Would the last pharmaceutical investor in Europe please turn the lights out
01.03.20
With just a week until the Commission publishes both its Industrial Strategy and the roadmap for the upcoming Pharmaceutical Strategy, the future of Europe’s life sciences sector is in sharp focus. The publication of both documents is eagerly anticipated. Much rests on their content; for patients across Europe, for the European economy and Europe’s life science community. In the midst of a coronavirus epidemic, attention turns to the research-based industry to rapidly develop diagnostics, vaccines and treatments in response to such a significant public health threat. It underlines the need for an infrastructure and policy environment that supports medical research in Europe. We welcome the new Commission’s recognition of the need for an Industrial Strategy and the importance of the pharmaceutical sector.
That recognition has been there before, but not the action and aligned policy thinking to back it up. In its 1994 Communication on the Outlines of an Industrial Policy for the Pharmaceutical Sector in the European Community, the European Commission stated that the pharmaceutical “industry is a substantial asset for growth and employment in the European Union” and that “there are signs that the competitiveness of the Community industry is yielding in comparison with its main competitors.”[1] Twenty-five years later, this prediction become painfully true and Europe has consistently failed to take the necessary steps to reverse the trend.
That recognition has been there before, but not the action and aligned policy thinking to back it up. In its 1994 Communication on the Outlines of an Industrial Policy for the Pharmaceutical Sector in the European Community, the European Commission stated that the pharmaceutical “industry is a substantial asset for growth and employment in the European Union” and that “there are signs that the competitiveness of the Community industry is yielding in comparison with its main competitors.”[1] Twenty-five years later, this prediction become painfully true and Europe has consistently failed to take the necessary steps to reverse the trend.
Through both the Industrial Strategy and the Pharmaceutical Strategy, this mandate of the Commission has perhaps a last opportunity to re-enter the global medical innovation race.
If the content of the Pharmaceutical Strategy undermines the ambition of the Industrial Strategy then there is a very real, immediate and tangible risk that Europe becomes simply a market for medical innovation that is researched and developed in other world regions.
EFPIA is committed to working with the EU Institutions to ensure alignment between the ambitions of the Industrial strategy and the development of the Pharmaceutical Strategy.
Empty threat or evidenced-based?
The sobering reality is that Europe has lost its place as the world’s leading driver of medical innovation. Today, 47% of global new treatments are of US origin compared to just 25% emanating from Europe (2014-2018)[2]. It represents a complete reversal of the situation just 25 years ago.
In parallel, Europe’s share of global R&D investment is falling. Over the past twenty years, the region’s research and development base has gradually eroded, with new leading-edge technology research units being transferred out of Europe, mainly to the United States over the past years and more recently to China. Until 1990, Europe led the world in pharmaceutical R&D and innovation and it has steadily lost ground so that by 1997, for the first time, the US industry overtook its European counterpart in terms of the total amount of R&D expenditure. Between 1990 and 2017, R&D investment in Europe grew 4.5 times, while in the US it has multiplied by more than 800%[3].
The reasons behind this 25-year downward trend in Europe can be attributed to a number of factors. What is clear is that unless the Commission acts now, the loss of competitiveness will continue and even accelerate in the context of fierce global competition for life-science investment.
Isn’t Europe just too important for companies to move investment to other markets?
Europe’s relative share of the global market is falling. During the period 2014-2018 the Brazilian, Chinese and Indian markets grew by 11.4%, 7.3% and 11.2% respectively compared to an average market growth of 5.0% for the top 5 European Union markets and 7.8% for the US market (IQVIA MIDAS, May 2019). In 2018, North America accounted for 48.9% of world pharmaceutical sales compared to 23.2% for Europe. According to IQVIA (MIDAS May 2019), 65.2% of sales of new medicines launched during the 2013-2018 period were on the US market, compared with 17.7% on the European market (top 5 markets). The shifting balance of the global pharmaceutical market coupled with developments in the R&D offerings in the US and Emerging Markets means Europe has to work even harder to develop a pro-innovation environment to stop the erosion and then compete to rebuild its life science sector.
