Mind the gap?

Europe vs. US (and them)

The Transatlantic Innovation Gap has been much talked about and analysed over the last three years. According to the Global Innovation Scoreboard (GIS) 2006, the average innovation performance of the EU25 is growing faster than that of three non-European leading countries, Israel, Japan and the US. However, the EU25 still faces a large gap in innovation performance with these countries – or does it?

Steve Arlington, a partner at PricewaterhouseCoopers and global leader of the Pharma R&D practice, believes that all depends on your perspective. But, he warns, if we do not have an innovation gap now, we are going to get one.

NGP. How has Europe been addressing the transatlantic innovation gap over the last couple of years?

SA. You would have to assume I agreed that there was an innovation gap. And I don’t. If you look at where start molecules and innovations have come from over the last 25 years, you will find a lot have come out of Europe. However, I do see a gap between the European and the US pharmaceutical companies concerning the ownership and volume of new medicines. The US pharmaceutical companies looked as if they had a better run than the European ones, at least until the last couple of years. Interestingly, however, data from Lehman Brothers shows that European companies, in terms of launches, for example, have either caught up or overtaken the US. So I think the gap depends on which way you look at it.

I agree that there is a gap from another perspective, which is the way we teach science, deliver science and bring through science graduates, certainly in the UK. In comparison to the US, we are getting fewer science graduates and we seem to be offering them fewer career opportunities. They can make a lot more money and have potentially bigger careers by going to the US. If we haven’t got an innovation gap now, we are going to get one.

NGP. What will have to be done to the European innovation culture so that it does not come to an innovation gap?

SA. We have to do more of what is already going on. This is ensuring in each European country that the infrastructure, which provides us bright new young scientists right from their schooling and throughout, is supported and working a lot better than it is at the moment. We need to bring more scientists through and keep those good scientists, which we are losing to the US.

Another one of my concerns for Europe is that, with the new consolidation of the large pharmaceutical and the mid-size pharmaceutical companies, the opportunities for employment are becoming less. Less companies in less countries across Europe with a consolidation of the industry means that the number of youngsters who are looking at the pharmaceutical industry as a career have less opportunities. There is nothing anybody can do about this in a short period of time because the consolidation is happening due to market forces. Companies are not bringing enough new drugs to the market fast enough. They are not expanding and growing.

NGP. Do you think that changes to the regulatory environment could foster more innovation in Europe?

SA. The regulatory environment isn’t stopping innovation. Some of the issues over the last 5 years around high profile product withdrawals have caused the public and politicians to lose confidence in the safety of some of our major drugs. However, the industry shouldn’t be blamed for this. As we get smarter, we can analyse more and we understand more. We find out things we never knew before. Therefore, regulations should change, which they do. There is a healthy tension between regulator and patient to ensure safety and profitability of the companies.

Innovation should be fostered by governments, making it much more attractive for pharmaceutical companies to do their research in their countries. Europe, however, is poor in what it has done to attract the pharmaceutical industry. The pricing policies of certain countries in Europe have done almost everything they possibly could do to drive the industry out of their countries. New drugs will only come from the pharmaceutical industry, so saving money on drugs, which is less than 10 percent of the total healthcare bill, is nothing short of bad policy and only means that pharmaceutical companies can’t make enough money to put into research.

Pharmaceutical companies can help repay government support by providing jobs, innovation and new medicines to society. However, we have lost our way between government and the pharmaceutical industry. That will only end up in the patient suffering.

NGP. Where do you see particular strengths and weaknesses of Europe’s pharmaceutical industry?

SA. The strength of Europe’s pharmaceutical industry is our diversity: Different companies, different cultures, different biotechs, large companies and small companies. Also, in the expanded Europe with the new markets being opened up, we have enormous talent pools opening up to us. The industry is certainly moving towards those. You will find very highly motivated scientist and medics being used with trials in Central Europe now providing high quality excellent work at very competitive cost, therefore removing a lot of the worries about us having to shift all of our clinical trials to Asia.

There is a lot of change needed in an industry that is highly conservative. The European pharma companies, however, are less conservative than their American colleagues in their ability to absorb and make change happen. But America is still the world’s largest market. The European companies will have to keep one eye on the American market as well as their home markets and get advantage from that. It is another one of those really difficult tensions to handle.

NGP. The pharmaceutical industry is under pressure to increase R&D effectiveness. This is a permanent challenge, but what about additional problems such as declining numbers of clinical trial participants?

SA. After the disaster of the TeGenero trial in the UK, everybody would have assumed that it was going to be God’s own job to get a patient in a trial. I have been told by the CROs and the industry that this has not happened.

In general, however, there are two issues that need addressing here. Firstly, the cost of patients per trial is becoming more and more expensive. Secondly, there is the real availability of patients. A number of companies conduct similar tests on similar drugs at the same time. Sometimes, there aren’t enough patients in the right phase of their disease for them all to have the right number of patients to feed.

Increasing R&D effectiveness is the million-dollar question. There are a number of problems. In the past, a number of research start points have come from government funded, publicly funded or non-governmental organisation research. A lot of those start points are altering. Therefore, the pharma industry is struggling to deliver its own fundamental research and start points.

Another problem are technologies and processes such as high throughput screening, genomics and RNAI technologies. They have all got great promise but we have expected too much from them too soon. They haven’t had time to come through and the industry and scientists haven’t had time to be able to work out how they are going to deliver, what they are going to deliver and when they are going to deliver it.

Last but not least, it is a problem that the pharmaceutical industry wants to launch a drug in a whole bunch of disease areas rather than trying to get a very limited label on a drug when it is released and expanding that label in conjunction with expanded trials.

NGP. What are the areas of biggest potential for Europe’s pharmaceutical industry in the next five years?

SA. There are some risks coming out there but I couldn’t predict winners and losers because it is specific to each company. I have some words of caution, though: a lot of pharmaceutical companies consider oncology drugs to be the most important addition to the marketplace, but this is a generalisation.

With the number of oncology drugs going into the pipeline and those due to be launched in the next three to five years, the previously underserved marketplace is likely to grow into one that is either well served or overserved. Therefore, the prices these companies think they might be able to command for these drugs will not be as high as they assume. Or some drugs will be seen as outfront success while others will be seen to be inefficacious or not good enough. While there will be clear winners, there will also be many losers.

Fast facts

For most of the past century, Europe has been leading the world in pharmaceutical innovation. But over the last decade, the US gradually overtook Europe both in terms of innovative efforts (R&D investment) and in terms of the output of its innovative activity (New Molecular Entities).

Europe is still leading the world in pharmaceutical production, which has risen fivefold in value over the last 20 years, with exports accounting for 60 percent of total production.

More than 400,000 Europe-born scientists are estimated to have crossed the Atlantic, where they account for 40 percent of scientists working in the US.

About 40 percent of the new active substances launched nowadays on the world market have been discovered and developed in Europe, whereas 30 years ago Europe’s share of pharmaceutical discoveries was 65 percent.