1. 1 Investing in Innovation Should the EU do more to match US investment in innovative medicines? Brian Ager EFPIA Gastein, 6 October 2004

2. 2 Europe has lot to gain in health and economic terms from a strong research-based pharmaceutical industry.

3. B. Ager 061004 3 Biomedical research is about 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)

4. B. Ager 061004 4 The 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

5. B. Ager 061004 5 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

6. B. Ager 061004 6 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

7. B. Ager 061004 7 Pharmaceutical R&D expenditure in Europe, USA and Japan, 1990-2003 Euro million, 2002 constant exchange rates Data 2003: estimate EFPIA & PhRMA Source: EFPIA member associations, PhRMA, JPMA

8. B. Ager 061004 8 Innovation – market penetration Geographical breakdown (by main markets) of sales of new medicines launched Source: IMS 57% USA25% EUR5% JPN 13% ROW 1995 - 2000 70% USA18% EUR4% JPN 8% ROW 1998 - 2002

9. B. Ager 061004 9 Product life cycle in US and Europe Time Sales Europe US Delay in Market Access Utilisation and Price Level Generic competition Source: GSK European policies do not reward innovation but neutralise generic competition

10. B. Ager 061004 10 Share of Parallel Imports in Pharmacy Market Sales (%) - 2002 % Note: Denmark, Germany, The Netherlands, Norway, Sweden, UK: Data 2002 Norway: share of total market sales (estimate) Source: EFPIA Member Associations

11. B. Ager 061004 11 Europe: its strengths > and and < weaknesses 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’)

12. B. Ager 061004 12 EU / 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)

13. 13 What should the EU do to match US investment in innovative medicines?

14. B. Ager 061004 14 Strengthening 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’)

15. B. Ager 061004 15 Strengthening 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

16. B. Ager 061004 16 Speeding up patient access to innovative 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)

17. B. Ager 061004 17 Speeding up patient access to innovative 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

18. B. Ager 061004 18 Improving 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

19. B. Ager 061004 19 In 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…