UK drug report could threaten EU industry’s competitiveness

Painstaking EU attempts to improve the competitiveness of the European pharmaceutical industry have been undermined by an unexpected attack from a traditionally supportive quarter.

The UK Office of Fair Trading (OFT) released on 20 February a stinging criticism of the national drug pricing scheme - seen by drug firms as the most innovation-friendly in Europe. It said it has allowed companies to overcharge the national health service by as much as 1,000% for widely-prescribed brands for treating cholesterol, blood pressure and stomach acid.

The OFT recommendation that the scheme should be fundamentally reformed to make it less industry-centred is a setback for drug firms’ efforts to secure a more favourable environment for investment and innovation in Europe. The industry is currently locked in a complex battle with European regulators and social security organisations over low drug prices.

As long as seven years ago, a European Commission report warned that Europe was lagging dangerously behind the US and Asia "in its ability to generate, organise and sustain innovative processes that are increasingly expensive and organisationally complex" - a diplomatic way of saying that government-imposed drug prices in many member states are so low that the industry cannot afford the research needed to remain a world player.

Since then, the EU has been trying to find a pan-European pricing formula that can help maintain drug innovation in Europe without breaching subsidiarity or busting national health budgets. A high-level group - the European pharmaceutical forum - set up by Commission Vice-President Günter Verheugen when he took over responsibility for industry affairs in 2004, is now approaching the crucial stage of its reflections. Innovative firms were already fearing that prospects for a radical improvement were slender, since member states jealously guard their sovereignty over drug pricing and reimbursement - and most of them are more interested in keeping health costs down than in promoting innovation.

Research-based companies have been concerned that the discussions in the forum are tending towards even tougher market entry controls for new medicines - particularly via some form of European assessment of relative efficacy. The industry suspects that this concept could easily be abused to keep newer, more expensive medicines, off the market - and it sees clear hints of the same approach in the OFT’s proposals to favour cheaper generic medicines. "This UK criticism of its own scheme is not going to help us," a senior industry figure told European Voice. "It will shift the balance of power in the forum even further away from support for innovation."

Not every part of the drug industry is hostile. Greg Perry of the European Generic Medicines Association said: "Anything that boosts generic volumes is good. Full marks to the UK. Now the same is needed in Spain and Italy." Representatives of smaller firms - particularly in the biotechnology sector - have also indicated some support for a review of the UK scheme.

Painstaking EU attempts to improve the competitiveness of the European pharmaceutical industry have been undermined by an unexpected attack from a traditionally supportive quarter.