What’s at stake for Europe?
Despite Europe’s relative decline in comparison to its competitors, the industry still invested an estimated € 36,500 million in R&D in Europe in 2018. It directly employs some 765,000 people in Europe and according to a report released by PwC in June 2019, supports around 2.7 million jobs in the EU. The same report highlighted that the activities of pharmaceutical companies contributed over € 100 billion directly to the EU economy, with an additional € 106 billion provided through the supply chain and employee spending[4].
Empty threat or evidenced-based?
The sobering reality is that Europe has lost its place as the world’s leading driver of medical innovation. Today, 47% of global new treatments are of US origin compared to just 25% emanating from Europe (2014-2018)[2]. It represents a complete reversal of the situation just 25 years ago.
In parallel, Europe’s share of global R&D investment is falling. Over the past twenty years, the region’s research and development base has gradually eroded, with new leading-edge technology research units being transferred out of Europe, mainly to the United States over the past years and more recently to China. Until 1990, Europe led the world in pharmaceutical R&D and innovation and it has steadily lost ground so that by 1997, for the first time, the US industry overtook its European counterpart in terms of the total amount of R&D expenditure. Between 1990 and 2017, R&D investment in Europe grew 4.5 times, while in the US it has multiplied by more than 800%[3].
The reasons behind this 25-year downward trend in Europe can be attributed to a number of factors. What is clear is that unless the Commission acts now, the loss of competitiveness will continue and even accelerate in the context of fierce global competition for life-science investment.
Isn’t Europe just too important for companies to move investment to other markets?
Europe’s relative share of the global market is falling. During the period 2014-2018 the Brazilian, Chinese and Indian markets grew by 11.4%, 7.3% and 11.2% respectively compared to an average market growth of 5.0% for the top 5 European Union markets and 7.8% for the US market (IQVIA MIDAS, May 2019). In 2018, North America accounted for 48.9% of world pharmaceutical sales compared to 23.2% for Europe. According to IQVIA (MIDAS May 2019), 65.2% of sales of new medicines launched during the 2013-2018 period were on the US market, compared with 17.7% on the European market (top 5 markets). The shifting balance of the global pharmaceutical market coupled with developments in the R&D offerings in the US and Emerging Markets means Europe has to work even harder to develop a pro-innovation environment to stop the erosion and then compete to rebuild its life science sector.
What’s at stake for Europe?
Despite Europe’s relative decline in comparison to its competitors, the industry still invested an estimated € 36,500 million in R&D in Europe in 2018. It directly employs some 765,000 people in Europe and according to a report released by PwC in June 2019, supports around 2.7 million jobs in the EU. The same report highlighted that the activities of pharmaceutical companies contributed over € 100 billion directly to the EU economy, with an additional € 106 billion provided through the supply chain and employee spending[4].
Even more significant is the growing body of evidence that patient outcomes are better in centres of research and development. In areas such as cancer, clinical research constitutes an important route for patients, for which current therapies are not a viable option, to get access to the latest innovation in cancer care. Industry-funded research is also an important part of the broader innovation eco-system, creating strong synergy effects for research and innovation in clinical and academic centres. As cutting-edge research continues to leave Europe in favour of other regions, so does the opportunity to deliver the very best care to patients across Europe and the opportunity to maintain a strong medical innovation environment in Europe overall.
Can we create a pro-innovation environment and support the access, availability and affordability of new treatments at the same time?
In her Mission letter to Commissioner Stella Kyriakides, President von der Leyen asked the new Commissioner to "look at ways to help ensure Europe has the supply of affordable medicines to meet its needs. In doing so, you should support the European pharmaceutical industry to ensure that it remains an innovator and world leader." Realising these ambitions means identifying the right policy driver(s) for the right issue. Broadly speaking, that means novel, evidence-based, flexible and collaborative models to solve access and shortages issues, supporting a stable, predictable regulatory and incentives environment to drive research into the next generation of treatments and the adoption of a renewed industrial strategy for Europe to ensure the industry remains an innovator and world leader. This is a multifaceted issue that requires a multifaceted approach. Choosing the wrong option for an issue, risks jeopardizing our collective ability to achieve the other goals. As part of the delivery of the Pharmaceutical Strategy, we support the creation of a High-Level Forum on Better Access to Health Innovation proposed by the European Health Coalition to develop multi-stakeholder solutions to introducing new technologies into health systems in a way that is sustainable, widely available and accessible to European citizens for the future of our healthcare systems.
