EUROPEAN COMMISSION Brussels, 13.12.2022 SWD(2022) 414 final COMMISSION STAFF WORKING DOCUMENT



IMPACT ASSESSMENT REPORT

Accompanying the document Proposal for a Regulation of the European Parliament and of the Council on fees and charges payable to the European Medicines Agency, amending Regulation (EU) 2017/745 of the European Parliament and of the Council and repealing Council Regulation (EC) No 297/95 and Regulation (EU) 658/2014 of the European Parliament and of the Council {COM(2022) 721 final} - {SEC(2022) 440 final} - {SWD(2022) 413 final} - {SWD(2022) 415 final}



Table of contents 1.Introduction: Political and legal context 2.Problem definition 2.1.What are the problems? The following section describes the main problems facing the EMA fee system, as identified by the recent evaluation. It extends this analysis to include issues that arose subsequently due to the impact of the COVID-19 pandemic. 2.1.1. Misalignment with provisions of new Union legislation [P0] Weaknesses identified in the evaluation 2.1.2. Misalignment of some fee levels with the underlying costs – a non-cost based system [P1] 2.1.3. Misalignment of some NCA remuneration with the costs incurred to undertake the work [P2] 2.1.4. The fee system is complex, partly inconsistent and not flexible [P3] Elements identified following the COVID-19 crisis 2.2.What are the problem drivers? 2.2.1. New and amended procedures for veterinary medicines (VMP legislation) and new estimated EMA costs as of 2024 for DARWIN (under the Regulation on a reinforced role for EMA) [D1] 2.2.2. The levels of fees and remuneration for EMA and NCAs for procedures are not fully cost-based [D2] 2.2.3. The fee system is complex [D3] 2.2.4. Assessing innovative medicinal products (e.g. gene therapy, personalised medicines) is becoming more complex [D4] 2.3.How likely is the problem to persist? 3.Why should the EU act? 3.1.Legal basis

3.2.Subsidiarity: Necessity of EU action 3.3.Subsidiarity: Added value of EU action 4.Objectives: what is to be achieved? 4.1.General objectives 4.2.Specific objectives 5.What are the available policy options? 5.1.What is the baseline from which options are assessed? (The do-minimum scenario) 5.2.Description of the policy options 5.2.1. Option 1 5.2.2. Option 2 5.2.3. Option 3 5.2.4. Option 3 ‘light’ 5.2.5. Horizontal measures 5.3.Options discarded at an early stage 6.What are the impacts of the policy options? 6.1.Public authorities and budgets (including governance and good administration) 6.1.1. Alignment of fees with underlying costs 6.1.2. Alignment of NCAs remuneration with costs incurred to undertake EMA activities 6.1.3. Fee system capacity to adjust to cost changes 6.1.4. Balance between a simple fee system and a cost-based system

6.1.5. Fee system capacity to adjust to ensure financing of incentives 6.1.6. Adaptability of fee system to ensure EMA can effectively respond to exceptional circumstances related to public health and animal health 6.1.7. Predictability 6.2.Administrative burden 6.2.1. Administrative burden on EMA and NCAs 6.2.2. Administrative burden on fee payers 6.2.3. Administrative burden for SMEs relative to other payers 6.3.Position of SMEs 6.4.Research and innovation 6.5.Functioning of internal market and competition 6.6.Discussion of information gaps and uncertainties 7.How do the options compare? 7.1.Overview of impacts 7.2.Appraisal of horizontal measures 7.2.1. Veterinary medicines incentives 7.2.2. Country coefficients for NCA remuneration 7.2.3. Incentive sharing 7.3.Effectiveness 7.4.Efficiency (balance of benefits and costs) 7.5.Coherence with other EU policy objectives

7.6.Preferred option – Option 3 ‘light’ 7.7.REFIT (simplification and improved efficiency) 7.8.Application of the ‘one in, one out’ approach 8.How will actual impacts be monitored and evaluated? Annex 1: Procedural information 1.Lead DG, Decide Planning/CWP references 2.Organisation and timing 3.Consultation of the RSB 4.Evidence, sources and quality Annex 2: Stakeholder consultation (Synopsis report) Annex 3: Who is affected and how? 1.Practical implications of the initiative 2.Summary of costs and benefits Annex 4: Analytical methods Annex 5: Context and relevant actors Annex 6: Summary Impact Tables from the Consultation Annex 7: Final Summary Impact Tables and Fee Grids



