Nathan Jessop is a columnist for Pharmaceutical Technology Europe.

Nathan Jessop

Rare diseases present an area of substantial unmet medical need. In Europe, a disease is defined as rare if it affects less than five people per 10,000 (1). More than 6000 different rare diseases have been identified to date, and it has been estimated that approximately 30 million people living in the EU suffer from a rare disease (2). Most rare diseases are caused by genetic defects, but environmental  exposure during pregnancy or later on in life, often in combination with genetic susceptibility, could also be a cause (1). 

Most pharmaceutical companies have shown little interest in developing drugs for rare diseases because these drugs were unlikely to generate sufficient return on investment. As a result, treatments for these disorders became known as 'orphan drugs'. To stimulate research in this area, a number of governments developed specific orphan-drug legislation, which provided incentives to companies who invested in this area. The types of incentives included are reduced fees for marketing-authorisation applications, scientific advice or protocol assistance, and protection from market competition once the drug is authorised (2). In 1983, the US adopted the Orphan Drug Act, with Japan and Australia implementing a similar legislation in 1993 and 1997, respectively. Europe followed relatively late in 1999 when it adopted Regulation (EC) N° 141/2000 on orphan drugs, but the legislation has been widely considered to be successful. Since its introduction, the European legislation has resulted in the review and approval of 69 treatments for some 55 different conditions (2, 3).  

Despite improvements in the situation for patients with rare diseases and their families, efforts are continually being made by stakeholders to raise awareness of the condition, widen access to treatment and ensure appropriate medical representation. Due to the political make-up of the EU, competencies for healthcare are split across countries; hence, the authorisation of a particular orphan drug does not necessarily mean that it is available to all patients in the region. A key annual event to raise awareness is Rare Disease Day, which is held on the last day of February (2). A main coordinator of this event is the European Organisation for Rare Diseases (EURORDIS), which represents 585 rare disease patient organisations in 54 countries covering over 4000 diseases (4). 

A controversial issue regarding orphan drugs is their pricing. Although they receive incentives to develop orphan drugs, particularly market exclusivity for 10 years in the EU, companies argue that they must still charge high prices to guarantee sufficient return. European healthcare systems are already struggling to cover the costs of treatment for citizens and there is a concern that orphan drugs are now placing too much pressure on the system.  

Although the need for orphan drugs is recognised, critics argue that industry is taking advantage of the incentivised system to maximise profits and that healthcare systems cannot cope with such pricing in the long term. In the past, small specialised companies focused on orphan drugs, but in recent years, a growing number of large pharmaceutical companies have moved into this field. Thomson Reuters Life Sciences estimated that the current global market for orphan drugs is worth US$50 billion and growing at 6% per year (5). 

Companies continue to state that it costs around US$1 billion to develop a new drug and that they need substantial revenue to cover the costs of developing drugs that fail during R&D (5). However, many observers believe that a number of the orphan drugs on the market have exceeded the costs of their development by a wide margin. A report by the BBC in January 2013, based on the views of Dr Carl Heneghan, director of the University of Oxford's centre for evidence-based medicine, suggested that approximately one in 10 orphan drugs has generated more than £620 million of revenues (6). Furthermore, the pricing of these drugs in relation to the patient population appears to be very high. For example, nine of the most expensive orphan drugs on the market, which cost more than £125,000 a year, treat diseases afflicting fewer than 10,000 patients (6).  Soliris (eculizumab), used to treat patients with paroxysmal nocturnal haemoglobinuria and atypical haemolytic uraemic syndrome, was approved in 2007 and is frequently cited as one of the world's most expensive drugs, at £250,000 a year (6, 7). Nevertheless, the manufacturer, Alexion, believes that the price is fair. It states that one third of patients died within five years before Soliris was available (5). 

One of the harder arguments for companies to justify in today's cost-conscious healthcare environment is when an existing therapy has been modified and adapted to become an orphan drug. In the BBC report, Dr Heneghan cited the example of oral ibuprofen, which costs approximately £0.08 per gram (6). The drug also exists on the market as an intravenous form (Pedea) for the treatment of the orphan disease patent ductus arteriosus, where it costs £6575 per gram (6). To account for this price variation, Orphan Europe, the manufacturer, explained that the drug was specially developed for a rare-disease population and should not be compared in such a straightforward manner with ordinary oral ibuprofen (6). 

In 2009, Firdapse, which contains the active substance amifampridine, was approved in the EU as an orphan drug for Lambert-Eaton myasthenic syndrome. However, a 2012 paper in the 

suggests that the branded product represents a slight modification of an unlicensed and low-priced compound that has been available for several decades (3). The unlicensed drug is 3,4 diaminopyridine (base form) whereas Firdapse is the phosphate-salt formulation of 3,4 diaminopyridine (7). It was suggested that the pricing of the Firdapse was 50- to 70-fold higher compared to the unlicensed formulation (6).  

