1. Improving the competitiveness of the pharmaceutical industry Dominique Limet Senior Vice-President and Area Director Southern and Eastern Europe

2. G10 - recognising the need for a competitive pharmaceutical industry  G10 Recommendations: the end of a process or the beginning of a change?

3. Pharmaceutical R&D expenditure - a comparison (e): estimate Source: EFPIA member associations, PhRMA, JPMA 1990-2001 € million

4. 0% 2% 4% 6% 8% 10% 12% 14% 16% Share of R&D (%) Pharmaceuticals Telecomms IT Electronics Cars Aeronautics Services Interm. goods Consumer Goods Agro-food Petro-Chemicals Media/Comms Research-driven pharmaceutical companies invest up to 14% of their sales in R&D, which represents a higher percentage than any other industrial sector R&D investment - driver of the pharmaceutical industry

5. Source: EFPIA, 2000 Location of R&D spending by EU companies 1990-1999

6. A call for Action A competitive environment: key to a thriving pharmaceutical industry in Europe  Competitive pricing for non-reimbursed medicines  Benchmarking for competitiveness  Principles of the Transparency Directive are key in finding solutions to accelerate market access  Transparency and predictability in Health technology assessments

7. The importance of pharmaceutical competitiveness for Europe  A knowledge-based economy  Provision of high-skilled jobs  Driver for innovation and investment  Provision of medical advances

8. ~100 Discovery Approaches 1 - 2 Products Products High Risk Process 12 - 15 years Cost of development +800 Mo euro on average High Risk Process 12 - 15 years Cost of development +800 Mo euro on average Drug discovery is a high-risk process Discovery Exploratory Development Idea Drug 12 - 15 Years Full Development Phase I Phase IIPhase III 015 5 10 Preclinical Pharmacology Preclinical Safety Millions of Compounds Screened Clinical Pharmacology & Safety Attrition is High in the R&D Process

9. Note: Data have been expressed in € million at current exchange rates - Original data in $ million: 231 (1991), 359 (1993), 429 (1997), 610 (1999), 802 (2001) Source: Di Masi J. et al., Tufts University, 1991; Office of Technology Assessment (OTA), 1993; Myers and Howe, 1997; Office of Health Economics & Lehman Brothers, U.K., 1999; Di Masi J., Tufts University - Centre for the Study of Drug Development, 2001 Estimated full cost of bringing a new chemical or biological entity to market- € million Our investment in R&D is a reflection of a high-risk development process

10. Comparison of product portfolios launched and in development (from 35 companies - source LEHMAN - BROTHERS) on the basis of size of targeted populations in OECD markets Current and future profile of pharmaceutical innovation

11. Stimulating research into new medicines Pharmaceutical industry R&D investments - 1962-1996

12. The pharmaceutical industry’s investment in the life-science sector

13. Increasing competitiveness: a dual approach  Meeting the pharmaceutical sector’s needs: –Rewarding innovation and improving the science base –Addressing structural issues –Improving market access  Creating the right conditions for a competitive industry

14. Increasing competitiveness: a dual approach  Meeting society’s health objectives: –Bringing innovative approaches to healthcare –Addressing health gaps and priorities  Operating in a manner that responds to Europe’s health needs

15. Europe’s ageing population Source: Economic Policy Committee (2001) “Budgetary challenges posed by ageing populations”

16. The limits of cost-containment  An increase in pharmaceutical spending largely due to ageing and the launch of innovative medicines  Pharmaceutical spending is an easy target but only represents a part of overall healthcare spending  A continuous focus on short-term cost-containment will not resolve long-term structural issues and challenges of healthcare systems in Europe

17. Avoiding the vicious circle Ad hoc emergency measures short-termism Access delays Healthcare rationing Budgetary pressures Less access for patients to innovative treatments Higher costs in other healthcare budget silos, i.e.hospitalisation Pharmaceutical industry must take measures to deal with abrupt changes

18. Renewing the ‘social contract’ Managing healthcare budgets Ensuring access for patients to innovative treatments Optimising healthcare intervention Predictability, communication, transparency R&D investment in medicines that count Business Planning for long-term supply of medicines Recognising the benefits of innovation

19. Next steps  Cost considerations are key  Long-term value is critical  Balancing the relationship to ensure that European pharmaceutical industry meets Europe’s needs in a changing world