Glossary Term or acronym Meaning or definition Abridged application An application for a new marketing authorisation for a medicinal product for human or veterinary use should normally be accompanied by a ‘full dossier’ (see further below in this table). However, in certain instances applicants are permitted to submit a medicinal dossier that does not include all of the results required for a full dossier. This is called an abridged application. An applicant can choose to submit an abridged application instead of a full dossier when the results of an already authorised medicine are relevant to the new medicinal product and when reference can be made to these results. See also ‘generic’, ‘biosimilar’ and ‘full dossier’. Additional activities Both EMA and NCAs undertake activities additional to the activities that were covered by the data gathering exercise of the EMA Management Board. These ‘additional activities’ do not concern time spent in and preparatory work for committees and working parties, nor any of the procedural activities covered by the external study. For more information, see Section 5. Administrative fee Fees charged on a one-off basis by EMA to undertakings for the provision of the following administrative services: negative administrative validation of an application, issuing of certificates outside of procedures, notifications of parallel distribution and variation worksharing (whereby a marketing authorisation holder (MAH) can submit the certain variations affecting more than one marketing authorisation from the same MAH in one application.). For reference of terms see also ‘parallel distribution’ and ‘Variation; Type IA, IB and II’. Advanced Therapy Medicinal Product (ATMP) Medicinal products for human use based on genes, cells or tissues used to diagnose, prevent or cure diseases or to replace, repair or regenerate human tissue. Advanced Therapy Medicinal Product (ATMP) classification Any applicant developing a product based on genes, cells or tissues may request a scientific recommendation of the Agency with a view of determining whether the referred product falls, on scientific grounds, within the definition of an advanced therapy medicinal product. The Agency shall deliver this recommendation after consultation with the Commission and within 60 days after receipt of the request. Annual fee Fees charged annually by EMA to undertakings for services related to the maintenance of a valid marketing authorisation (e.g. databases). Two types of annual fees exist: (1) an annual fee for centrally authorised medicinal products (CAPs) for human and veterinary use (CAP annual fee) and (2) a pharmacovigilance annual fee for nationally authorised medicinal products (NAPs) for human use. Basic fee The full applicable fee before reductions (fee incentives) or additional amount (for the assessment of additional strengths, pharmaceutical forms or presentations) have been applied. See also under ‘procedural fee’. Biosimilar application A biological medicinal product that is highly similar to an already authorised biological medicine (‘the reference product’) and for which not all test results need to be provided as for a full dossier. A biosimilar application is a type of abridged application. See also ‘abridged application’ and ‘full dossier’. Centrally authorised medicinal product (CAP) Medicinal products authorised at European Union level. The marketing authorisation is granted by the European Commission and is valid in all Member States. CAP annual fee See under ‘annual fee’. Coordination group The coordination groups for human medicinal products (CMDh) and veterinary medicinal products (CMDv) were set up for the examination of any questions relating to nationally authorised medicinal products, specifically related to disagreements on the grounds of potential serious risks to public health between Member States on pending initial marketing authorisation and variation procedures. The tasks also include certain pharmacovigilance activities related to nationally authorised products. Data Analysis and Real World Interrogation Network (DARWIN EU®) The Data Analysis and Real World Interrogation Network (DARWIN EU) is the EMA’s infrastructure that will support regulatory decision-making by: · establishing and expanding a catalogue of observational data sources for use in medicines regulation; · providing a source of high-quality, validated real world data on the uses, safety and efficacy of medicines; · addressing specific questions by carrying out high-quality, non-interventional studies, including developing scientific protocols, interrogating relevant data sources and interpreting and reporting study results. The integration of DARWIN EU in the European Health Data Space (EHDS) (as a node in the digital infrastructure for secondary use of health data) will enable EMA’s and national competent authorities’ to use these data whenever needed throughout the lifecycle of a medicinal product. European Health Data Space (EHDS) The creation of a European Data Space is one of the priorities of the Commission 2019-2025, including the health sector. A common European Health Data Space will promote better exchange and access to different types of health data (electronic health records, genomics data, data from patient registries etc.), not only to support healthcare delivery (so-called primary use of data) but also for health research and health policy making purposes (so-called secondary use of data). Extension of marketing authorisation (line-extension) Procedure via which any of the following changes are made to an already existing authorisation: Changes to the active substance, strength, pharmaceutical form, and/or route of administration; Other changes specific to veterinary medicines to be administered to food-producing animals or the change or addition of target species. Fee payer Fee payers are mainly pharmaceutical companies, preparing or seeking to either (a) apply for a marketing authorisation to place a medicinal product on the market, or (b) amend an existing marketing authorisation. This includes multinational companies as well as smaller entities. Full dossier An application for a new marketing authorisation for a human medicinal product should normally be accompanied by results of pharmaceutical (physico-chemical, biological or micro-biological) tests, pre-clinical (toxicological and pharmacological) tests and clinical trials (Article 8i of Directive 2001/83/EC). In the case of veterinary medicinal products these are results of pharmaceutical (physico-chemical, biological or micro-biological) tests, safety and residue tests, pre-clinical and clinical trials, and tests assessing the potential risks posed by the medicinal product for the environment (Article 12j of Directive 2001/82/EC). Applications that are submitted in accordance with these requirements are called a ‘full dossier’. See also ‘abridged application’. Generic application Application for a medicine containing the same active substance(s) and used at the same dose(s) to treat the same disease(s) as an already authorised medicine (‘the reference medicine’). A generic application is a type of abridged application. See also ‘abridged application’ and ‘full dossier’. Generic medicine A generic medicine is developed to be the same as a medicine that has already been authorised, called the reference medicine. A generic medicine contains the same active substance(s) as the reference medicine, and it is used at the same dose(s) to treat the same disease(s). However, a generic medicine's inactive ingredients, name, appearance and packaging can be different. Health technology assessment (HTA) HTA bodies provide recommendations on medicinal products and other health technologies with regard to their properties and direct and indirect impact as well as unintended consequences. It is mainly aimed at informing policy and decision-making in health care, especially on how best to allocate funds in terms of reimbursement. Immunological veterinary medicinal product/ immunologicals A veterinary medicinal product intended to be administered to an animal in order to produce active or passive immunity or to diagnose its state of immunity. Inspection Medicine developers and (future) marketing authorisation holders should ensure that they and any parties working for them comply with standards set out in Union legislation and guidelines for good clinical practice (GCP), good laboratory practice (GLP) and good manufacturing practice (GMP) for investigational and to be authorised or already authorised medicinal products. Compliance with these standards is verified by the national competent authorities during (GCP/GLP/GMP) inspections. When it concerns products that are to be authorised or have been authorised via the centralised procedure, EMA is responsible for coordinating the inspections by NCAs. Limited market A market for one of the following medicinal product types: (a) veterinary medicinal products for the treatment or prevention of diseases that occur infrequently or in limited geographical areas; (b) veterinary medicinal products for animal species other than cattle, sheep for meat production, pigs, chickens, dogs and cats; Management Board data gathering (MBDG) In March 2014, the EMA Management Board set up a Data Gathering Steering Group to gather evidence on the time spent by staff of the EMA Secretariat and NCAs on EMA-related activities, to support the evaluation of the EMA fee system by the European Commission. Maximum residue limit (MRL) The maximum concentration of a residue of a pharmacologically active substance (veterinary medicine) which may be permitted in food obtained from an animal exposed to that substance. Micro, small and medium-sized enterprise (SME) The following definition is not specific to the pharmaceutical sector, but instead applies EU-wide (Commission Recommendation 2003/361/EC): Microenterprise: company which employs fewer than 10 people and which has an annual turnover and/or annual balance sheet total not exceeding €2 million. Small enterprise: company which employs fewer than 50 people and which has an annual turnover and/or annual balance sheet total not exceeding €10 million. Medium-sized enterprise: company which employs fewer than 250 people and which has an annual turnover not exceeding €50 million and/or a balance sheet total not exceeding €43 million. Minor use/minor species (MUMS) Veterinary medicines for the treatment of rare diseases in major animal species (cattle, sheep, pigs, chickens, salmon, cats and dogs) and for the treatment of minor animal species. Nationally authorised medicinal product (NAP) Medicinal products authorised at the national level in one or more Member States. The marketing authorisation is granted by the relevant National Competent Authority(ies) of the Member State(s) where the application is made. National Competent Authorities (NCAs) National regulatory authorities responsible for the regulation of medicinal products for human and veterinary use in the European Economic Area. Orphan designation The procedure via which it is evaluated whether a medicinal product fulfils the criteria of an orphan medicinal product. Orphan medicinal product Medicine used to diagnose, prevent or treat life-threatening or chronically debilitating diseases that are either rare or unlikely to generate sufficient return to justify the necessary investment, and where no satisfactory or better alternative already exists within the European Union. A condition is defined as ‘rare’ if it affects no more than five in 10 thousands people in the EU. Paediatric investigation plan (PIP); waiver; deferral; modification Development plan drawn up by a pharmaceutical company containing information on how that company intends to gather data on the use of the medicine concerned in children. The aim is to ensure that data are gathered that are necessary to approve use of a medicine in children. Normally, a PIP is required with each application for authorisation of a new medicine. However, under certain circumstances the applicant may request EMA to waive or defer the PIP. A waiver is granted if the development of a medicine in children is not needed or not appropriate, such as for diseases that only occur in adults. A deferral allows the applicant to delay development in children until, for instance, enough information is gathered about its effectiveness and safety in adults. An approved PIP can be modified at a later stage as knowledge increases or if it is proven that the implementation of the PIP is impossible or no longer appropriate. Parallel distribution The distribution of a centrally authorised medicine from one Member State to another by a company other than the owner of the medicine. Peer-review(er) One of the members of the CHMP or CVMP is appointed to review the scientific evaluation of the rapporteur and co-rapporteur conducted during the first phase of applications for a marketing authorisation and extensions of existing marketing authorisations, with the purpose of ensuring the quality and consistency of these evaluations. The peer-reviewer especially focusses on the draft list of questions compiled by the rapporteurs for the relevant scientific committee. Periodic Safety Update Report (Singe Assessment) (PSUR/PSUSA) Reports containing information and a critical analysis on a benefit-risk balance of an authorised medicinal product. The report is compiled by the owner of the marketing authorisation and submitted to the relevant competent authority for evaluation. Based on the assessment of a PSUR, the relevant competent authority can determine whether actions are needed to protect public health, for instance via the update of information for patients and health care professionals. Pharmacovigilance The monitoring of adverse effects (safety) of medicines or any other medicine-related problem after their placing on the market, with the aim to identify, assess and prevent such problems. Pharmacovigilance annual fee See under ‘annual fee’. Pharmacovigilance procedural fee Procedural fee related to pharmacovigilance activities (assessment of PSUR, PASS, pharmacovigilance referrals). See also under ‘procedural fee’. Pharmacovigilance referral Referral (arbitration) related to the safety of a medicine. See further under ‘referral’. Post-authorisation safety study (PASS) A study carried out after a medicine has been approved in order to gain more information on its safety or to measure the effectiveness of measures taken to reduce safety risks. PRIority MEdicines (PRIME) A voluntary scheme launched by the European Medicines Agency in 2016 to enhance support for the development of medicines that target an unmet medical need or that offer a major therapeutic advantage over existing treatments. Via participation in this scheme developers of medicines receive early and proactive support from EMA to optimise development plans and accelerate scientific evaluation with the aim of early access to patients. This scheme also provides fee incentives for scientific advice requests for PRIME products from micro-sized enterprises and SMEs as well as academic sector applicants. Procedural fee Fees charged by EMA to undertakings on a per-service basis. Procedural fees are applicable to a specific set of services provided either before or after the granting of a marketing authorisation (‘pre- and post-authorisation procedural fees’). Protocol assistance Protocol assistance is a special form of scientific advice specifically available for developers of orphan designated medicines. See further under ‘scientific advice’ and ‘orphan designation’. (Co-)Rapporteur Scientific committees of EMA appoint one of their members as rapporteur and may appoint a second one as co-rapporteur to lead the scientific evaluations of applications submitted to EMA. The rapporteurs are responsible for drafting the assessment reports submitted to the committees for discussion and adoption. Referral (arbitration) Procedure initiated to resolve issues such as concerns over the safety of an already authorised medicine or to resolve disagreement among Member States on the benefit-risk balance of a new medicine under evaluation. Referrals can be initiated by the European Commission, a Member State or the owner (marketing authorisation holder) of the product. Regulation on a reinforced role for EMA Regulation (EU) 2022/123 of the European Parliament and of the Council of 25 January 2022 on a reinforced role for the European Medicines Agency in crisis preparedness and management for medicinal products and medical devices Renewal A new marketing authorisation is only valid for five years from the date the Commission notifies the marketing authorisation holder the authorisation has been granted. An application for renewal of the authorisation shall be submitted timely (i.e. nine months before its expiry date) to ensure it remains valid. Once renewed, the marketing authorisation is valid for an unlimited period, unless the Commission decides, on justified grounds relating to pharmacovigilance, including exposure of an insufficient number of patients to the medicine concerned, to proceed with one additional five-year renewal. Scientific advice EMA can give advice to a developer on the appropriate tests and studies in the development of a medicine. This helps to facilitate the development and approval of a medicine. Scientific services Services provided by EMA upon application for any scientific advice or opinion by a scientific committee other than those related to scientific advice, initial marketing authorisation, inspection, variation, extension, renewal, referral, maximum residue limit, transfer of marketing authorisation, or the maintenance of a marketing authorisation. This includes any evaluation of traditional herbal medicinal products, any opinion on medicinal products for compassionate use, any consultation on ancillary substances, including blood derivatives, incorporated in medical devices, and any evaluation of plasma master files and vaccine antigen master files. Synthetic year A synthetic year is used to determine costs to EMA and NCAs incurred for EMA-related activities in a ‘typical year’. The synthetic year “neutralises” differences in the reporting of data for EMA and NCAs. This was necessary to ensure that, for activities where NCAs are involved, the number and type of activities is the same for EMA and NCAs in the ‘typical year’. Unitary costs and unitary fees Costs to EMA and NCAs or fees charged to industry for a given activity, such as the evaluation of a marketing authorisation application or variation. Variation; Type IA, IB and II Change to the terms of an existing marketing authorisation, e.g. the change in manufacturing site, the addition of an indication, the replacement of an excipient of the medicinal product. Type II variations concern major changes which may have a significant impact on the quality, safety or efficacy of the medicinal product. These variations require approval by the relevant competent medicine authority before they can be implemented. Type IA variations concern minor changes which have only a minimal impact or no impact at all on the quality, safety or efficacy of the medicinal product. These variations do not require approval by the relevant competent medicine authority prior to implementation (‘Do & Tell’). Type IB variations concern changes that are neither Type IA nor Type II variations. These variations require approval by the relevant competent medicine authority before they can be implemented. Veterinary Medicinal Product Regulation (VMP) Regulation (EU) 2019/6 of the European Parliament and of the Council of 11 December 2018 on veterinary medicinal products and repealing Directive 2001/82/EC Weighted average of NCAs’ costs In the model calculating costs and income of EMA and NCAs for a ‘typical year’ NCAs costs were determined as a weighted average of costs estimated for various NCAs, using as weight the frequency of involvement of the NCAs.





