EU report looks into innovative activities in the pharmaceutical sector

December 15, 2004

Brussels, 14 Dec 2004

If the EU wants to compete with the US and Japan as a location for innovative pharmaceutical activity, it must streamline the regulatory process and offer faster market access for drug companies, says a recent report.

The report, which was requested by the European Commission in the face of falling applications for marketing authorisations in 2002 and 2003, advises EU policy makers to introduce a harmonised ten year data exclusivity period for new drugs, as well as more flexible pricing to increase incentives to innovate.

Between 1999 and 2003, EU regulatory authorities recorded a significant fall in applications for approvals on new drugs, from to 17, as well as a reduction in applications for marketing authorisations for new active substances.

However, according to the report carried out by the consultancy Charles River Associates, 'the recent decline [does not] reflect a crisis in innovation [...] and there will be a gradual increase in marketing authorisations over the next couple of years'. This analysis was based on an assessment of new product 'pipelines' of drugs currently being tested for use.

The report, warns, nonetheless, that the crisis lies in the fact that 'the number of new products has not increased whilst the overall level of resources being invested has risen dramatically'. The reason behind the increase in cost of developing new drugs is their greater complexity and the need to carry out more trials than in the past.

'Over the last decade there has been a five-fold increase in the costs of clinical development and a 60 per cent increase in the real cost of preclinical development,' states the report. The report goes on to state that the EU has lost competitiveness compared to the US, where a more liberal pricing structure and the potential for greater profits has led to a shift in activity.

Furthermore, the growing importance of generic medicines in countries such as France and Spain, who have recently introduced rules to encourage generic competition, reduces the incentive to innovate.

'Encouraging generics while holding prices of branded products constant or even forcing them to fall reduces the return to innovation,' states the report. 'In the longer run this lowers the incentive to bring products to the market. If the incentive to innovate should be maintained, the encouragement of generics needs to be matched by an increase focus on price setting during the patented period,' it adds.

Reducing the price premium that first products in a new category traditionally enjoyed in many European countries will lead to 'therapeutic reference pricing for patented products [reducing] the returns to innovation and hence the incentives in invest in R&D,' the authors continue. On the other hand, granting extended date protection and market exclusivity periods for existing products increases the return to innovation.

The report then goes on to recommend two key actions:

'The applied sciences require further development in order to catch up with development in basic research and new technologies,' it states. 'Policy needs to focus on the 'critical path' between basic research and product development and in particular on activities such as the clinical trials designs and the development of appropriate biomarkers.'

The second recommendation is to improve communication between the authorisation authorities and the pharmaceutical companies during the key phases of the development process. In addition, better co-operation is required between public and private research organisations carrying out basic research (between universities, research institutions and the pharmaceutical industry) in order to overcome fragmented research systems.

'In the US, the National Institutes of Health (NIH) is seen as coordinating public and private research, bringing together funds, scientific knowledge and centres of excellence. At the European level, virtual institutes for health have been suggested to deal with this issue,' concludes the report. To read the full report, please visit: http:/// docs/Doc2004/nov/EU%20Pharma%20Innovatio n_25-11-04.pdf

CORDIS RTD-NEWS / © European Communities
Item source: http:/// ALLER=NHP_EN_NEWS&ACTION=D&SESSION=&RCN= EN_RCN_ID:23069

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