regulatory organisation.
Path to readiness
Several pharmaceutical companies with non-EU principal structures are already reviewing their EU trade operating models and evaluating compliant alternatives. The challenge is to reduce compliance exposure while preserving tax efficiency and limiting operational complexity.
Some national health authorities are already starting to anticipate the implementation of Article 166, organisations should begin preparing now, given the lead time required to operationalise new entities, obtain licences, and implement new processes.
How Deloitte can support
Deloitte is supporting clients in assessing alternative compliant models and evaluating their respective advantages and trade-offs across regulatory compliance, direct & indirect tax, transfer pricing, and operational complexity.
Our integrated Tax & Legal (including Transfer Pricing, Business Tax, Indirect Tax, Global Trade Advisory), Quality, Regulatory, and Supply Chain teams provide a cross-functional approach to defining and implementing a tailored target model. The optimal solution will be specific to each organisation and requires the balancing of the compliance exposure, tax impact, and implementation complexity and assessment of your organisation’s resilience in the long term to further tightening of the regulation.
If this topic is relevant to your organisation, we would be pleased to arrange a 30-minute discussion to assess your potential exposure and outline practical response options.