This issue prompted a number of physicians to write an open letter in the 

(BMJ) to UK prime minister David Cameron complaining about the way in which companies were unfairly using orphan-drug legislation to their advantage (8). A series of exchanges between BioMarin, the manufacturer, and the signatories to the BMJ letter took place, culminating in the lead author writing an FP10 prescription for the cheaper unlicensed drug, 3,4-diaminopyridine (8, 9). Although BioMarin then voluntarily cut its prices for Firdapse by 10%, the UK commissioners network did not recommend funding of the drug (8). The UK commissioners network took the view that although legally Firdapse and 3,4 diaminopyridine were two separate clinical entities, the two forms of the drug could be considered to be bioequivalent (7). It was calculated that on average, the base form of the drug costs £1200 per patient per annum, whereas Firdapse costs, on average, £44,000 per patient per annum (7). This development apparently led to some prescriptions of the unlicensed 3,4 diaminopyridine (base form), which could be legally challenged by the UK's Medicines and Healthcare Products Regulatory Agency (MHRA) or Biomarin (8). However, as the lead author of the BMJ letter pointed out, such a legal  challenge might prove embarrassing for these organisations (8). 

Despite the controversy concerning certain high-cost orphan drugs, at present, these treatments only account for a small percentage of the overall European drug budgets. In 2007, orphan drugs accounted for 1.7% of the French drug budget, 2.1% in Germany, 1.0% in the UK, 1.5% in Italy and 2.0% in Spain (3). However, healthcare systems need to be designed to cope with future demand, and given that most rare diseases are not well treated, there is a likelihood that countries will be asked to fund additional orphan drugs in the future. One study suggested that there will be between eight and 12 new orphan drugs approved in Europe each year (10). With patients wanting access to these treatments but companies seeking to maximize revenues, European governments are now placed in a difficult situation of over pricing. Although there has been speculation that governments will take a tough line with the industry, it remains to be seen what form such action will take and whether they will remove some of the specific market incentives that were designed to stimulate orphan drug R&D in the first place (11). A delicate balance will need to be struck so as not to reverse the advances made in orphan-drug development and treatment access. 

1. European Commission website, "Rare Diseases," 

ec.europa.eu/health-eu/health_problems/rare_diseases/index_en.htm

2. European Medicines Agency website, "28 February 2013—Rare Disease Day: Rare disorders without borders," 

www.ema.europa.eu/ema/index.jsp?curl=pages/news_and_events/news/2013/02/

4. European Organisation for Rare Diseases (EURORDIS) website, 

5. K. MacDonald, BBC, "Orphan drugs: Remarkable drugs at remarkable prices," Press Release, 16 Jan. 2013. 

6. BBC website, "A GP's view: Orphan drug costs prohibitive," 

7. West Midlands Commissioning Policy (WM/35), 

www.wmsc.nhs.uk/uploaded_media/Firdapse%20-%20WM35%20-%20Dec%202010%201.pdf

website, "It's the BMJ wot won it, and the NHS should think like Tesco," 

blogs.bmj.com/bmj/2011/01/11/david-nicholl-its-the-bmj-wot-won-it-and-the-nhs-should-think-like-tesco/

9. V. MacDonald, Channel 4 News, "Drug companies exploiting law for profit," 

www.channel4.com/news/drug-companies-exploiting-law-for-profit

10. European Organisation for Rare Diseases (EURORDIS) website, "Orphan drugs: rising to the challenge to ensure a better future for 30 million patients in Europe," 

, "Orphan drugs could lose their government subsidies," Press Release 11 Apr. 2013. 

Articles

Orphan drugs for rare diseases are a major area of investment for pharmaceutical companies, but are they becoming too expensive for Europe to afford them?

The Dilemma with Orphan Drugs

A major financial concern for pharmaceutical companies is the so-called "patent cliff," which represents the sharp downturn to be expected for product sales upon the expiry of its patent. In 2012, an estimated US$33 billion of sales was reported to have been lost as a result of the patent cliff (1). It has been suggested that for the period between 2012 and 2018, more than US$290 billion of sales would be at risk from patent expirations, with 2015 being the most crucial year for pharmaceutical companies (1). 

			Patent expiry results in generic-drug competition and pharmaceutical companies must plan well in advance on how to deal with this difficult period. Most companies will emphasise the strengths of their product pipelines and highlight the next generation of innovative products that they hope to bring into the  market. These products are often follow-on products for existing ones, for example the use of different formulations, rather than truly novel therapies. 			

With many companies being listed on the stock market, investors and analysts will be looking for companies that have potential to launch new blockbusters and bring in sufficient revenues to make up for the shortfalls of products with expired patents. However, replacing previous blockbusters with next generation products is not easy, particularly in today's harsh pricing environment. Some companies may find that their own pipelines are not strong enough to guarantee promising products. As a result, they may consider alternative strategies such as acquisitions or mergers with other companies to strengthen their product portfolio. 