Within the European Union (EU), all medicinal products for human and veterinary use must be authorised either at EU (central) or Member State (national) level. At EU level, the Commission authorises these products based on the scientific assessment of their quality, safety and efficacy, as delivered by the European Medicines Agency (EMA), with the involvement of national competent authorities (NCAs) in the Member States. The EMA is a decentralised Agency of the Union. It charges fees to marketing authorisation holders and applicants for obtaining and maintaining EU-wide marketing authorisations for medicinal products for human and veterinary use. The EMA remunerates NCAs for their scientific assessment work. The services for which EMA charges fees include scientific advice, assessment of applications for a marketing authorisation, changes to existing marketing authorisations (variations and extensions), and other pre- and post-authorisation procedures, and annual fees for the maintenance of already authorised medicines. Pharmacovigilance activities conducted at EU level for nationally authorised medicines for human use are also financed by fees paid by marketing authorisation holders to EMA. The broad purpose of this initiative is to provide the EMA with a sound financial basis for the future. The proposed revision aims to address the shortcomings highlighted in the 2019 evaluation of the EMA Fee system, as defined in the two EMA fee regulations: (1) the Fee Regulation (EC) No 297/95 and its implementing rules and (2) the Pharmacovigilance Fee Regulation (EU) No 658/2014. The revision will also address the problems caused by, and the lessons learnt from the COVID-19 pandemic in order to make the new fee system even more effective, future proof and crisis-resistant. This initiative is limited to revising the EMA fee system based on an assessment of the costs of the activities of EMA and NCAsas they are set by the current EU pharmaceutical legal framework. The role of EMA as defined in its Founding Regulation, the way in which the EMA’s committees operate and the role of the NCAs in relation to their contributions to EMA are out of the scope of this impact assessment. Changes in the functioning of these operations and measures to improve efficiency of EMA and NCA services may be considered in the ongoing revision of the pharmaceutical legislation and are therefore out of the scope of this revision. More detailed background information on the regulatory framework, specifically on the elements related to the authorisation, maintenance and monitoring of medicinal products, the tasks under the remit of EMA and their links with the EMA fee system are presented in Annex 5. Legal Context The general provisions laying down the composition of the EMA budget and the principles of remuneration to rapporteurs and experts are contained in the EMA Founding Regulation. The specific fee amounts and levels of remuneration for the contributions of the national experts on the other hand are detailed in the main Fee Regulation and its implementing rules and in the pharmacovigilance fee regulation. The requirement for a cost-based fee system, which is the backbone of the revised system, stems from the legal provisions in the main EMA fee Regulations (article 12 from the main fee regulation and recital 7 from the pharmacovigilance fee regulation.). The cost alignment objective stems from the main Fee Regulation which stipulates that any review of the fees shall be based on an evaluation of the Agency’s costs and on the basis of the related costs of the services provided for by the Member States. The EMA Founding Regulation stipulates that EMA revenues and costs should be balanced. EMA revenues include fees which should cover, as part of the revenues of EMA, the costs of the Agency and the costs for remunerating NCAs for their contribution to EMA’s tasks. The pharmacovigilance fee regulation specifically states that “Any future revisions of the pharmacovigilance fees or other fees levied by the Agency should be based on a transparent and independent evaluation of the costs of the Agency and the costs of the tasks carried out by the national competent authorities.”. In addition, a number of sectorial legislations provide incentives for specific types of products and/or applicants that are applied to the amount laid down in the regulations above. The need to ensure that EMA costs are covered is linked firstly to the budgetary principle in the Financial regulation whereby revenue and expenditures shall be balanced (also reflected in the founding Regulation of the Agency) and, secondly, to the balancing nature of the contribution from the Union to the revenue of EMA. Both revenue sources (contribution from the Union budget and fees) are part of the revenue sources of the Agency, as per its Founding Regulation. Recent amendments to the pharmaceutical framework have introduced provisions impacting the EMA Fee System. First, the 2018 revision of the founding regulation introduced the use of “charges” as an additional source of revenue for EMA. Furthermore, a requirement for the Commission to review the regulatory framework for fees payable to the Agency by 2019 was also introduced. Secondly, the Veterinary Medicinal Products Regulation ( Regulation (EU) 2019/6 ), which became applicable on 28 January 2022, updated the rules on the authorisation and use of veterinary medicines in the EU. Consequently, the current fee system is not fully aligned with the new and amended provisions put in place for the veterinary sector. Finally, the Regulation reinforcing EMA’s role in crisis preparedness and management for medicinal products and medical devices (hereafter referred to as Regulation on a reinforced role for EMA) was recently adopted to codify and further strengthen structures and processes established by EMA during the COVID-19 pandemic. One specific activity (DARWIN EU) introduced as part of these changes was assigned an EU budget allocation only to the end of 2023. Therefore, the continued operation of DARWIN EU as of 2024 will require a new financing mechanism through the introduction of additional fee revenue (all other activities under said regulation are provided for and financed through an EU budget contribution to the EMA budget). Political Context The European Court of Auditors has repeatedly noted the need to introduce a system of remuneration for services provided by Member State authorities based on their costs. The EMA fee legislation is crucial for the successful implementation of the underlying pharmaceutical legislation of the EU. By way of example, the Regulation on a reinforced role for EMA is an important pillar of the European Health Union. Similarly, the new VMP regulation aims inter alia at enhancing the EU’s action against antimicrobial resistance. Appropriate cost-based funding of the relevant activities provided for in these regulations, as outlined above, is fundamental for equipping the Union with the necessary instruments to implement the new tasks. The EMA fee system plays an important role in such funding. Furthermore, the fee system is closely linked to the underlying regulatory framework set by the Union pharmaceutical legislation. The ongoing revision under the Pharmaceutical Strategy for Europe, including the ongoing revision of the legislation on orphan and paediatric medicines, may have a direct impact on the fee system. Given the time constraints outlined above, the revision of the fees framework needs to move forward, ahead of the finalisation of these other legislative revisions. However, any new fee system will need to be agile and adaptable in order to respond to the rapidly changing landscape in the pharmaceutical sector to cater for any new provisions that may emerge from this revision process. Finally, the COVID-19 pandemic has put strain on NCAs and their available resources, in particular for those called on to make an intensified contribution to the authorisation processes for new vaccines and therapeutics and to monitor the availability of crisis-specific medicines. On 7 December 2021, the Council adopted Conclusions on Strengthening the European Health Union in which they invited the Commission to pay due attention when revising the EMA fee system in order to “avoid causing damage to national competent authorities” and to safeguard and strengthen the EU regulatory system for medicinal products, including the scientific contributions made by NCAs. 1.1.What are the problems? The following section describes the main problems facing the EMA fee system, as identified by the recent evaluation. It extends this analysis to include issues that arose subsequently due to the impact of the COVID-19 pandemic. 1.1.1.2.1.1. Misalignment with provisions of new Union legislation [P0] From a legal perspective, the main problem is the lack of alignment of the fee legislation with the new provisions introduced by the VMP Regulation (further compounded during the Covid-19 pandemic, see below ‘Further elements identified following the COVID-19 crisis’). The VMP regulation introduced changes to regulatory procedures for which currently there are no fees. In addition, it broadened the scope of veterinary medicinal products eligible for the centralised procedure, which affects both EMA income and NCA remuneration as well as their costs related to veterinary activities.

As an interim measure to cover the new regulatory procedures for which no fees exist, the Implementing Rules of the current Fee Regulation have been amended, to guarantee continuity of funding from 28 January 2022, when the VMP regulation applied. Fees and remuneration amounts for new procedures have been introduced using existing amounts as benchmarks, whilst for amended procedures existing amounts continue to apply. This measure cannot be considered a sustainable solution as a) not all necessary fees can be introduced/amended through the implementing rules (annual fees) and b) the fee and remuneration amounts are not cost-based. Weaknesses identified in the evaluation The 2019 evaluation found that, although the existing fee system is generally effective and efficient, there are a number of weaknesses that might affect EMA’s ability to meet its costs in the future, including the remuneration to NCAs for their scientific contribution. 1.1.2.2.1.2. Misalignment of some fee levels with the underlying costs – a non-cost based system [P1] The procedural activities, the timelines and actors involved with their respective roles are defined in the overarching pharmaceutical legislation. Based on the information collected on the frequencies of such procedures and the workload involved for the different actors, the evaluation showed that though the current fee system covers costs overall, it is not fully cost-based, as there are discrepancies between revenues and costs calculated per type of procedure. Some fee levels are not aligned with the respective underlying costs. More specifically, fee revenue for some procedures exceed the total EMA and NCA costs of delivering them whilst for some other procedures they fall short of costs. For example, as shown in Figure 1, human medicine “variation” fees amount to €72 million/year vs. €18 million/year of total underlying costs. The opposite can be observed for initial marketing authorisation procedures, with fees amounting to €27.5 million/year vs. €50 million/year of underlying costs. Similar discrepancies have been observed also for veterinary medicines, though on a much smaller scale, as shown in Figure 2. The cost misalignment of individual fee levels with the average unitary costs drives a misalignment of the overall fee revenue per type of procedure and leads to a misalignment at the level of the system whereby overall procedural revenue is not aligned to the overall procedural cost, for all procedures taken together. Furthermore, for some procedural activities there are no fees (e.g. procedures related to paediatric investigation plans and orphan designation), meaning that EMA has to rely on other sources of income (e.g. annual fees; EU and EEA budget contributions; etc.) to address any shortfall. The misalignment of fees with the underlying costs also affects the fee payers, since they are charged fees that are not necessarily reflective of the workload required for the service provided. Figure 1: Comparison of total costs and fees for EMA and NCAs over one synthetic year before incentives applied under the current financial model – human medicines only Figure 2: Comparison of total costs and fees for EMA and NCAs over one synthetic year before incentives applied under the current financial model – veterinary medicines only 1.1.3.2.1.3. Misalignment of some NCA remuneration with the costs incurred to undertake the work [P2] At the level of individual activities, a high degree of variation exists in the extent to which remuneration aligns with costs. NCAs receive more remuneration than their incurred costs for certain procedures (e.g. variations) and less for others (e.g. initial marketing authorisation procedures). For example, as shown in Figure 3, for human medicine variation and scientific advice procedures the fee revenue is almost 3 times higher than the underlying costs incurred to undertake the work, whilst for initial marketing authorisations and inspections costs exceed the total remuneration received for those activities. Discrepancies are not as large for veterinary medicines, where only in the case of initial marketing authorisations are costs considerably higher than remuneration. Furthermore, for some procedural activities EMA fees do not exist and, consequently, no respective remuneration is provided to NCAs (e.g. procedures related to paediatric investigation plans and orphan designation). This affects more or less all NCAs serving as rapporteurs for a procedure, with NCAs that undertake only veterinary activities (16 out of 48) being less likely to cover their aggregate costs, due to the lower fees applied to those procedures. In addition there is a difference between the approach taken for pharmacovigilance activities compared to other types of activities. The 2014 Pharmacovigilance Fee Regulation introduced fees and remuneration based on cost estimations whereas fees set under the main Fee Regulation, remunerates NCAs at 50% of the fee (i.e. not cost-based). The Court of Auditors has also repeatedly criticised the non-cost-based approach to remuneration of NCAs (in relation to the main fee regulation). The evidence suggests that misalignments at the individual activity level may lead to an imbalance in the overall level of remuneration to NCAs. Whilst the total remuneration for procedural activities exceeds the related costs, the overall remuneration received by NCAs is not sufficient to cover their aggregate costs when all the additional non-procedural activities they reported are included . Such additional non-procedural activities are activities carried out by NCAs not directly linked to a specific procedure (e.g. activities not triggered by an application which have no defined timelines) and which an analysis is needed to determine whether they fall into the scope of remunerable services provided to EMA by NCAs. Such activities include IT developments, audits, signal detection, reporting on adverse drug reactions etc. However, whether, and to what extent, the cost of these additional non-procedural activities should be covered by EMA fee remuneration, was the subject of a separate analysis (see Section 6.1. Public authorities and budgets (including governance and good administration) to determine their eligibility under the Founding Regulation. Annex 4 –Addendum 2 contains further information on NCA “additional non-procedural activities” eligible for remuneration, how they have been defined as well as the methodology used to calculate the costs eligible for remuneration.

