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Investing in InnovationInvesting in Innovation

Should the EU do more to match US Should the EU do more to match US investment in innovative medicines?investment in innovative medicines?

Brian Ager

EFPIA

Gastein, 6 October 2004

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Europe has lot to gain in health and Europe has lot to gain in health and economic terms from a strong economic terms from a strong

research-based pharmaceutical research-based pharmaceutical industry.industry.

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Biomedical research is about Biomedical research is about patients patients

Can expect to live 30 years longer than 100 years ago

Huge reductions in mortality (e.g. HIV/AIDS, many cancers, cardiovascular diseases)

Significant progress in quality of life (e.g. asthma, diabetes)

Huge challenges remain (e.g. Alzheimer, multiple sclerosis, orphan diseases)

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The pharma industry in EuropeThe pharma industry in Europe High-tech sector with the highest value added per

employee 3.4% of the total EU manufacturing value added

588,000 highly qualified jobs 100,500 of them in R&D

Euro 21,1 billion invested in R&D 15% of the whole EU business R&D expenditure

Trade surplus of Euro 40 billion Highest contribution among high-tech sectors to

Europe’s trade balance

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Innovation is a key element Innovation is a key element Competitiveness is fuelled by successful

innovation

Innovation is founded on a strong science and research base

Innovation is critical for the success of industry in Europe

Innovation contributes to the health of patients and the wealth of society

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Why are we loosing ground?Why are we loosing ground?

Under-investment in research, education and training (brain drain)

Poor reward for innovation

Europe is not functioning as a single market

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Pharmaceutical R&D expenditure in Europe, USA and Japan, 1990-2003

Euro million, 2002 constant exchange rates

Data 2003: estimate EFPIA & PhRMASource: EFPIA member associations, PhRMA, JPMA

7941

11423

17661

2016422584

27167

43695436 6317

8177

21100 (e)

7191

12552

28964 (e)

n.a.0

5000

10000

15000

20000

25000

30000

35000

1990 1995 2000 2002 2003

Europe

USA

Japan

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Innovation – market penetrationInnovation – market penetrationGeographical breakdown (by main markets) of sales of new medicines launched

Source: IMS

57% USA 25% EUR 5%JPN

13%ROW

1995 - 2000

70% USA 18% EUR 4%JPN

8%ROW

1998 - 2002

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Product life cycle in US and EuropeProduct life cycle in US and Europe

Time

Sales EuropeUS

Delay in Market Access

Utilisation and Price Level

Generic competition

Source: GSK

European policies do not reward innovation but neutralise generic competition

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Share of Parallel Imports in Share of Parallel Imports in Pharmacy Market Sales (%) - 2002Pharmacy Market Sales (%) - 2002

12,2

7,1

10,5

6,3

10,2

17,6

024681012141618

DK DE NL N S UK

%

Note: Denmark, Germany, The Netherlands, Norway, Sweden, UK: Data 2002 Norway: share of total market sales (estimate)

Source: EFPIA Member Associations

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Europe: its strengths > and < Europe: its strengths > and < weaknessesweaknesses

A comparatively strong scientific research base

A significant record of pharmaceutical innovation

A (potentially) large domestic market

A highly regulated environment (regulatory ‘overkill’)

A lack of single market (patchwork of pricing and reimbursement regulations)

A lack of willingness to pay for innovation (innovation is a ‘cost’)

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EU / US ‘Global’ EnvironmentEU / US ‘Global’ Environment

USA Basic patent (20 years) Patent Term Restoration – max 5

years, 1984 Biotech Patent, 1983

Orphan Drug Act, 1984 Same levels of IPRs across all

States Bayh-Dole Act + National Institutes

for Health Economic environment (direct

access to a large unified market; competitive market pricing)

EUROPE Basic patent (20 years) SPC – max 5 years, 1992

Biotech Patent 2000-yet to be applied in 8 MS

Orphan Drug Reg., 2000 Lower IPRs in some EU MS (+ EU

enlargement) European Framework Research

Programme Economic environment (no direct

market access; price controls; parallel trade)

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What should the EU do to match US What should the EU do to match US investment in innovative medicines?investment in innovative medicines?

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Strengthening the EU science baseStrengthening the EU science base

Establish a ‘European Technology Platform’ for pharmaceutical research (7th EU R&D Programme)– Insufficient dialogue with regulators prior approval– Insufficient support of early stage (pre-competitive)

research

Support development of orphans and paediatrics– Adopt proposed regulation on medicines for children– Implement all provisions of the 2000 Orphan Drug

Regulation (no ‘cherry picking’)

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Strengthening the EU science baseStrengthening the EU science base Implement EU pharmaceutical legislation in EU-25

– No derogation to Acceding Member States (e.g. RDP)– Remove all illegal copies of centrally-approved products from

Acceding countries‘ market

Maintain high standards of intellectual property protection in EU and worldwide– Adopt Community Patent legislation– Ensure balanced implementation of Doha Declaration (§6)– Implement Biotech Patent Directive– Address existing trade barriers on non-EU markets

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Speeding up patient access to Speeding up patient access to innovative medicinesinnovative medicines

Member States to improve market access conditions for innovative medicines (G10 Rec. 3)

– Recent cost containment policies adopted by some Member States are against the spirit of Rec. 3 (e.g. introduction of reference prices for patented medicines in Germany, no admission to reimbursement of innovative medicines in Poland since 1998)

– Poor reward for innovation (market access delays, no reward for incremental innovation, slow diffusion of new medicines)

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Speeding up patient access to Speeding up patient access to innovative medicinesinnovative medicines

Member states to limit price controls only to those medicines purchased or reimbursed by the State (G10 Rec. 6)

– Immediate launch of medicines after grant of MA

– Option of letting manufacturers set prices of products while negotiating safeguards in compliance with EU competition rules

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Improving regulatory environmentImproving regulatory environment

Address the shortcomings of the Clinical Trials Directive

Ensure no ‘add-in’ regulation on pharmaceuticals via other sectoral legislation (e.g. REACH)

– Exclude from the scope of the REACH proposal medicines and related pharmaceutical intermediates

Provide a practical framework for the provision of information to patients on medicines including from companies

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In conclusionIn conclusion Innovation is crucial to Europe Pharmaceutical innovation brings benefits to

patients and wealth to society Governments have a role to play

– welcome and reward innovation– regulate less and better

Need to keep the right balance between industrial policy and health policy

A challenge for us all…