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Relight the EU fire

Europe must set up a regulatory and political environment, which, above all, stimulates research and development and rewards innovation, says Dr Franz Humer.

FireMedical progress underpinned by pharmaceutical innovation has played, and continues to play, a major role in increasing life expectancy, improving the quality of life and eradicating diseases which were previously life-threatening.

Through our intensive, lengthy, highly complex and dedicated research effort, new generations of therapies have been introduced that have revolutionised healthcare, making once life-threatening diseases uncommon, and allowing millions of people to be treated and lead better, or more normal, lives.

Major achievements have been made in the treatment of infectious diseases and childhood illnesses, some forms of cancer, nervous disorders, stomach ulcers, asthma, hypertension and diabetes, to name but a few. Consequently, whereas just surviving childhood was a challenge in 1900 and the average life expectancy in Europe was then only 55, a child born today can expect to live until almost 80.

Today, in our European laboratories, more than 100,000 industry scientists are researching new cures and better treatments for cancer, heart disease, HIV/AIDS, Alzheimer's, Parkinson's, arthritis, osteoporosis, cystic fibrosis and others.

A snapshot overview indicates that pharmaceutical and biotechnology companies are currently working on the research and development of more than 700 new medicines and vaccines in all therapeutic categories.

In 2003 alone, the pharmaceutical industry in Europe invested over Ä21bn in R&D, which accounts for 15 per cent of the EU's total business R&D expenditure. Through its massive R&D investment, the research-based industry represents our society's best hope to fight, defeat, and eventually eradicate a wide range of illnesses that are costing a fortune, not to mention causing pain and suffering.

Time is money
Huge as industry's R&D investment is however, it is by no means a guaranteed path to success. Due to the growing sophistication of products, the complexity of regulatory requirements, as well as administrative delays, it now takes an average of between 12 to 13 years to turn a promising new compound into an approved medicinal product.

The average medicine then has around eight to 10 years of effective patent protection left by the time it reaches the pharmacy shelves, before facing stiff generic competition. The result is that each new medicine now costs in the region of Ä900m to develop, half the medicines that reach the final stage of clinical trials fall at that hurdle, and only three out of 10 marketed medicines produce revenues that match, or exceed, average R&D costs.

Against this background, the main challenge for European pharmaceutical companies is to remain competitive, and to continue to innovate. There is no doubt that the research-based pharmaceutical industry remains one of the most innovative and successful high-tech industries in the European Union.

It is a key asset to the health and wealth of Europe, employing nearly 600,000 people and providing a significant positive contribution to the European trade surplus.

Yet, despite its contribution to Europe's health, society and economy, the reality is that the pharmaceutical industry in Europe faces the challenge of declining competitiveness, as compared to the United States.

One cause for special concern is that Europe has been losing ground over the last decade as a research base, seeing a steady transfer of its R&D to the US, where the environment is more attractive for R&D investment and more supportive of pharmaceutical innovation.


Focus on the US 
Key benchmarking indicators show that in 1990, the global research-based pharmaceutical industry still invested roughly 50 per cent more in Europe than in the US. Today, the same global industry invests 40 per cent more in the US, compared with Europe.

Even the major EU pharmaceutical companies have changed the distribution of their R&D spending to the benefit of other regions. These investments provide output benefits for the US which is now the world's leading inventor of new medicines. US companies are clearly dominating the industry's `champions league'.

These trends are not only causing concern in our own industry, they have also woken up Europe's political leaders. It is one of the top priorities of the new president of the EU Commission, JosÈ Manuel Barroso, to turn Europe into the most competitive and dynamic knowledge-based economy in the world.

At EU level, the widespread concern caused by the deterioration of the European pharmaceutical industry's competitiveness lead to the creation of the G10 High-Level Group on Innovation and Provision of Medicines.

This group has identified key measures to improve the political and regulatory environment, particularly to address market distortion. The diagnosis is right, but key recommendations remain unimplemented.

Key features of the European pharma marketplace are that there is no market pricing for new medicines in most EU countries and that cost-containment policies focus at the beginning of the product life cycle, rather than at the end of the product life cycle, as in the US.

Today, European patients have to wait two to four years longer than US patients to get access to new therapies.

Furthermore, the existence of price differentials within Europe, due to different national pricing and reimbursement regulations, leads to significant parallel trade flows, which benefit neither social security systems nor patients. They deprive the industry of valuable resources to fund the research and development of new products.

Top priorities
The way forward for Europe is to improve the competitiveness of its research-based pharmaceutical industry by setting up a regulatory and political environment, which, above all, stimulates R&D and rewards innovation.

Firstly, Europe needs to strengthen its base for more innovation in this important industrial sector. The proposed European Technology Platform for innovative medicines could become an excellent institutional framework, as well as the motor for strengthening biomedical research in Europe.

Secondly, the European patient should have faster access to new medicines. Today, patients across Europe do not get speedy and equal access to innovative medicines, essentially because of delays in pricing and reimbursement decisions, which take place at national level.

Consequently, more than two years may elapse from the awarding of a marketing authorisation before new medicines become available on some national markets. This is clearly unacceptable.

Thirdly, new innovative medicines should be launched at competitive market prices at time of market approval irrespective of status of reimbursement negotiations.

Innovative medicines should be rewarded, instead of being the prime target of cost-containment policies. More price competition, particularly for non-reimbursed medicines, should lead to more competition in the marketplace.

In addition, encouraging R&D requires the maintenance of a high level of intellectual property protection, the setting up of an active industrial policy, and also a change of mindset.

Healthy spending 
Former EU Commissioner for Health, David Byrne, said recently: Europe needs a paradigm shift from seeing health expenditures as a cost to seeing effective health policies as an investment. Despite the fact that they generate substantial savings, keeping employees in good work and productive in the community, new medicines are too often perceived as a threat to healthcare systems, rather than an investment and a benefit.

With a strategy that, above all, stimulates R&D in Europe and rewards innovation, our industry will not only be able to improve healthcare in Europe and bring new innovative drugs faster to European patients, but it will also contribute to the `Lisbon objective' of economic growth, to more and better jobs, and, thus, guarantee high living standards for current and future generations of European citizens.

The Author
Dr Franz B Humer is president of the European Federation of Pharmaceutical Industries and Associations (EFPIA).

2nd September 2008


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