These misalignments could affect the ability of NCAs to remunerate the needed expertise for the evaluation of EU-level procedures. Although the evaluation did not show any major problem of effectiveness of the EMA fee system it found that if NCAs were to reduce their involvement due to lack of financial resources for remunerable contributions to EMA this would negatively affect the sustainability of the regulatory network and the work of EMA. Figure 3: NCA costs and fee revenue/income over one synthetic (modelled) year with fee incentives applied as per current financial model – human medicines Figure 4: NCA costs and fees revenue/income over one synthetic (modelled) year with fee incentives applied as per current financial model – veterinary medicines 1.1.4.2.1.4. The fee system is complex, partly inconsistent and not flexible [P3] The structure of the fees paid by industry should be as simple as possible to apply in order to minimise the related administrative burden for all stakeholders (EMA, NCAs, industry). This need is not fully met by the current system. Around 90 basic procedural fees, relating to medicinal products for human and veterinary use, exist under the current system and additional amounts may be added to those basic fees. Whilst these additional layers contribute to fairness by allowing for a more detailed breakdown of fees and fee incentives, they also add to the complexity of the fee system (there is a large number of specific fee values to be calculated), and the resulting financial flows are not easily predictable for fee payers. The administrative burden on EMA and industry is evident - in 2021, 32,967 sales orders were triggered by EMA, resulting in over 18,000 invoices to pharmaceutical companies. SMEs and research organisations, also reported difficulty in navigating the rules and amounts for fees charged, and felt that the system is not always transparent and easily accessible to them. In 2021, around 8% of the sales orders and invoices issued by EMA were for SME applicants. Secondly, the fee system is not fully coherent internally with certain pieces of legislation that govern and affect the fee system. For example, in the main Fee Regulation incentives are applied after remuneration of NCAs (EMA absorbs the shortfall), whilst under the Pharmacovigilance Fee Regulation incentives are applied before NCA remuneration (the shortfall is shared proportionally by NCAs and EMA). There is no rationale for this divergence of approach, and it points to a problem of principle as to whether NCAs of Member States should share the burden of the incentives. Furthermore, the way NCA remuneration is calculated is not aligned across the two regulations; NCA remuneration in the main fee regulation is calculated as a percentage of the fee charged to industry, whilst NCA remuneration in the Pharmacovigilance fee regulation is expressed as finite amounts based on estimated underlying costs. The fee system is also not coherent with the Paediatric Regulation as it does not provide remuneration to NCA rapporteurs for their scientific assessments. These inconsistencies affect NCAs in terms of the level of remuneration they receive for the various scientific services they provide. Furthermore, the different ways in which their remuneration is calculated means that remuneration does not fully reflect underlying costs. While the main Fee Regulation currently provides some flexibility to accommodate changes in the regulatory system through implementing rules, the existing fee system cannot address some core issues, such as the variability in workload for assessments categorised under the same procedure type, or variability in complexity (e.g. for procedures relating to the latest innovations in medical science, such as gene therapy, personalised medicines) which would result in varying time required to complete the assessment. It may also affect the distribution, in both number and type of activities across NCAs. As it stands, the only regular updating of fee levels foreseen is that which adjusts them in line with the rate of inflation. Consequently, the fee system is not flexible enough to accommodate significant fluctuations in EMA and NCAs’ workload or, more specifically, the changes in time and budget needs related to varying complexity of the activities undertaken. The current possibility to adapt the fee system through ‘implementing rules’ of the current main EMA fee regulation is not fully adequate to ensure full alignment to legislative changes. For example, while it has allowed for a partial alignment to the new VMP provisions, it could not accommodate the new costs for DARWIN EU as changes in the amount of the annual fees require a full-fledged legislative procedure. Elements identified following the COVID-19 crisis The Regulation on a reinforced role for EMA was adopted to enable the Agency to act in preparation for and during major events and public health emergencies. The provisions in that regulation affect EMA and NCA, both financially and operationally. The increased workload has led to additional costs, for which no quantifiable data exists, and has further highlighted the importance of having a flexible system that would be able to adapt to meet changing costs on an objective basis to guarantee the sustainability of the operation of the regulatory network. In line with the Regulation on a reinforced role of EMA, additional payments have been put in place respectively in the current system, financed through the EU budget contribution. The COVID-19 pandemic also showed the value of a flexible fee system. Upfront fee payments were introduced, via the implementing rules of the main fee regulation, for the “rolling review” approach, along with the possibility of additional remuneration (top-up payments) , beyond regular remuneration foreseen in the fee system, to NCA rapporteurs. 1.2.What are the problem drivers?

Regulatory drivers 1.2.1.2.2.1. New and amended procedures for veterinary medicines (VMP legislation) and new estimated EMA costs as of 2024 for DARWIN (under the Regulation on a reinforced role for EMA) [D1] New and amended procedures for veterinary medicines have been introduced by the VMP Regulation, which has become applicable in January 2022. The current fee legislation does not provide fees for some newly introduced activities, whilst it includes fees and remuneration for procedures that are going to disappear. An interim measure has been put in place in order to ensure continuity of funding for the veterinary operations between January 2022 and the applicability of a new fee regulation. Nonetheless, this measure cannot be considered as a sustainable solution as some fees, such as annual fees, cannot be introduced/amended by the implementing rules and amended existing fees could not be fully benchmarked on the new regulatory processes, and therefore cannot be considered cost-based. Furthermore, with regard to the operation of DARWIN EU, financing via an EU budget contribution has been allocated until end of 2023 (time limited), following which financing will need to be ensured through fee revenue. 1.2.2.2.2.2. The levels of fees and remuneration for EMA and NCAs for procedures are not fully cost-based [D2] In accordance with the legislation, fees charged to industry should be based on the costs of the Agency and the costs of NCAs for services provided to the Agency. However, the current system was designed to be updated principally based on the annual inflation rate, and not to regularly track and cater for workload fluctuations over time. This has had a significant effect on the alignment of fees with underlying costs. 1.2.3.2.2.3. The fee system is complex [D3] The complexity of the current EMA fee system stems from (1) the wide variety of underlying services provided and activities carried out by EMA (most of them requiring the contribution of NCAs) and (2) the several layers of legislation governing and influencing the fee system. Since the last amendment of the main Fee Regulation in 2005, several pieces of sectorial legislation established additional fee incentives. The adoption in 2014 of the Pharmacovigilance Fee Regulation has added to the overall complexity. Divergent approaches on elements such as the application of incentives and the way NCA remuneration are calculated in both EMA fee regulations lead to even more incoherence in the resulting system. Real world drivers 1.2.4.2.2.4. Assessing innovative medicinal products (e.g. gene therapy, personalised medicines) is becoming more complex [D4] Several NCA representatives reported that evaluating medicinal products has become increasingly complex in recent years due to more sophisticated innovations and advances in science (e.g. gene therapy, personalised medicines). Contributors to this additional complexity include very innovative products without clinical data or with insufficient data and therefore potentially requiring in future more extensive assessment, big data, analysis of real-world data and patient experience data (including how to address differences in data standardisation), health technology assessments (HTA), and companion diagnostic reviews. In the veterinary medicines sector, increasing complexity is also expected in activities related to monoclonal antibodies and stem cells. There is currently no monitoring system to capture the possible significant effects of these developments on the relevant costs. 1.3.How likely is the problem to persist? The misalignment of the fees regulations with new (and future) pieces of legislation represent a risk for the financial sustainability of EMA and the contributions of NCAs. EMA tasks linked to the veterinary pharmacovigilance procedures are not covered by specific fees and may in the long run be covered by an additional EU budget contribution. The implementation of the Regulation on a reinforced role for EMA as of 2024 requires substantial input from fee revenue, with the current cost estimations, and may become a breaking point for the capacity of the current fee system to adapt to the anticipated costs. As presented, the EU budget contributions will cover costs for the operation of DARWIN EU only until end of 2023, and a specific EU budget financing of that particular activity is no longer earmarked as of 2024. Secondly, significant shortfalls in the EMA budget, arising from the misalignment of fees and costs, could negatively affect the financial sustainability of EMA in the future. This in turn could affect the remuneration of NCAs and consequently their ability of to contribute to the EU regulatory system by providing expertise for the evaluation of EU-level procedures The EU is experiencing fast technological transformation and there is a general trend towards convergence of industries, products, technologies and services. These trends will influence the research and innovation landscape, including in health and will have an impact on the functioning of EMA. In view of the current revision of the underlying pharmaceutical legislation, there may be more changes to the legal framework in the future. The fee system will have to adapt continuously, beyond the current revision, to provide appropriate fees and remuneration for the services provided.

