Competitiveness of the European-based Pharmaceutical Industry Prospective of a New Member State Imre Hollo Deputy Secretary of State, MOH Hungary

Multiple interests complicate policy making in the sector  Patients should receive safe, efficacious and good quality drugs  Drug costs should be under control  Domestic pharmaceutical industry should be strengthened

Competing Pharmaceutical Policy Interests Health Care Policy Industrial Policy Public Health Policy Cost containment Cost containment Promoting local R&D Promoting local R&D Safe medicines Safe medicines Generic Promotion Generic Promotion Intellectual property rights protection Intellectual property rights protection Efficacious treatment Efficacious treatment Improving prescribing Improving prescribing Generating employment Generating employment Innovative cures Innovative cures Ensuring access Ensuring access Contributing to a positive trade balance Contributing to a positive trade balance Patient access to drugs Patient access to drugs Regulating consumer behavior Regulating consumer behavior Promoting SMEs Promoting SMEs High quality medicines High quality medicines Source: Regulating Pharmaceuticals in Europe, Mossialos, et al.

The EU’s response to the challenge – the G10 Report The G10 R The G10 Report represents a significant achievement. It looks at ways we can build on to improve the competitiveness of the industry while meeting important public and social objectives. The Report recognizes that progress can only be made by looking at action at both a European and a national level and by considering competitiveness issues in the light of achieving public health and social objectives

The G10 Process Diagnosis: competitiveness of EU-based pharma industry is lagging behind the USA The objective of the Group was to review the extent to which current pharmaceutical, health and enterprise policies can achieve the twin goals of both encouraging innovation and competitiveness and ensuring satisfactory delivery of public health and social imperatives.

Some key recommendations of the G10 process Member States and EU institutions should Member States and EU institutions should improve legislation or the operation of the licensing system to improve the introduction to the market in particular for innovative medicines Respecting national competence, Member States should examine the scope for improving time taken between the granting of a marketing authorization and pricing and reimbursement decisions Member States explore ways of increasing generic penetration in individual markets (including generic prescribing and dispensing). Particular attention should be given to improved market mechanisms in full respect of public health considerations. Full competition should be allowed for medicines not reimbursed by State systems or medicines sold into private markets.

Industry focus Although the G10 approach attempts to balance competing objectives, it seems to be stronger on the industrial promotion side Although the G10 approach attempts to balance competing objectives, it seems to be stronger on the industrial promotion side Emphasis is on liberalization and on ensuring the free movement of goods underpinning the single market Emphasis is on liberalization and on ensuring the free movement of goods underpinning the single market Public reimbursement of drugs is seen as a main engine for promoting competitiveness of the EU-based industry Public reimbursement of drugs is seen as a main engine for promoting competitiveness of the EU-based industry

The Hungarian case Pharmaceutical expenditures have been rising steadily in the past decade and consume almost 34% of total health expenditures (CZ:25%, G:14%, F:20%) Pharmaceutical expenditures have been rising steadily in the past decade and consume almost 34% of total health expenditures (CZ:25%, G:14%, F:20%) Public pharmaceutical expenditures are also sizable on a dollar per capita basis, as they reach $280 calculated in PPP compared to $240 in the UK or $266 in the Netherlands. Public pharmaceutical expenditures are also sizable on a dollar per capita basis, as they reach $280 calculated in PPP compared to $240 in the UK or $266 in the Netherlands.

Public Expenditure on Pharmaceuticals

Pharmaceutical consumption per capita (in boxes)

Reasons for the high drug bill International experience also shows that the younger democracies are and the less experience they have in negotiation with the pharmaceutical industry, the faster public expenditures devoted to drugs grow. International experience also shows that the younger democracies are and the less experience they have in negotiation with the pharmaceutical industry, the faster public expenditures devoted to drugs grow. Increased drug consumption only partly explains the high public pharmaceutical expenditures. The other reason behind this phenomenon is the strong market presence of innovative products accounting for 75% of the domestic market. Increased drug consumption only partly explains the high public pharmaceutical expenditures. The other reason behind this phenomenon is the strong market presence of innovative products accounting for 75% of the domestic market.

How to stop the galloping growth? In light of Hungary’s goal to join the EURO zone by 2010, galloping pharmaceutical expenditures need to be capped. In light of Hungary’s goal to join the EURO zone by 2010, galloping pharmaceutical expenditures need to be capped. This is why the Government has launched a comprehensive re- regulation of the pharmaceutical sector. This is why the Government has launched a comprehensive re- regulation of the pharmaceutical sector. The objective is to regulate and influence both the supply and the demand side of the market. The objective is to regulate and influence both the supply and the demand side of the market. The main aim is to (i) reduce the currently prevailing information asymmetry by ensuring that the right information is given to the patients; (ii) reach a balance in terms of market share between innovative and generic products; (iii) reduce the scope of discretionary public policy measures and to (iv) guarantee the financial sustainability of the market. The main aim is to (i) reduce the currently prevailing information asymmetry by ensuring that the right information is given to the patients; (ii) reach a balance in terms of market share between innovative and generic products; (iii) reduce the scope of discretionary public policy measures and to (iv) guarantee the financial sustainability of the market.

Is reimbursement the cure? Is public reimbursement the only way to further competitiveness of the European-based pharmaceutical industry? Is public reimbursement the only way to further competitiveness of the European-based pharmaceutical industry? Competitiveness is much more complex and depend on several factors: Competitiveness is much more complex and depend on several factors: Education and the link between education and business (e.g. MIT, entrepreneur labs, etc.) Education and the link between education and business (e.g. MIT, entrepreneur labs, etc.) Tolerance, inclusion of foreigners (no free movement of labor from the Member States the most of the EU countries) Tolerance, inclusion of foreigners (no free movement of labor from the Member States the most of the EU countries) More EU funds for research (also in the new Member States) More EU funds for research (also in the new Member States) Pushing innovative firms to establish production/R&D facilities Pushing innovative firms to establish production/R&D facilities

Reward only real innovation… A detailed study by Prescrire found: A detailed study by Prescrire found: That only 0.3 % of the 2693 new drugs approved and patented over the past 22 years provide a major therapeutic advance That only 0.3 % of the 2693 new drugs approved and patented over the past 22 years provide a major therapeutic advance 2.7 % provide important therapeutic benefits with certain limitations 2.7 % provide important therapeutic benefits with certain limitations 7.9 % have some value, but do not fundamentally change the present therapeutic practice 7.9 % have some value, but do not fundamentally change the present therapeutic practice 16% provide minimal additional value 16% provide minimal additional value The rest (1584 of all new drugs) are considered “therapeutically superfluous” The rest (1584 of all new drugs) are considered “therapeutically superfluous” Source: Regulating Pharmaceuticals in Europe, Mossialos, et al.