EU pharmaceutical reform: article 166

Following agreement between the EU institutions, the core legislative texts have been finalised and endorsed at institutional level. The reform has since progressed through the relevant parliamentary committee stage, clearing the way for the remaining formal steps required for adoption. At this point, substantive changes to the agreed framework are considered unlikely, and the focus is increasingly shifting from legislative negotiation to implementation readiness.

For the Directive, a transitional period extending into 2028 is expected for national transposition.

At this stage, substantive changes to the agreed texts are considered highly unlikely. The focus is therefore shifting from legislative monitoring to implementation readiness.

At the heart of the new framework, and the provision with the most immediate operational impact for non-EU/EEA-based pharmaceutical companies, is Article 166(1)(c) of the Pharmaceutical Directive. 

In its current agreed form, it provides that holders of a wholesale distribution authorisation (WDA) shall:

"procure, including by financial transactions, their supplies of medicinal products only from persons who are themselves in possession of a wholesale distribution authorisation in the Union or a manufacturing authorisation."

The explicit reference to “procure, including by financial transactions” is decisive. It makes clear that the EU/EEA framework does not only regulate the physical handling of medicinal products, but also the financial and legal supply chain through which EU/EEA wholesalers procure those products.

This wording is widely understood as targeting arrangements in which:

• medicinal products are physically stored and distributed within the EU/EEA, but
• the wholesaler’s contractual or economic supplier is a non EU/EEA entity that does not hold an EU/EEA wholesale or manufacturing authorisation.

Once the Directive applies, such structures are expected to be incompatible with Article 166.

Article 166 does not emerge in a vacuum. It represents the legislative codification of a regulatory direction that EU/EEA courts and health authorities have been building for years:

• Germany (2021): The German Federal Administrative Court established that controlling the supply chain, including financial transaction, is what matters, not merely the physical flow of goods.
• CJEU (2023): The Court of Justice of the European Union confirmed that wholesalers must source exclusively from authorised suppliers within the EU/EEA.
• Sweden (2025): The Administrative Court of Appeal in Stockholm affirmed that procuring from a non-EU/EEA entity is non-compliant, and that the Swedish Medicines Agency may demand corrective actions.

What was established through individual rulings is now written into a harmonised, EU/EEA-wide legislative framework. The direction is no longer subject to interpretation; it is settled law.

The impact is broad. Any non-EU/EEA-based pharmaceutical company, including those operating under a Swiss principal model, that sells or invoices EU-stored medicinal products to EU/EEA wholesalers or group affiliates is directly affected. Health authorities across virtually all Member States have already been challenging such arrangements during GDP inspections. Non-compliance can result in major findings and, in the most critical scenarios, supply chain disruptions until a compliant solution is in place.

The regulatory expectation is now unambiguous: both the financial path and the physical path of medicinal products must run through EU/EEA authorised entities.

The transitional period to 2028 relates to the formal transposition of the Directive into national law. It does not pause current enforcement. Health authorities are already applying the underlying principles today, and have been for years, under existing GDP requirements and the established case law. Companies that treat 2028 as a distant deadline risk finding themselves on the wrong side of an inspection before the Directive even formally applies.

Moreover, redesigning an operating model of this nature is not a simple exercise. It spans regulatory, tax, transfer pricing, operations, finance, IT, and requires engagement with health authorities across multiple jurisdictions. From our experience advising numerous multinational pharmaceutical companies through precisely this transition, the end-to-end process typically takes up to 12 months. The arithmetic speaks for itself.

Despite the headlines, this is not an existential threat to Swiss-based pharmaceutical headquarters. What must change is not necessarily where strategic decisions are made, but how commercial and financial flows are structured to ensure every wholesale transaction involving EU/EEA-stored medicinal products occurs between EU/EEA-authorised entities.

Practical, compliant solutions exist, and they can be designed to preserve the strategic and economic benefits of a Swiss centre while fully satisfying EU/EEA regulatory expectations. The key lies in getting the cross-functional design right from the start: regulatory compliance, tax, transfer pricing alignment and operational feasibility must be addressed as one integrated equation, not in silos.

PwC Switzerland has been advising clients on these issues since the earliest enforcement actions, well before Article 166 became a headline topic.

• Deep regulatory experience: long‑standing involvement in cases shaped by enforcement practice.
• Proven implementation capability: operating models designed and implemented for multinational pharmaceutical groups, tested in real GxP inspections across multiple Member States.
• True cross‑functional delivery: integrated regulatory, legal, tax, transfer pricing and operational expertise in a single, coordinated engagement.
• Swiss‑centre perspective, global reach: locally grounded advice, delivered consistently across jurisdictions.

When regulatory change intersects with operating models, theory is not enough. Execution matters.