. 1.4.Legal basis The legal basis for EU action is that the proposed regulation would be based on a dual legal basis, Article 114 and Article 168(4)(c) of the Treaty on the Functioning of the European Union, and will aim to replace or amend as necessary the two EMA fee regulations. The proposed regulation is based on Article 114 TFEU as differences between national legislative, regulatory and administrative provisions on medicinal products tend to hinder intra-Union trade and therefore directly affect the operation of the internal market. The EMA Fee Regulation ensures the availability of the necessary financial resources to apply the Union procedures for the assessment of medicinal products, which have been introduced amongst other things to prevent or eliminate obstacles that could result from parallel procedures at national level. Thereby this Regulation contributes to the well-functioning of the internal market and the common post-marketing surveillance of medicinal products. In addition, the proposed Regulation is based on Article 168(4) (b) and (c) TFEU as it aims to support the goal of setting high standards of quality and safety of medicinal products and the protection of public health through measures in the veterinary field. It ensures the availability of sufficient financial resources to perform the activities that are necessary to guarantee that high standards are applied for the authorisation of pharmaceutical products and maintenance of those authorisations. The EU budget contribution included in the current multiannual financial framework (MFF) will be taken into account too. 1.5.Subsidiarity: Necessity of EU action EMA is a decentralised Agency of the EU, therefore decisions on its funding and the fees it may charge are taken at EU level. Only the Union can act to enable the Agency to charge fees and to define the levels of those fees. The proposed legislation will not apply to fees charged by NCAs in their respective Member States, for which the EU does not have competence. 1.6.Subsidiarity: Added value of EU action Since only the Union can act to enable the Agency to charge fees and to define the levels of those fees, the added value is inherent and is linked to the necessity of EU action. 1.7.General objectives The general objective of this initiative is to provide a sound financial basis for EMA and its activities, including cost-based remuneration for the services provided by NCAs. This will be achieved by better aligning fees to underlying costs and to simplify as far as possible the system, while ensuring that the EMA budget is in balance. The EU budget contribution included in the current multiannual financial framework (MFF) is taken into account. In addition, the initiative has to respect a number of fundamental overarching principles that are crucial for the sound functioning of the fee system. The future fee system has to ensure that EMA’s costs (including expenditure for cost-based remuneration to NCAs) are covered, taking into account the balancing subsidy of the EU budget contribution, as provided by the EMA founding regulation. This is aligned with the principle whereby the financing of certain services, for which a cost-based approach is not viable, is guaranteed by a redistribution of the costs for those services across all revenue sources of EMA (including fees, charges, EU budget contribution). These services concern activities for specific markets, applicants and product categories where fees are reduced or incentivised in legislation/ policy (e.g. veterinary medicinal products, SMEs).

Additionally, the fee system needs to guarantee an adequate level of agility to be able to adapt to future changes in the regulatory system, including relevant changes in the Union pharmaceutical legislation following the review under the Pharmaceutical Strategy for Europe. While it is an overall objective of the fee legislation to ensure a level-playing field for SMEs, the evaluation did not identify any issue in that respect and therefore, this is not part of the specific objectives of this revision which are described below. The EMA fee reductions for SMEs are laid down in Commission Regulation (EC) No 2049/20053 which will continue to apply. In addition, it should be noted that facilitating the development and marketing of safe and effective medicines is an objective of the overarching EU pharmaceutical legislation and it is not an objective of this revision. 1.8.Specific objectives Based on the problems outlined in Section 2, the specific objectives of the initiative are: ØObjective 1: to align the fee system to new legal provisions introduced by recent legislation. Specifically, orelevant changes to the rules applicable to the authorisation and monitoring of veterinary medicinal products (VMP), as introduced by the new VMP Regulation; orelevant changes in the cost basis for EMA operations introduced by the Regulation on a reinforced role for EMA Furthermore, it should take into account a new legal provision, which introduces “charges” as a possible source of revenue for the Agency in the EMA Founding Regulation as currently applicable. ØObjective 2.1: To better align procedural fees to respective costs while respecting fee incentives set in existing policies ØObjective 2.2: , To allow remuneration of NCAs based on their relevant costs; ØObjective 3: To simplify the fee system in order to minimise the administrative burden generated, as well as making the system more coherent internally by harmonising the current practices introduced by existing Regulations; ØObjective 4: To allow sufficient flexibility to accommodate fast-paced developments in the pharmaceutical sector and the increasing complexity of products submitted to the Agency for evaluation. The objectives of simplification and flexibility stem from the experience gathered and the evaluation and, therefore, the Commission enjoys more discretion in that respect, as compared to the cost-based objective which is the backbone of this revision. In practical terms, the main trade-off is between cost-alignment and simplicity, since cost-alignment requires more procedural fees, while simplicity means less procedural fees and more reliance on annual fees. While flexibility can be seen as a horizontal feature (i.e. how fast and simple the procedure is to adjust the amounts of fees and remuneration), it is influenced by the balance between cost-based and simplification, i.e. it is in principle easier to monitor the cost and adjust the fee for a given type of procedure as compared to an annual fee. The policy options assessed were designed in order to address an increasing number of objectives set for the new initiative, starting from the bare minimum, and the expanding to the full scope. The policy options consist of: ·A baseline scenario that extrapolates what will happen in the absence of a legislative reform to the EMA fee system. ·Three main policy options that will change substantive aspects of the fee system in different ways. ·A number of horizontal measures that are used in combination with one or more of the main options to adjust a specific aspect of the system. Table 1: Policy option descriptions (main options and horizontal measures) Option category Policy Option Summary Baseline Do-minimum Fee system adjusted to account for the 2018 VMP Regulation and revised EMA Founding Regulation current policy commitments as these already apply. This creates the baseline scenario to which all other options can be assessed. Main policy options 1 In addition to the ‘do minimum’, cost-based fees are introduced for all veterinary medicines procedures, as per the new VMP regulation. 2 Introduces a cost-based fee system for all EMA activities for both veterinary and human sectors. No changes to the fee system structure, but fees are included for additional procedural activities, for which no fees are charged currently (and no remuneration is paid). Unremunerated procedural activities in the current system become remunerated under this option. 3 Cost-based fee system for human and veterinary activities, with a simpler fee structure. 3 ‘light’ Implements a more limited simplification of the fee system structure described in option 3. Horizontal measures A Veterinary fee reductions: (I)Cost-based fees for veterinary medicines with a general fee reduction only, i.e. all fees reduced by 50% (II)Cost-based fees for veterinary medicines with a 50% general fee reduction and specific incentives for certain categories (III)Cost-based fees for veterinary medicines with specific incentives for certain categories (IV)Same as (iii) but with larger incentives. B Applies a country coefficient to NCA remuneration. C Applies incentives to cost-based fees before remuneration to NCAs. C1 Based on C. Applies specific incentives for veterinary medicines (limited markets and some immunological products), combined with a 25% reduction of the veterinary annual fee.

1.9.What is the baseline from which options are assessed? (The do-minimum scenario) The baseline (do-minimum scenario) is the reference scenario, against which the other options and horizontal measures are tested. It consists of the current fee system, which remains unchanged, while taking into account the newly introduced provisions for the veterinary sector (to the extent possible without legal change) and the Regulation on a reinforced role for EMA (i.e. an increased cost of EMA for Darwin EU). As a result, in the baseline scenario: ·The structure of the fee system is unchanged: granular fees charged per procedure and annual fees for maintenance of authorisation and for pharmacovigilance. NCA remuneration non cost-based, in general 50% of the fee. ·Relevant fee incentives are applied in line with existing legislation and rules. ·The veterinary sector is aligned with the new VMP Regulation rules to the extent possible without legislative change (resulting in the introduction of some new fees and the amendment of some other existing ones). The amounts for new and amended fees are benchmarked to existing fees (i.e. they are not cost-based). The current unitary fee amounts are applied to the fees of the remaining veterinary procedures unaffected by the VMP Regulation. The current remuneration system (50% of the fee) is applied to the new veterinary classification of procedures. ·The part of the fee system related to human medicine remains unchanged. The current unitary fee amounts and the current NCA remuneration system (50% of the fee) are applied. ·Aggregate fee revenue is expected to change due to the change of classification and frequency of procedures under the VMP regulation. ·The estimated cost of DARWIN EU appears in costs of EMA as of 2024, based on an estimation of the costs of the operational phase of DARWIN EU. This cost is covered neither by the EU budget nor by fees. 1.10.Description of the policy options 1.10.1.5.2.1. Option 1 The first option is alignment of the fee system with the provisions introduced by new VMP regulation, including recalculation of fees for the veterinary sector in line with the cost-based principle ( the effect of the Regulation on a reinforced role for EMA is taken into account) (Objective 1). The three veterinary horizontal measures can be applied to this option (see below section 5.2.5.1) The overall architecture of the system (in terms of disaggregation of procedural fees vs annual fees) remains unchanged. For human medicines, fees and NCA remuneration remain unchanged. In addition, the mechanism of remuneration to NCAs remains unchanged, maintaining a percentage basis. Hence, in this option: ·Cost-based procedural and annual fees are introduced for the veterinary sector. ·A pharmacovigilance annual fee for veterinary medicines is introduced to cover the cost of EMA pharmacovigilance activities in the veterinary sector. It is charged in the same way as the human pharmacovigilance annual fee in the current fee system, i.e. based on chargeable units for Nationally Authorised Products. ·Fee incentives (i.e. discounted fee rates) for SMEs are applied in line with existing SME legislation but general reductions and product-specific reductions are not applied to veterinary medicines (these are explored through the horizontal measures dealing with veterinary incentives). However, taking into account the Regulation on a reinforced role for EMA and the estimated cost of DARWIN EU as of 2024, an additional element had to be added to the design to make it viable, by introducing additional fee revenue for the Agency as of January 2024 to balance the budget. Therefore, whilst procedural fees and respective NCA remuneration for human medicines remain unchanged, as compared to the current system, the estimated impact of DARWIN EU on EMA’s costs is incorporated in the analysis from 2024 onwards and is covered by the human Pharmacovigilance annual fee (Pharmacovigilance annual fee) and human CAP annual fee in proportion 75% / 25%.