Can we create a pro-innovation environment and support the access, availability and affordability of new treatments at the same time?
In her Mission letter to Commissioner Stella Kyriakides, President von der Leyen asked the new Commissioner to "look at ways to help ensure Europe has the supply of affordable medicines to meet its needs. In doing so, you should support the European pharmaceutical industry to ensure that it remains an innovator and world leader." Realising these ambitions means identifying the right policy driver(s) for the right issue. Broadly speaking, that means novel, evidence-based, flexible and collaborative models to solve access and shortages issues, supporting a stable, predictable regulatory and incentives environment to drive research into the next generation of treatments and the adoption of a renewed industrial strategy for Europe to ensure the industry remains an innovator and world leader. This is a multifaceted issue that requires a multifaceted approach. Choosing the wrong option for an issue, risks jeopardizing our collective ability to achieve the other goals. As part of the delivery of the Pharmaceutical Strategy, we support the creation of a High-Level Forum on Better Access to Health Innovation proposed by the European Health Coalition to develop multi-stakeholder solutions to introducing new technologies into health systems in a way that is sustainable, widely available and accessible to European citizens for the future of our healthcare systems.
How can the Commission’s Industrial Strategy help reverse Europe’s decline in medical research?
Competition to attract global life-science investment and the world’s brightest minds has never been more intense with other global economies moving quickly to create pro-innovation environments. The implementation of an ambitious Industrial Strategy for Europe with a closely aligned Pharmaceutical Strategy is critical to reverse the decline and put Europe in the best possible position to compete with other global economies. To be effective, it requires a regulatory framework that is stable yet fast, effective and globally competitive. It has to include an IP framework that protects investment in medical research and guarantees at least parity with competitor regions such as the US and China. It needs to look at new incentives for high unmet medical needs, such as antimicrobial resistance (AMR). It needs to support faster, more equitable access to new treatments for patients across Europe and a research infrastructure that helps deliver the next generation of treatments.
Competition to attract global life-science investment and the world’s brightest minds has never been more intense with other global economies moving quickly to create pro-innovation environments. The implementation of an ambitious Industrial Strategy for Europe with a closely aligned Pharmaceutical Strategy is critical to reverse the decline and put Europe in the best possible position to compete with other global economies. To be effective, it requires a regulatory framework that is stable yet fast, effective and globally competitive. It has to include an IP framework that protects investment in medical research and guarantees at least parity with competitor regions such as the US and China. It needs to look at new incentives for high unmet medical needs, such as antimicrobial resistance (AMR). It needs to support faster, more equitable access to new treatments for patients across Europe and a research infrastructure that helps deliver the next generation of treatments.
In a new EFPIA paper, An EU Industrial Strategy: An Opportunity to Drive Europe’s Health and Growth, which will be launched on Monday 09 March 2020, we set out a series of proposals designed to help realise the potential of the biopharmaceutical sector for Europe’s economy, its research eco-system and patients.
As a life-scientist and a passionate European, I am deeply concerned by the long-term trend of research and development activity moving to other regions and the impact on European patients. Europe has an unparalleled history of medical innovation - Its future is much less certain. I hope that the publication of the Industrial Strategy and of the Pharmaceutical Roadmap will be catalysts to put Europe back on course to once again be a world leader in medical innovation.
[1] p.3, Communication from the Commission to the Council and the European Parliament on the Outlines of an Industrial Policy for the pharmaceutical sector in the European Community, Commission of the European Communities (1994)
[2] Pharmaprojects & SCRIP, March 2019
[3] EFPIA member associations & PhRMA, yearly publications 1990-2019
[4] https://www.efpia.eu/media/412939/efpia-economic-societal-footprint-industry-final-report-250619.pdf
