A university hospital hematology department develops a CAR-T cell therapy protocol for patients who have exhausted standard treatment options. Manufacturing occurs in the hospital's GMP facility. Administration happens under the treating physician's direct responsibility. Funding flows through the research budget. No marketing authorization exists. The hospital believes it operates within a regulatory exemption. Whether that belief survives scrutiny depends on factors the treating physicians may never have considered.
1. What Does the Hospital Exemption Permit?
Art. 28(2) Regulation (EC) No 1394/2007 on advanced therapy medicinal products, as implemented through Art. 3(7) Directive 2001/83/EC, permits Member States to authorize the use of ATMPs prepared on a non-routine basis according to specific quality standards and used within the same Member State in a hospital under the exclusive professional responsibility of a medical practitioner, in order to comply with an individual medical prescription for a custom-made product for an individual patient.1ATMP Regulation, Art. 28(2); Directive 2001/83/EC, Art. 3(7) (as amended). The dual legal basis is significant: Art. 3(7) is the operative provision that national laws typically transpose. The statutory language appears precise. It is not.
Art. 28(2) conditions the exemption on specific quality standards 'equivalent to those provided for at Community level'. This equivalence requirement creates uncertainty: does it require full GMP compliance, hospital pharmacy standards, or some intermediate level? The European Commission's 2017 ATMP GMP Guidelines provide detailed requirements for authorized ATMP manufacturing but do not clearly delineate what "equivalent" means for exempt hospital preparations.2European Commission, Guidelines on Good Manufacturing Practice specific to Advanced Therapy Medicinal Products (EudraLex Volume 4, Part IV, 22 November 2017). Member States have addressed this gap differently: some requiring GMP certification for exempt facilities, others accepting hospital pharmacy accreditation, and others leaving the determination to competent authority discretion.
The regulatory landscape for starting materials is also shifting. Regulation (EU) 2024/1938 on substances of human origin (SoHO), with most substantive provisions applicable from 7 August 2027, will impose new quality and safety requirements on tissue establishments, including those within hospitals that collect and process patient-derived cells for exempt ATMP manufacturing.3Regulation (EU) 2024/1938 on substances of human origin [2024] OJ L 2024/1938. The interaction between SoHO requirements and hospital-exempt ATMP manufacturing is examined in more detail in Insight 02. Whether hospital-exempt ATMP facilities will need to comply with SoHO requirements in addition to the 'equivalent quality standards' already required under Art. 28(2) remains an open question that adds prospective uncertainty to exempt operations already underway.
Each element of this formulation creates further interpretive questions. 'Non-routine basis' often lacks a harmonized quantitative definition across Member States. Does treating fifteen patients annually constitute routine? Fifty? One hundred? The answer varies by Member State and by the specific ATMP category. 'Same Member State' appears clear until a hospital network spans multiple jurisdictions or a patient travels for treatment. 'Exclusive professional responsibility' raises questions when multiple specialists contribute to treatment decisions, when external consultants advise on manufacturing protocols, or when the prescribing physician lacks expertise in cellular therapy production.
The exemption exists to enable innovation. Its boundaries exist to ensure that innovation does not escape regulatory oversight.
EU-level guidance from the European Medicines Agency's Committee for Advanced Therapies acknowledges these ambiguities without fully resolving them.4CAT, Reflection paper on classification of ATMPs (EMA/CAT/600280/2010 rev.1, 21 May 2015); CAT/CHMP, Guideline on investigational ATMPs in clinical trials (EMA/CAT/22473/2025, adopted by CHMP 20 January 2025, effective 1 July 2025). The CAT's classification guidance is particularly relevant: before determining whether the hospital exemption applies, institutions must establish that their product actually qualifies as an ATMP, a determination that itself requires regulatory analysis of the therapy's composition, mode of action, and clinical application.5Art. 17 ATMP Regulation (n 1) (CAT classification procedure). Classification as an ATMP triggers the Art. 28 exemption framework.