1.10.2.5.2.2. Option 2 The second option also aligns the system with the new VMP Regulation and reinforced role of EMA regulation (objective 1) but also aligns fees and remuneration amounts to the respective costs of EMA and NCAs for carrying out the work (Objective 2). All horizontal measures can be applied to this option (see below sections 5.2.5.1- 5.2.5.3) Whilst the overall architecture of the system remains unchanged as compared to baseline and option 1, option 2 introduces a cost-based fee system for all EMA activities, i.e. calculates cost-based fees and NCA remuneration amounts for both veterinary and human medicines. Furthermore, in this option: ·Cost-based fees are introduced for some activities for which fees are not currently charged (including but not limited to orphan and paediatric procedural activities). In addition, NCA cost-based remuneration is introduced per procedure for these activities. ·The CAP annual fee (levied on Centrally Authorised Products) is calculated based on all other costs (non-fee generating and horizontal) and taking into account all available revenue sources to balance the budget. This includes the cost of financing DARWIN EU, as of 2024. NCAs are also remunerated via the annual fee for eligible additional activities. ·Costs and associated remuneration for pharmacovigilance activities are covered by the procedural pharmacovigilance fees and the Pharmacovigilance annual fee (calculated based on chargeable units for Nationally Authorised Products), for medicines for both human and veterinary use. ·Relevant fee incentives continue to apply in line with existing legislation and rules. Fees for some activities continue therefore to be waived. However, full cost-based remuneration is paid to NCAs. 1.10.3.5.2.3. Option 3 The third option builds on option 2, not only introducing a cost-based fee system for human and veterinary activities, but also simplifying the fee system structure (objective 3) for both human and veterinary medicines. Horizontal measures can be applied to this option (see below sections 5.2.5.1 - 5.2.5.3) In this option the following simplifications are introduced: ·A reduced number of procedural fees are applied for post-authorisation non-pharmacovigilance activities for human and veterinary medicines. Procedural fees are levied for pre-authorisation activities (human and veterinary), inspections and only some major post-authorisation activities (e.g. referrals). Due to technical complexities linked to the variety of products included in pharmacovigilance procedures and activities, pharmacovigilance procedures continue to attract procedural fees. ·The CAP annual fee covers a broader set of costs as compared to the current system including those non-pharmacovigilance post-authorisation procedures that would no longer levy a procedural fee. Furthermore, it includes the cost of financing DARWIN EU, as of 2024. ·NCA remuneration for those post-authorisation procedures that are charged under the CAP annual fee is no longer per-procedure and is included in the annual remuneration paid to NCAs via the CAP annual fee. ·The Pharmacovigilance annual fee cover costs of EMA horizontal pharmacovigilance activities in both the human and veterinary sectors. In this option procedure-based fees are presented for pharmacovigilance procedures. 1.10.4.5.2.4. Option 3 ‘light’ This option implements a partial simplification of the fee system structure (i.e. a reduced version of Option 3). This responds to feedback received to the inception impact assessment to have an option with a more modest level of simplification, as compared to Option 3. A more limited set of activities are covered by annual fees (mainly minor variations and renewals of authorisations) while procedural fees are maintained for a larger number of activities (mainly major variations). This option is referred to as Option 3 ‘light’ in the remainder of the Staff Working Document. All horizontal measures can be applied to this option (see below sections 5.2.5.1 - 5.2.5.3).

1.10.5.5.2.5. Horizontal measures 1.10.5.1. A, B, C, C1 - Veterinary medicines Three horizontal measures have been considered for the fees applied to veterinary medicines. These introduce general fee reductions and/or incentives for veterinary medicines only. Each can be applied in combination with option 1, 2, 3 or 3 ‘light’. ·Horizontal measure A introduces a 50% general fee reduction applied to all (cost-based) fees for veterinary medicines. No additional fee incentives are applied. ·Horizontal measure B introduces a 50% general fee reduction applied to all (cost-based) fees for veterinary medicines and further specific incentives. This horizontal measure is the same as Horizontal measure A, but it also includes in addition specific fee incentives that are applied for veterinary products for limited markets and some immunological products. ·Horizontal measure C introduces only specific incentives that are applied for veterinary products for limited markets and some immunological products. No general reduction is applied to veterinary medicines cost-based fees. ·Horizontal measure C1 is based on sub option C. It introduces specific incentives that are applied for veterinary products for limited markets and some immunological products, combined with a 25% reduction of the cost-based annual fee for centrally authorised veterinary products. No general reduction is applied to veterinary medicines cost-based fees. 1.10.5.2. D - Country coefficient applied to NCA remuneration This horizontal measure applies a country coefficient to NCA remuneration. Application of country coefficients would result in an adjustment to remuneration that is linked to costs in each Member State. This horizontal measure could apply to Option 2, 3 or 3 ‘light’. 1.10.5.3.E - Sharing the cost of fee incentives between EMA and NCAs In the main options, remuneration is to be calculated fully cost-based, even when fee incentives apply. This horizontal measure applies incentives to cost-based fees before remuneration to NCAs, which means that the NCA remuneration is reduced in proportion to the fee reduction (this mechanism applies currently for pharmacovigilance fees and remuneration under Regulation 658/2014). Fee incentives are also applied to NCA remuneration so that the cost of incentives is shared in proportion to the incentive rates between EMA and NCAs. This horizontal measure could apply to Options 2, 3 or 3 ‘light’. 1.11.Options discarded at an early stage The following options were discarded early in the process as their impacts were largely undesirable and there was little, if any, support for them among stakeholders. ·Implementation of a fee system in which fees would be paid to the Commission, not EMA as is currently the case. In this scenario, EMA would be fully funded by the EU budget contribution and it is the Commission that would reimburse the NCAs. This was discarded as it is out of scope of the fee legislation: it is the EMA Founding Regulation that lays down the revenue sources available to EMA, i.e. fees charged by EMA itself and the EU budget contribution. ·Implementation of a flat fee system. This would mean for example that all post-authorisation procedures, including for pharmacovigilance, would no longer attract a fee and the respective cost would be included in the calculation of the annual fee. Whilst the evaluation indicated that such a design would be considered simpler, it also found it would be much less fair, e.g., payers of a flat fee would pay for procedures that do not concern their products. Therefore the option was discarded as it was considered that it would lead to less fairness and proportionality. Instead, option 3 was introduced and, following feedback from the inception impact assessment, a ‘light’ version was introduced. As presented in Section 5.1, the baseline (“do minimum scenario”) consists of the current fee system, with unchanged fees structure and amounts through legislative action. The only changes are the introduction of fees and remuneration for most of the new provisions of the veterinary sector, to the extent possible without a legislative change. The output of the financial modelling applied to the baseline shows a significant negative balance (see table 3 and 6). This is because, whilst new provisions stemming from the new VMP Regulation can be partly addressed through non-legal changes with the introduction of new procedural fees and remunerations, costs which can only be covered by annual fees (e.g.: DARWIN EU, Vet Pharmacovigilance annual fee) would remain uncovered as it is only possible to change annual fees by amending the legislation. Furthermore, the targeted introduction of fees and remuneration for new procedures would not allow to reconsider the costs of the sector in a holistic way taking due account of changes in the frequencies of activities and in the workload involved. Overall, under the baseline, the Agency would not be able to balance its budget and the operation of its network would become unsustainable. Therefore the baseline is not considered as a possible option.

