Europe faces stiff competition in the global healthcare arena

Date: 25/10/01

By Laurence Frost

The year 1997 was a landmark for the pharmaceuticals industry in Europe - the first in which its total spending on research and development was outstripped by the US sector.

The European drug industry's slide from first to second place in the drug research stakes is the result of a trend that began years earlier, and has continued ever since.

Over the past 10 years, average sales growth has been below 10 per cent in Europe, compared to 15 per cent in the US. Europe's share of the world market - now worth €392 million - has slipped from 32 per cent to 22 per cent in the same period, while America's has increased from 31 per cent to 43 per cent. To top it all, the five-fold growth in US research since 1990 dwarfs Europe's doubled R &D spend. Simply put, Europe's industry is losing competitiveness.

There are several complex reasons for this sorry state of affairs. Among them are concerns that the European Commission is soft on drug patent enforcement. Drug firms and their investors cite its support for a loosening of trade-related intellectual property agreements (TRIPs) at next month's World Trade Organisation ministerial meeting in Doha, Qatar.

The issue made headlines again this week when Ottawa, traditionally an advocate of tough TRIPs, incurred the wrath of Germany's Bayer by licensing a Canadian firm to make patent-busting copies of its anti-anthrax drug Cipro. Ottawa later had to reverse its decision amid the threat of legal action.

But top of industry's list of gripes is the EU's fragmented pricing and reimbursement systems. To get a new drug approved for sale, a firm is forced to negotiate with each individual member state.

The result is different prices for each national healthcare market. This wreaks havoc in what is supposed to be a single market, as wholesalers make a tidy profit buying up stocks where drugs are cheap, and selling them on to countries where higher rates are in force.

The so-called parallel traders say their activities cut costs for national health systems and patients. Drug firms grumble that their profits - and research funds - are finding their way into the pocketsof middlemen.

They blame the Commission's obsession with applying single market rules where no single market exists. EU industry Commissioner Erkki Liikanen has so far refrained from tackling the issue head-on. Following a review of existing pharmaceuticals legislation in July, the Commission proposed such sops as measures to speed up the approval process (which precedes price negotiations) and an even quicker 'fast-track' for approving ground-breaking new treatments. A one-year extension of patent protection completes the bundle.

Several drug companies have attempted to clamp down on parallel traders by forcing them to pay higher prices for shipments destined for export. The future of such schemes now depends in part on the European Court of Justice, which is due to rule on GlaxoSmithKline's appeal against a Commission ban on its dual pricing regime in Spain. But that decision is years rather than months away.

Hopes for a new initiative to break the deadlock were raised when Liikanen established the top-level 'G10' medicines group earlier this year, charged with carrying out a no-holds-barred appraisal of the industry's problems including pricing and reimbursement. The participating CEOs, interest groups and commissioners (Liikanen and his health colleague, David Byrne) published the fruit of their labours last month in a paper which will presumably form the basis of their report to Commission President Romano Prodi next April.

The document fails conspicuously to float new ideas, instead falling back on a recommendation last heard at the 'roundtable' convened by Liikanen's predecessor, Martin Bangemann.

The argument runs that national health providers should take steps to improve their uptake of cheaper 'generic' drugs once patents expire, and plug the savings back into purchasing budgets. This would increase governments' willingness to pay higher rates for new drugs, boosting incentives to innovate and simplifying costly price negotiations.

Besides doing little to level pricing disparities, the approach raises the problem of enforcement. The EU's lack of legal competence in healthcare - a jealously guarded haven of national sovereignty - would frustrate any formal attempt to stop governments simply transferring the savings elsewhere. Such considerations explain why, increasingly, the drug companies are turning their attention to the national health providers themselves.They are forging alliances with patients' groups, rallying anyone with an axe to grind behind the banner of 'patient empowerment'. Ordinary people, they argue, should have a greater input into the treatment decisions that affect them - and this will mean informing the public about the drugs that are available, and what they do.

Of course it goes without saying that a more widespread awareness of new, potentially life-saving treatments would turn the public spotlight on the protracted haggling that delays their availability to patients. Healthcare budgets will tend to increase as governments become increasingly reluctant to hold out until the price is right. Liikanen's pharmaceutical review has responded to demands for patient empowerment with proposals under which the firms will for the first time be allowed to provide product information directly to the public, mainly via websites and brochures.

Changes in patient attitudes are already being observed. Doctors say the media exposure given to Pfizer's anti-impotence drug, Viagra, had patients queuing to demand it by name. Based on this experience, they fear it will become more difficult to prescribe the best treatment for an 'informed' patient who is convinced that a particular branded drug will end his or her misery.

A recent speech by Franz Humer, the CEO of Roche, confirmed that a shift in this delicate balance of power was firmly on the agenda. "Patients' empowerment requires a willingness to accept that the physician-patient relationship will change," he said. "A knowing patient may or may not want to follow the treatment course which, according to best practice, would be envisaged."

Consumer groups are already on the defensive against what they see as a foot in the door for direct-to-consumer advertising of prescription drugs. But the truth is a scenario similar to that in the US - where you only have to flip open a lifestyle magazine or turn on the TV to be entreated to 'ask your doctor' for a new branded drug - is still a long way off. The Liikanen proposal leaves the door firmly closed to drug advertising in the mainstream media.

More urgent action will be needed on more than just the one front, if the slide of EU competitiveness in pharmaceuticals is to be halted. The G10's interim report has been distributed for wider consultation with industry, medical, consumer and patient interests. And for the moment, industry is persisting with the exercise, in the hope that inspiration will strike somebody, anybody, at the last minute. "It may be a poor show," as a participant put it recently, "but it is the only show in town."

Major feature assessing the challenges faced by the pharmaceuticals industry in the EU. Article forms part of a special report on pharmaceuticals.

http://pharmacos.eudra.org http://pharmacos.eudra.org

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