Member States have implemented Art. 28 differently. Germany, for example, requires authorization from the Paul-Ehrlich-Institut under § 4b(3) AMG; France mandates authorization from the Agence nationale de sécurité du médicament; Italy has applied the exemption only where no authorized equivalent exists.6§ 4b(3) AMG (Germany); Art. L. 4211-9-1 Code de la santé publique (France); Decreto legislativo 219/2006, Art. 3(1)(f-bis); Decreto del Ministero della Salute 16 gennaio 2015 (Italy, conditioning exemption on absence of therapeutic alternative). The relationship between hospital exemption and authorized alternatives creates regulatory tension: if an authorized CAR-T therapy exists for a patient's indication, does the hospital exemption remain available for a hospital-developed alternative? Some Member States condition exemption availability on the absence of an authorized equivalent, a position that increasingly constrains hospital innovation as more ATMPs receive marketing authorization. These national variations illustrate the broader pattern: an institution developing an ATMP must understand not only the EU framework but the specific national implementation in each jurisdiction where patients might receive treatment.
One obligation that hospital-exempt preparations do not escape is pharmacovigilance. Art. 28(2) conditions the exemption on traceability and pharmacovigilance requirements 'equivalent to those provided for at Community level'. In practice, this means institutions operating under the exemption must maintain adverse event reporting systems, patient follow-up protocols, and traceability records comparable to those required for fully authorized ATMPs. This obligation is frequently underappreciated, and it connects directly to the incremental-drift problem examined below. The moment an institution fails to maintain pharmacovigilance systems equivalent to those required for authorized products, the conditions underpinning the exemption may be compromised, regardless of whether the exemption was otherwise validly invoked.
2. When Does Exemption Require Authorization?
The transition from exemption to authorization requirement often occurs through incremental decisions rather than deliberate strategic choice. A hospital develops a therapy for a rare pediatric condition. Initial patients are treated within the institution. A pediatric oncology network expresses interest. The hospital agrees to manufacture the therapy for patients at partner institutions. Each expansion seems clinically appropriate. Collectively, they may transform what began as exempt hospital practice into unauthorized medicinal product distribution.
Manufacturing scale presents similar risks. The hospital exemption contemplates preparation 'on a non-routine basis'. If manufacturing processes become standardized, if batch records follow templates rather than patient-specific protocols, if quality control procedures mirror industrial GMP rather than hospital pharmacy standards, regulators may conclude that the activity no longer qualifies for exemption regardless of patient numbers.
The commercial dimension adds complexity. A hospital develops an ATMP protocol with significant intellectual property value. A pharmaceutical company offers to license the technology for industrial development. The license agreement contemplates continued hospital manufacturing during the transition period. If the hospital receives no payment for manufactured product (only license fees for the underlying technology) the exemption may survive intact. If the commercial arrangement effectively converts hospital manufacturing into contract manufacturing for the licensee, the exemption likely fails. The distinction is likely to turn on contractual structure and practical operation rather than stated intent, though published regulatory guidance on this specific boundary remains limited.
A parallel boundary, equally susceptible to incremental drift, separates hospital-exempt treatment from clinical research. When the hematology department in the opening scenario begins systematically tracking treatment responses across all patients, publishing outcomes data, and refining the protocol based on aggregate results, the activity starts to resemble a clinical trial. Under the EU Clinical Trials Regulation, a clinical study of a medicinal product becomes a 'clinical trial' requiring ethics committee approval and regulatory authorization where assignment to a therapeutic strategy departs from normal clinical practice, or additional diagnostic or monitoring procedures are applied beyond it. In Switzerland, the Humanforschungsgesetz (HFG) imposes similar requirements when human research extends beyond individual treatment decisions.7Regulation (EU) No 536/2014 on clinical trials on medicinal products for human use, Art. 2(2)(2), 4–14; Bundesgesetz über die Forschung am Menschen (Humanforschungsgesetz, HFG) vom 30. September 2011 (SR 810.30), Art. 2–3, 45–47. The distinction between clinical care and clinical research is not always clear, but the consequences of misclassification include both regulatory sanctions and the potential invalidation of data that the institution may later need for a marketing authorization application.
Consider the inverse scenario. A pharmaceutical company holds marketing authorization for a CAR-T therapy. A hospital believes it can manufacture a substantially similar therapy under the hospital exemption. The authorized manufacturer argues this undermines the incentive structure for ATMP development. Regulators face competing policy objectives: enabling hospital innovation versus protecting investment in authorized products.
3. How Does Swiss Law Differ?
Swiss law provides its own framework for hospital preparation of medicinal products, one that does not map neatly onto the EU structure. The Heilmittelgesetz permits pharmacies and hospitals to prepare medicinal products for individual patients without Swissmedic authorization, subject to cantonal supervision. Swiss law distinguishes between Formula magistralis (prescription-based preparation for individual patients under Art. 9(2)(a) HMG) and Formula hospitalis (hospital-specific preparations where no equivalent authorized product exists under Art. 9(2)(cbis) HMG).8Art. 9 Abs. 2 Bst. a (formula magistralis) und Bst. c^bis (formula hospitalis) HMG (SR 812.21).