Finally, elements such as the scope of activities for which remuneration from EMA can be paid to NCAs and the scope and level of existing fees incentives were also considered out of scope, since this is provided for in EMA’s founding regulation (the former) and in sectorial legislation (the latter). Given the nature and scope of the policy choices concerned, the impacts identified in the screening are purely of an economic nature. No significant social, environmental or fundamental rights impacts have been identified due to the nature and scope of this initiative. Table 2 lists the categories for which impacts are foreseen, distinguishing between the ones where more significant impacts are expected () and those where some impact is at least possible (). Economic Impacts Significance of impact Public authorities and budgets  Administrative burdens on business  Position of SMEs  Innovation and research  Functioning of the internal market competition  Table 2 Categories for which impacts are foreseen The impacts of the options were assessed based on the analysis of the outputs of the financial model delivered by an external study as well on the feedback received from the targeted stakeholder consultations, which were carried out through an online survey and interviews. Further details on the stakeholder consultations can be found in the synopsis report, Annex 2. 1.12.Public authorities and budgets (including governance and good administration) Under this heading, the impacts of the different options on the various public bodies involved with EMA’s activities have been assessed. These include not only EMA, but also the different NCAs which provide the bulk of the scientific assessment work that is core to EMA’s function as the agency for medicines assessment and surveillance of the EU for centralised products. The basic question that arises, is whether the different levels of fees that would be set under the different options are sufficient to enable both EMA and the NCAs to continue to fund their centralised activities in the future. This includes both setting fees at a rate that is sufficient to cover the real and relevant costs incurred, and ensuring that the resulting revenues are fairly distributed between the different actors. Tables presented below correspond to the calculations presented at the consultation stage, as presented in Annex 6 2024 Do minimum Option1 Option 2 Option 3 Option 3 ‘light’ (baseline) EMA income (€'000) Total industry procedural fees 225,236 230,466 183,513 144,976 164,037 Total industry annual fees 137,174 171,634 195,683 234,220 215,159 Total industry fees 362,410 402,100 379,196 379,196 379,196 Total EU budget contribution 34,000 34,000 34,000 34,000 34,000 Total EMA income 396,410 436,100 413,196 413,196 413,196 EMA expenditure (€'000) Total expenditure on human and veterinary procedures 114,269 114,527 116,080 116,080 116,080 Total expenditure on other activities 162,141 162,141 162,141 162,141 162,141 Total remuneration to NCAs (*) 160,014 162,647 134,975 134,975 134,975 Tot EMA expenditure 436,424 439,315 413,196 413,196 413,196 Variance (€'000) -40,013 -3,215 0 0 0 Table 3 The financial model supporting this impact assessment was designed to respect the principle of a balanced EMA budget and it was tuned around the central year of the current MFF, 2024. As a result, as shown in Table 3 above, the majority of the options, except option 1, calibrate the income from industry fees so that once combined with the EU budget contribution, they match the projected expenditures of the specific year. The ‘do-minimum’ baseline scenario shows a significant negative balance, which is why it is discarded, demonstrating the need for legislative action to adapt the current system to newly introduced requirements and activities for the Agency and the network, which would remain otherwise uncovered (see Section 5.1.1). The total NCA remuneration appears as an expenditure of the EMA budget. Moving to a cost-based system, by definition the remuneration amounts are calculated so to match the modelled costs for the identified eligible procedural and horizontal activities. Table 4 breaks down the distribution of remuneration for procedural and horizontal activities under the different options, with variations depending on the different options designs. 2024 Do minimum (baseline) Option 1 Option 2 Option 3 Option 3 ‘light’ €'000 Total remuneration to NCAs (*) Remuneration from procedural activities 120,620 123,032 117,808 102,657 114,008 Remuneration from annual fees 39,394 39,615 17,167 32,318 20,968 Total NCA remuneration 160,014 162,647 134,975 134,975 134,975 Table 4 Whilst the model was tuned to correctly balance the budget of 2024, minor variances can be observed between the projected income and expenditures across the years. As shown in Table 5, even in presence of variances the balance is always positive for the majority of the options (varying from €2.1 million to €8.1 million in surplus), with the exception of Option 1, for the reasons already explained above. For Option 1 a negative balance of between €1.4 million and €3.2 million would be experienced for the years from 2024 to 2026. Budget balancing p/year 2022 2023 2024 2025 2026 €'000 Do-minimum -14,958 -17,358 -40,013 -41,475 -42,666 Option 1 3,449 2,127 -3,215 -2,507 -1,437 Option 2 5,255 4,851 0 2,779 5,544 Option 3 4,218 8,142 0 2,707 5,711 Option 3 ‘light’ 4,506 4,464 0 3,241 6,529 Table 5

EMA responded positively to options 2, 3 and 3 ‘light’ in terms of the ability of balancing the agency budget, whilst option 1 would cause a significant shortfall given the level of EU budget contribution decided under the current MFF. EMA remarked that, whilst under all three of these options the agency would be able to balance its budget, the decrease in remuneration for NCAs could undermine the ability of the NCAs to contribute to the centralised system and ultimately put at risk the stability of the network. From the NCAs side, the general opinion with the calculations presented for the consultation was that options 2, 3 and 3 ‘light’ would worsen the current situation, as they would receive even less remuneration than under the ‘do-minimum’ baseline. Over half of NCAs and one ministry of health responding to the targeted survey indicated that option 1 would have no impact vis-a-vis the ‘do minimum’ baseline on their ability to undertake EMA activities, whilst implementation of options 2 and 3 would have a negative impact on their ability to undertake such activities. All five NCAs dealing only with veterinary medicines believed that option 1 could bring positive impacts in comparison to the current framework, whilst they were opposed to option 2 and 3 (NB their responses seemed to focus only on certain aspects, and not the fee system as a whole). The HMA (Heads of Medicines Agencies in the Member States) stated that there are already some difficulties in meeting demand for rapporteurs and co-rapporteurs to carry out assessment activities and any option that reduced remuneration of NCAs would worsen this difficulty. Comments were also made that a strict approach to costs does not reflect the current situation and need for resources to cope with the Covid-19 crisis as well as the ever increasing workload and complexity of the products that regulators have to deal with. However, no further data usable by the study model was provided. In addition, the availability of resources in the national agencies has likely experienced an external shock, possibly due to the increased frequency and accelerated pace of assessment procedures for products related to the pandemic. A link between this possible structural problem and EMA remuneration has not been demonstrated. The different parties consulted, including NCAs, did not express firm positions on the design of the different fee structures proposed under the various options. The consultation process above all revealed a broad consensus that the cost of additional NCA activities eligible for remuneration by EMA (i.e. in line with NCAs’ role under the EMA founding regulation), and therefore included in the annual fee calculation, remained underestimated by the interim fee grids presented for consultation. The annual fee amounts and eligible costs for NCA remuneration which are part of the cost base of that fee were therefore recalculated (Annex 7). The approach followed to identify additional NCA activities eligible for remuneration by EMA and estimate their amounts is described in Annex 4 addendum 2.. Table 7 in section 6.1 presents the cost of the additional activities as estimated post-consultation The output of the calculations of option 2, the annual remuneration to NCAs, are equal to the amount of eligible additional activities, since procedural fees are cost based and no procedural cost is included under the annual fee in that option. Options 2, 3 and 3 ‘light’ adhere to the cost-based principle and, therefore, they all cover the same estimated costs for EMA and for NCAs. Table 6 below shows for the reference year 2024 the effect of the resulting recalculation on the remuneration provided to NCAs and its effect on the overall balancing of the EMA budget. The overall output between the various options remains largely unvaried, with Do-minimum showing a considerable negative balances whilst Option 2, 3 and 3 ‘light’ match exactly the projected expenditures for the given year, with the only difference of Option 1 showing this time a slightly positive balance. Comparing Table 4 and Table 7, as a result of the recalculation, remuneration from annual fees has more than doubled in Option 2, 3 and 3 ‘light’, reaching overall annual amounts ranging between €63 and 74 million. The recalculated remuneration results in a proportional increase in total recalculated revenue from cost-based fees. Tables presented below correspond to the calculations post consultation 2024 Do minimum (baseline) Option 1 Option 2 Option 3 Option 3 ‘light’ EMA income (€'000) Total industry procedural fees 235,918 238,246 185,276 148,912 165,927 Total industry annual fees 141,690 173,683 223,751 260,116 243,101 Total industry fees 377,608 411,929 409,027 409,027 409,027 Total EU budget contribution 34,000 34,000 34,000 34,000 34,000 Total EMA income 411,608 445,929 443,027 443,027 443,027 EMA expenditure (€'000) Total expenditure on human and veterinary procedures 113,436 113,436 113,218 113,218 113,218 Total expenditure on other activities 162,141 162,141 162,141 162,141 162,141 Total remuneration to NCAs (*) 167,669 167,669 167,669 167,669 167,669 Tot EMA expenditure 443,246 443,246 443,027 443,027 443,027 Variance (€'000) -31,637 2,684 0 0 0 Table 6 The two main factors behind the negative financial balance of the ‘do minimum’ baseline scenario presented in Table 6 above are the introduction of the VMP Regulation, which accounts for roughly 50% of the €31.6million deficit, and the introduction of DARWIN EU, which accounts for the other 50%. The shortfall linked to the VMP Regulation is mainly due to new pharmacovigilance activities introduced by this Regulation which cannot be covered by new annual fees under the current system. The second factor, i.e. the cost of the operational phase of DARWIN EU [16 € million as per estimated costs] would need to be financed through annual fees which cannot be introduced under the current system. These elements challenge the viability of the ‘do-minimum’ baseline scenario. 2024 Do minimum Option 1 Option 2 Option 3 Option 3 ‘light’ €'000 Total remuneration to NCAs (*) Remuneration from procedural activities 126,562 128,271 108,394 92,864 104,215 Remuneration from annual fees 41,107 39,398 59,274 74,805 63,454 Tot NCA remuneration 167,669 167,669 167,669 167,669 167,669 Table 7 Also the effect on the balance of the EMA budget over the study years has not changed following the recalculation, with a positive balance for majority of the options (varying from €2.3 million to €8.5 million in excess) this time including also Option 1. Budget balancing p/year 2022 2023 2024 2025 2026 €'000 Do-min -7,363 -9,364 -31,637 -32,681 -33,401 Option 1 8,539 7,687 2,684 3,729 5,113 Option 2 5,402 4,949 0 2,348 4,836 Option 3 4,353 8,233 0 2,649 5,322 Option 3 ‘light’ 4,690 4,576 0 2,759 5,756 Table 8 In the analysis that follows, the level of performance of the options is assessed using indicators which are graded as Low/Medium/High, where higher means better. It has to be recalled that all options but option 1 are designed to cover overall the estimated costs. The assessment is based on indicators that may be either qualitative (e.g. whether a balance between a simple fee system and a cost-based system is achieved) or quantitative (e.g. whether aggregate costs are covered, whether individual fee and remuneration levels are aligned with respective cost assessment) elements. Performance levels are then assigned based on a comparison between the options, as far as such comparison is possible. For example options 2, 3 and 3 ‘light’ are all deliberately designed to cover the aggregate costs, therefore the objective is considered fully achieved by all, and their performance is graded in each case as High. Option 1 does not achieve the objective (a deficit is calculated), its performance is therefore ranked as Low. When the objective is considered to be achieved only to a certain extent by a given option, – neither complete failure, nor complete or sufficient success, the performance of the option in question is assessed as “Medium”.

