European pharma: where next?

In 2005, the pharmaceutical industry in Europe invested over €21 billion in R&D, which accounts for 18 percent of the whole EU 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 pain and suffering.

Huge as industry’s R&D investment is, however, it is by no means a guaranteed path to success. Due to the growing understanding of the scientific basis of diseases, the complexity of regulatory requirements and “administrative” delays, it now takes an average of 12 to 13 years to turn a new promising compound into an approved medicinal product. The average medicine has then about eight to10 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 range of €900 million to develop, that half the medicines that reach the final stages of clinical trials fall at that hurdle and that 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-based pharmaceutical companies is to remain competitive and to continue to innovate.

Europe still lacking

Europe has been losing ground over the last decade as a research base, with 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. Key benchmarking indicators show that in 1990, the global research-based pharmaceutical industry still invested roughly 50 percent more in Europe than in the US. But today the same industry is investing 40 percent more in the US compared to investments in 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.

Key features of the European pharmaceutical marketplace are that there is no market pricing for new medicines in most EU countries. In Europe’s cost-driven healthcare environment, payers do not reward value. Cost-containment policies focus at the beginning rather than at the end of the product life cycle like in the US. And evaluation of effectiveness is turned into a new hurdle. As a result, European patients have to wait for two to four years longer than US patients to get access to potentially life saving new medicines.

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

A new way forward

The way forward for Europe is to strengthen its science base and 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 reward innovation.

First, as part of its Research Framework Programme 7 (RFP7), the EU needs to rapidly implement the Innovative Medicines Initiative (IMI), which is a unique pan-European public and private sector collaboration for boosting biomedical research in Europe.

Second, we must improve stakeholders’ understanding of the value of innovation for patient and society and secure sustainable funding mechanisms for innovative drugs. EFPIA is putting forward concrete recommendations for an optimal balance between enhanced competitiveness and improved public health.

Third, European patients should have faster access to new innovative therapies. More than two years may elapse from the awarding of a marketing authorisation before a new medicine becomes available on some national markets because of delays in pricing and reimbursement decisions. The time needed for setting reimbursement prices at national level must be shortened, in line with the time limits set by the Transparency Directive.

In implementing new EU and national strategic agendas for health, which above all stimulate R&D in Europe and reward innovation, we are confident that the research-based pharmaceutical industry will be able to improve healthcare in Europe and bring new innovative medicines faster to European patients.

Brian Ager is Director General of the European Federation of Pharmaceutical Industries and Associations (EFPIA), the federation of the national pharmaceutical industry associations of European countries and companies undertaking research, development and manufacturing of medicinal products in Europe for human use.

Brian Ager: “European patients have to wait for 2-4 years longer than US patients to access potentially life saving medicines”