For cell-based products, however, the critical interface question is whether these HMG exemptions survive contact with the Transplantationsgesetz. Art. 49 TxG equates transplant products (Transplantatprodukte) with medicinal products, thereby subjecting them to Swissmedic's authorization framework under the HMG. The associated ordinances (particularly the Transplantationsverordnung and the AMBV) impose process-authorization requirements that apply regardless of whether the product would otherwise qualify for an HMG pharmacy exemption.9Art. 49 Bundesgesetz über die Transplantation von Organen, Geweben und Zellen (Transplantationsgesetz) vom 8. Oktober 2004 (SR 810.21). Transplant products treated analogously to medicinal products; authorization derives from HMG and AMBV via Art. 49 TxG. If a university hospital prepares an autologous cell therapy under the formula magistralis exemption, the Transplantationsgesetz's process-authorization requirement may nevertheless apply, effectively neutralizing the HMG exemption for this product category. The result is that Swiss institutions cannot assume that hospital pharmacy exemptions available for conventional medicinal products extend to cell-based therapies without first resolving the TxG classification question for their specific product.
A Swiss academic medical center developing an ATMP must navigate this domestic framework while considering whether its activities might eventually require EU market access. If the institution wishes to treat patients from EU Member States, or to collaborate with EU institutions, the EU regulatory framework becomes relevant even for activities conducted entirely within Switzerland. The hospital exemption under Art. 28 ATMP Regulation is structured around preparation and use 'within the same Member State', a territorial limitation that does not accommodate products manufactured outside EU territory, regardless of where the patient is located.10Art. 28(2) ATMP Regulation (n 1): the exemption applies to ATMPs 'used within the same Member State in a hospital'. The provision presupposes Member State territory for both manufacture and administration.
The Mutual Recognition Agreement between Switzerland and the EU includes a sectoral annex covering GMP inspection and batch certification for pharmaceuticals.11Agreement between the European Community and the Swiss Confederation on mutual recognition in relation to conformity assessment [2002] OJ L114/369, Sectoral Annex on Good Manufacturing Practice (GMP) for Medicinal Products. However, ATMP manufacturers seeking to place products on the EU market still require EU manufacturing or import authorization under the applicable pharmaceutical legislation; the MRA facilitates inspection recognition but does not eliminate this requirement. Clinical data generated under Swiss regulatory supervision may require supplementary analysis for EU submission. These are not insurmountable obstacles, but they require planning that institutions focused on immediate patient care may defer until the regulatory pathway becomes urgent.
Swiss institutions face constraints beyond domestic regulatory frameworks. Technology license agreements, typically governed by foreign law, may impose limitations that Swiss regulatory exemptions cannot override. The regulatory and contractual dimensions interact in ways the following section examines.
4. How Does Intellectual Property Complicate the Exemption?
ATMP development frequently involves licensed intellectual property: vector technologies, cell processing methods, and genetic modification techniques. License agreements often contain territorial restrictions, field-of-use limitations, and sublicensing prohibitions. The hospital exemption operates within regulatory space; it does not override contractual obligations to technology licensors.
If a hospital licenses vector technology for research purposes and subsequently uses that technology in exempt hospital ATMP manufacturing, the licensor may claim breach of the research-only field limitation. If the license was negotiated with clinical application in mind, the hospital may have stronger footing, but the license terms may contemplate authorized products rather than exempt preparations, creating ambiguity about royalty obligations, reporting requirements, and termination triggers. The hospital's regulatory status becomes irrelevant to the contract dispute; what matters is the four corners of the license agreement and the licensor's appetite for enforcement.
