New Danish Law Requires Pharmaceutical Companies to Establish Safety Stocks and Report Stock Levels of Critical Medicines

Last year an amendment to the Danish Medicines Act introduced an obligation on companies placing critical medicines in the primary sector on the Danish market to establish and maintain a physical safety stock and start reporting stock levels by 1 January 2025. This new legislation has raised several concerns, including supply reliability and market impact.

According to Section 75(2) of the Danish Medicines Act, companies placing critical medicines for the primary sector on the Danish market must establish and maintain a physical safety stock in Denmark. This obligation does not apply to parallel importers and distributors.

The legislation is a response to recent cases of medicine supply disruptions and aims to ensure that patients are not adversely affected during short-term supply disruptions. It also provides the Danish Medicines Agency (DKMA) and other stakeholders with crucial time to implement measures to mitigate the consequences of longer-term supply disruptions.

The specific requirements of the stock obligation are outlined in Executive Order No 869/2024, while Executive Order No 870/2024 lists the critical medicines, categorised by use, formulation, and strength.

As of 20 December 2024, the list of critical medicines includes 552 medicines.

Companies must maintain stocks equivalent to six weeks of sales for each medicine at the package level. These volumes are set biannually on 1 January and 1 July, with any necessary increases implemented by the first day of the following quarter. For new medicines, the obligation starts six months after their market introduction in Denmark, based on sales during the first three months.

Safety stock packages must have a shelf life exceeding six weeks to ensure availability for dispensing or sale and treatment according to their Summary of Product Characteristics (SPC). The obligation begins when a medicine is listed on the Danish medicine price list (Medicinpriser) and continues until the marketing authorisation is deregistered. The safety stocks must be established no later than 1 January 2025.

The DKMA may grant full or partial exemptions from the stock obligation, considering the compliance burden relative to supply reliability. Exemptions may also allow stocks to be stored in another EU/EEA country instead of Denmark.

Companies may use the mandatory safety stocks to supply the Danish market for up to three months, provided they notify the DKMA and replenish the stocks within that period.

Additionally, the stock obligation is suspended if the company reports a supply failure, or if the DKMA approves the use of stocks to supply other countries experiencing a supply failure.

The DKMA received more than 60 applications for exemption from the stock obligation.

In addition to maintaining safety stocks, Section 75B of the Danish Medicines Act requires companies placing critical medicines for the primary sector on the Danish market to report their stock levels of these medicines digitally to the DKMA every other Monday. This data supplements information from medicine wholesalers, the regional procurement organisation (Amgros I/S), primary sector pharmacies, and public hospital pharmacies.

The new legislation on mandatory safety stocks and reporting has faced criticism from various stakeholders. Ida Sofie Jensen, Executive Director of the Danish Association of the Pharmaceutical Industry (LIF), has expressed disappointment with the process, noting that concerns from experts, suppliers, and the opposition have largely been ignored.

Chief among the concerns voiced by the industry is that the new act may create more problems than it solves. Manufacturers have voiced concerns that parallel importers and distributors have been given an unfair competitive advantage as they are exempt from the additional costs of maintaining mandatory stocks physically in Denmark. Overall increased costs and demand for additional medicines to build up stocks may lead to higher medicine prices and shortages, adversely affecting patients and the healthcare sector.

Although the stock obligation, as intended by the legislature, aims to minimise supply shortages of critical medicines for the benefit of patients and thereby protect human life and health, it remains debatable whether it is the right remedy, especially considering that mandatory stocks have been criticised for raising the costs of medicines more than addressing actual supply issues.

The new statutory requirements for mandatory safety stocks and the reporting of stock levels are, as a starting point, positive since the purpose is to strengthen the reliability of supply for critical primary sector medicines for patients. Overall, the introduction of national safety stock requirements is also consistent with the policy seen in other major EU/EEA member states aimed at tackling domestic shortage risk.

Bearing that in mind, there have been significant concerns about the potential negative consequences of these legislative changes for Denmark and the EU from a broader perspective. From a legal standpoint, it is worth noting the apparent lack of co-ordination and alignment with competing legislative initiatives pursued at the EU level, including the upcoming reform of the EU pharmaceutical legislation, which aims to achieve supply security across the EU. It will be interesting to see if a convergence will take form.