Overall, all options 2, 3 and 3 ‘light’ being designed to cover all costs, they are assessed at the maximum (High) on this indicator, while option 1 is simply not cost-based, and so scores the lowest possible (Low). Option 1 Option 2 Option 3 Option 3 ‘light’ Indicator 1 : fee system covers relative aggregate costs Low High High High 1.12.1.6.1.1. Alignment of fees with underlying costs Cost-reflectivity of fees and remuneration reflects the will of the co-legislator expressed in the legal texts. Moving to a cost-based system, by design the options align the level of fees and the remuneration amounts with the underlying costs. Tables 6, 7, 8 in the previous sections already showed how overall income from fees allows, when combined with the EU budget contribution, to cover total EMA expenditure, including NCA remuneration. On a more granular level, cost-reflectivity means better alignment of the individual fee and remuneration levels to their respective cost base. Option 2 is scored high on the indicator of cost-reflectivity, given that by design this option sets cost-based fees to a very detailed level of granularity (as per current system). Option 1, on the other hand, is scored the lowest because only veterinary medicine fees/remuneration are cost-based in that option. Option 3 ‘light’ has slightly less granular cost-reflectivity than Option 2 but because only some minor post-authorisation activities are included in the flat annual fee, the performance is overall the same. Option 3 is considerably less granular than Option 3 ‘light’, as in this case the vast majority of post-authorisation activities are included in the flat annual fee. Therefore, Option 3 is scored Medium on the cost-reflectivity indicator. Option 1 Option 2 Option 3 Option 3 ‘light’ Indicator 2: Alignment of fees with costs of individual activities Low High Medium High Effect of the horizontal measures When the horizontal measures for different combinations of general reductions and specific incentives for veterinary medicines are considered, as the magnitude of the reductions/incentives increases, there is a decrease in the cost-based approach of the resulting net fees paid. With fees being set at the same level regardless of the NCA in charge of the assessments, use of country coefficients would have no effect on fees paid by payers, not affecting the cost-based approach from their perspective. On the other hand, they would have an effect on the balance of the EMA budget as, whilst they would bring NCAs remunerations closer to the underlying costs, it would cause variations in EMA income according to which NCAs would take on the assessment activities. Similarly to the application of a country coefficient, the distribution of the loss of revenue from the application of fee incentives between EMA and NCAs (or incurred, as now, by the EMA budget only, with the exception of fees for pharmacovigilance) would not affect the (net-of-incentives) fees paid by payers, and hence does not impact the cost base of the fees. Nonetheless, if NCAs were required to share the cost of incentives this would reduce NCAs’ remuneration below the level of the costs the NCAs incur to undertake EMA activities. There is no mechanism for making good that NCA financial shortfall within the EMA fees system, though it could potentially be cross-subsidised from the national budget. By legislation, EMA has recourse to an EU budget contribution, set by the European Parliament and the Council (‘the budgetary authority’) based on an evaluation of needs and taking account of the level of fees set. 1.12.2.6.1.2. Alignment of NCAs remuneration with costs incurred to undertake EMA activities As was demonstrated in the evaluation of the EMA fees and remuneration system, the current fee and remuneration system leaves many differences between the costs incurred by NCAs when undertaking work on the individual procedures and the remuneration they receive for it from EMA. On the aggregate level of the system, NCA procedural costs are fully covered, while the declared non-analysed cost of additional activities was covered at ca. €27.5 million which required further analysis of whether and to what extent such activities are compatible with a remuneration from EMA. These differences in procedural remuneration are positive in some cases, negative in others, when analysed type of procedure per type of procedure. Moving to cost-based fees and remuneration should reduce or remove those differences, by design. Option 1 matches NCA costs and remuneration very poorly and is given a low level of performance; Option 2 matches costs and remuneration very closely and is therefore scored ‘high’; Options 3 ‘light’ and 3 receive different scores (3 ‘light’ performs better than 3), reflecting the fact that the loss of granularity relative to Option 2 is significant in Option 3 and the consequent scope for overall costs and remuneration for any individual NCA in any year to differ either negatively or positively is higher in Option 3 then in Option 3 ‘light’, while the difference generated by 3 ‘light’ is not considered significant enough to trigger a different performance level than Option 2. NCAs who considered that option 3 negatively impacts financial predictability for their organisations (15 NCAs quoted below in the indicator on predictability) cited the potential risk of increased workload (that is of procedures included under the annual fee) not being appropriately remunerated, thereby having negative consequences. It follows also from this argument that option 3 ‘light’ scores better in that respect as compared to option 3. Option 1 Option 2 Option 3 Option 3 ‘light’ Indicator 3: Alignment of NCA remuneration with NCA costs for EMA activities Low High Medium High

Effect of the horizontal measures If the cost of the veterinary incentives (general fee reduction / general fee reduction and specific incentives / specific incentives only) is not shared with NCAs, there will be no effect on the gap between NCA costs and NCA remuneration for EMA activities. Sharing the cost of incentives with NCAs would reduce NCA remuneration, for those activities where incentives apply. This horizontal measure consequently performs less well on this indicator than if the cost of incentives is not shared. The application of country coefficients would, by design, bring NCA costs and remuneration closer together. However, country coefficients would add significant administrative burden and the effect of such measure is considered outweighed by the methodological approach to calculate NCA costs based on a weighted average. 1.12.3.6.1.3. Fee system capacity to adjust to cost changes The capacity of the fee system to adjust to cost changes is linked to how fees and remuneration amounts can be adjusted (i.e. which procedure is used to introduce the adjustments). The current EMA fee legislation permits updating of fees in line with general inflation via delegated act. Beyond inflation, the principle is that fee amounts can only be adjusted via full ordinary legislative procedure (co-decision of the European Parliament and the Council). Remuneration amounts are currently established by the EMA management board in relation to fees under regulation 297/95 and by the co-legislator in relation to fees under regulation 685/2014. In line with the approach followed in the most recent update of the EMA fee legislation, i.e. regulation 658/2014, both fee amounts and fee-related remuneration amounts will be established in the revised legislation proposed here. Updating of fees and remuneration based on inflation is maintained as a horizontal feature of the system in all options and independent of any horizontal measures applied. The contemplated mechanism is a delegation of powers to the Commission (delegated acts) to adjust the amounts, based on the outputs of a monitoring system that will be introduced by the proposed legislation. Further, a monitoring system would be needed whichever policy option was implemented. Cost changes can be more precisely monitored in a more granular, thus less simple, system than in a system which relies to a greater extent on annual fees, but the cost and difficulty of monitoring would not vary significantly by option. However, considering that major procedures attract a separate fee under option 3 ‘light’ and assuming that this increases the capacity of the system to adjust to significant changes in the costs of these specific procedures compared to Option 3 (while also being simpler than the structure retained under options 1 and 2) option 3 ‘light’ performs Medium, i.e. higher than Option 3 (Low) and lower than options 1 and 2 (High). On this reasoning, the performance of Option 1 is assessed as on par with that of Option 2, because this indicator is indifferent to the fact that the principle of non-cost-based fees is maintained under Option 1 for human fees, focusing instead exclusively on the effect of the fee structure (which is the same in these two options) on future adjustments. Option 1 Option 2 Option 3 Option 3 ‘light’ Indicator 4: Capacity of fee system to adjust to cost changes High High Low Medium Effect of horizontal measures The capacity of the fee system to adjust to cost changes is independent of how the individual fees are initially calculated, the incentives applied to the fees whether country coefficients are used to determine NCA remuneration, and whether the cost of incentives is shared with NCAs. 1.12.4.6.1.4. Balance between a simple fee system and a cost-based system This indicator is based on the ability of the option to achieve a balanced approach between two contradictory objectives, i.e. a simpler fee system, and a fee system that is better aligned to underlying costs. The first objective requires fewer fee levels (the extreme scenario being one flat fee and no procedural fees), while the latter implies maximum granularity, i.e. calculating as many fee and remuneration levels as there are procedures and levels of complexity (the extreme scenario being charging fees and paying remuneration based on individual invoicing for each individual procedure). Feedback received, in particular from NCAs and fee payers, points to the need to achieve a balance between these objectives, as respondents seem to lean towards more or less granularity depending on their position and vision, without an indication that one should be given more weight than the other. For example, fifteen NCAs considered Option 3 would negatively impact financial predictability, because it is not granular enough, and therefore not sufficiently cost-based, while eleven and seven NCAs respectively considered the impact of Option 3 to be positive or remain the same, logically leaning more towards a simpler, less granular fee system. This indicates that options should also be assessed against an indicator of achieving a system that is balanced in that respect. The maximum performance level is attributed to 3 ‘light’ as, compared to other options, it achieves balance by bringing some level of simplification through including some procedures in the scope of the annual fee, while catering for concerns expressed that potential increased workload for some procedures could not be captured, by leaving for example major variations outside the scope of the annual fee, as compared to option 3. Applying the same reasoning, option 3 performs less well (Medium) than 3 ‘light’ (High) and option 2 scores less (Low) than option 3 (Medium) because, although it is more granular and, therefore, more reflective of the cost-based approach, it does not offer any simplification and, therefore, it does not introduce a balanced approach between a simplified system and a cost-based system, which is tracked by this indicator. Option 1 has the same score as option 2 (Low), as they both have the same fee system structure. Option 1 Option 2 Option 3 Option 3 ‘light’ Indicator 5: Balance between simplification and granular cost-based approach Low Low Medium High 1.12.5.6.1.5. Fee system capacity to adjust to ensure financing of incentives Under the current fees and remuneration system, the cost of incentives is, in the first instance, borne by the EMA budget (with the notable exception of incentivised fees for pharmacovigilance). The EU budget contribution amounts, pre-determined in the Multi Annual Financial Framework of the Union, provides a possible mechanis