Patent considerations add further complexity. An institution manufacturing an ATMP under hospital exemption may infringe patents held by companies manufacturing authorized versions of similar therapies. As a general principle, hospital exemption from regulatory authorization provides no exemption from patent infringement; the two legal regimes operate independently, though the specific exposure in any given case requires patent-specific analysis. In Switzerland, Art. 9(1)(b) PatG provides an experimental use exemption, but its application to clinical treatment, as opposed to pure research, is contested; using a patented technology to treat patients, even without marketing authorization, may fall outside the exemption's scope.12Art. 9 Abs. 1 Bst. b Bundesgesetz über die Erfindungspatente (Patentgesetz, PatG) vom 25. Juni 1954 (SR 232.14) (experimental use exemption); Art. 9 Abs. 1 Bst. c PatG (Bolar exemption, limited to regulatory submission activities). In the EU, the Bolar exemption (Art. 10(6) Directive 2001/83/EC) is limited to activities directed at obtaining regulatory authorization; it does not cover clinical treatment under hospital exemption. This gap is not an oversight but a structural feature of patent law: pharmaceutical regulation and patent law serve different objectives, and exemptions in one framework do not automatically create exemptions in the other.
The uncertainties compound across regulatory and commercial dimensions. At what patient volume does 'non-routine' preparation become routine manufacturing requiring authorization, and who makes that determination when the threshold is crossed? If manufacturing protocols are standardized across a hospital network, whether the exemption applies to each institution independently or to the network collectively may determine whether scale efficiencies create regulatory exposure. When technology license agreements permit 'clinical use', whether exempt hospital preparation constitutes clinical use within the contemplated scope depends on interpretations the drafters likely never considered. And if a patent holder for an authorized CAR-T therapy objects to hospital-exempt manufacturing of a similar product, the defenses available, and the cost to assert them, may exceed the institution's resources regardless of the underlying merits.
5. What Happens When the Exemption Becomes the Ceiling?
Institutions developing ATMPs under hospital exemption face a strategic choice that regulatory frameworks do not make for them. The exemption enables immediate clinical application without the time and cost of marketing authorization. It also creates a ceiling on geographic reach, manufacturing scale, and commercial potential. Moving beyond the exemption requires not merely regulatory submission but reconfiguration of manufacturing, quality systems, organizational structure, and often intellectual property arrangements.
The threshold questions require institution-specific analysis. An institution's regulatory defensibility depends not on the strength of its exemption claim at the outset, but on how that claim withstands accumulating changes in patient volume, manufacturing practice, and collaborative scope. Documentation choices made early shape the institution's ability to demonstrate that its activity remained within exempt territory throughout, yet many institutions treat exemption qualification as a one-time determination rather than an ongoing compliance obligation.
Contractual and regulatory exposures compound in ways that may not surface until an external event forces scrutiny. A technology license negotiated for research purposes may not contemplate hospital-exempt manufacturing, creating latent contractual risk that remains invisible until a licensor objects or an acquisition due diligence exposes the gap. Cross-jurisdictional collaboration introduces further uncertainty: EU-wide terminology masks national implementation differences that cannot be assumed away, and the regulatory framework in each relevant jurisdiction requires independent compatibility analysis.
The most consequential planning gap concerns the transition from exempt preparation to authorized manufacturing. Institutions that have not identified the triggers requiring that transition, or the timeline it demands, risk discovering that growth has created a regulatory crisis rather than a planned evolution. For institutions contemplating this path, EMA's PRIME scheme offers a concrete bridge: enhanced regulatory interaction and early dialogue specifically designed for developers of products addressing unmet medical needs, including academic institutions whose ATMPs have demonstrated initial clinical promise under hospital exemption.13EMA, PRIME: Priority Medicines (EMA/7872/2021, last updated 10 October 2024). PRIME designation provides appointment of a rapporteur, early dialogue, and accelerated assessment. Academic sponsors may benefit from fee reductions. The scheme does not eliminate the regulatory gap between exemption and authorization, but it reduces the informational asymmetry that makes the transition appear more daunting than it needs to be. And where the therapy proves successful, whether the intellectual property structure permits commercialization without renegotiation of foundational agreements shapes the value the institution can actually realize.
These questions resist standardized answers. Each institution's regulatory position depends on the specific therapy, the patient population, the manufacturing infrastructure, and the network of contractual obligations that may constrain future options. The European Commission's revision of the general pharmaceutical legislation (proposed in April 2023 and under co-legislative procedure as of October 2025, including revised hospital exemption provisions) may eventually provide greater clarity, but institutions cannot defer planning pending regulatory reform.14European Commission, Proposal for a Directive on the Union code relating to medicinal products for human use COM(2023) 192 final (26 April 2023). Revised hospital exemption provisions in Art. 2 (substantive requirements at Art. 2(3)–(6)); trilogue ongoing as of October 2025. The hospital exemption creates regulatory space for early-stage development; it does not provide a permanent operational framework for mature therapies.