Sanofi is one company that recently had to contend with the patent cliff. However, because it had already planned for the patent cliff a long time ago, the company's management has confidently predicted that it will be able to deal with this scenario by the end of 2013 (2). In 2012, Sanofi's profits were set for a 15% sales drop due to patent expiries of major products, primarily its anticoagulant Plavix (clopidogrel) and the blood pressure drug Avapro/Aprovel (irbesartan) (2, 3). By the end of 2012, sales of Plavix had dropped 6% at constant exchange rates to €503 million, while sales of Avapro/Aprovel had dropped by 34% to €212 million (2). The company was able to somewhat compensate by improved sales of its diabetes franchise. In particular, sales of Lantus (insulin glargine) grew 23% to €1.34 billion, thereby becoming the company's leading product  (2). Nevertheless, Sanofi's emphasis has been onits pipeline products, with the company expecting to launch 18 new drugs by the end of 2015 (3). In addition, Sanofi acquisition of Genzyme has helped expand its biotech potential and capitalise on Genzyme's existing track record in rare disease therapies (2, 3). 

			Although the focus has been on next generation products for companies dealing with the patent cliff, it does not mean that companies have given up on products nearing their patent expiration. In fact, companies are proactively defending the patents of these products from potential infringement by generic-drug competitors. While there must be a sound legal reasoning for such cases, for generic-drug companies, these complex legal defences by  originator companies can be viewed as primarily designed to delay entry of their products. Given that a  blockbuster drug brings in billions of dollars per year in sales, even delaying generic drug competition by weeks represents a considerable amount of money from continued sales of the product for the originator company. Companies must be extremely careful when using legitimate means to deal with potential generic drug competition but there are signs that this is not always the case. 			

Recently, the Office of Fair Trading (OFT) launched an investigation into GlaxoSmithKline (GSK) over its antidepressant product Seroxat (paroxetine). The OFT is investigating whether GSK paid other companies to slow down production of cheaper, generic versions of the drug, thereby costing the National Health Service (NHS) extra money because of the lack of alternatives to the branded drug (4). GSK was accused of abusing its market dominance by using "pay-for-delay" agreements between 2001 and 2004 to persuade Alpharma, Genetics UK and Norton Healthcare to slow development of their generic  alternatives (4). GSK admitted that it had certain agreements with the companies highlighted, but denied motives of delaying entry of generic paroxetine into the market. 

This is the first time the OFT has launched such an investigation in the UK. Pay-for-delay agreements are taken seriously because the NHS may  be denied significant cost savings if companies are able to delay the potential emergence of generics (5). At present, the OFT has not revealed how  much GSK might have paid the other companies for delaying their products but it has been suggested that if the OFT proves its case, GSK could be fined 30% of its UK turnover during the  2001–2004 period, which has been estimated at £1.4 billion per year (4). 

Although GSK's case came as a shock for the UK, pay-for-delay agreements have been investigated before in Europe. In January 2013, the European Commission announced the launching of an enquiry into the activities of Johnson & Johnson (J&J) and Novartis over a potential pay-for-delay agreement between their respective Dutch subsidiaries in relation to fentanyl, a painkiller (6). According to the European Commission, Janssen-Cilag, the J&J subsidiary supplying fentanyl in the Netherlands, came to an agreement with generic competitor Sandoz, a Novartis subsidiary, in July 2005 (6). As a result, Sandoz avoided entering the market with generic fentanyl patches from July 2005 until December 2006, even though there was no regulatory barrier to develop and market generic versions of the product. The  European Commission alleges that this practice may have delayed entry of cheaper generic medicines for up to 17 months and kept prices for fentanyl artificially high in the Netherlands. If the case is proven, then this may represent a breach of EU antitrust rules, specifically Article 101 of the Treaty on the Functioning of the EU (TFEU), which bans practices that restrict competition (7). 

The companies currently involved in European pay-for-delay cases are likely to be nervous because of a previous case involving AstraZeneca. In June 2005, the European Commission adopted a decision that cost AstraZeneca a €60-million fine for misusing the patent system and the procedures for marketing pharmaceuticals (8). In one instance, AstraZeneca had provided misleading  information to its parent offices in Belgium, Denmark, Germany, the Netherlands, Norway and the UK to prevent generic-drug companies from competing against its antiulcer product Losec (omeprazole) (8).  Another abuse by the company involved deregistration of market authorisations for Losec in selected countries to exclude competition from generic firms and parallel traders (8). AstraZeneca's defence that its conduct constituted normal competition was dismissed. 

			Today, pharmaceutical companies are not only facing immense  pressure from the patent cliff, but they are also being increasingly scrutinised in the public eye on how they respond to these challenges. In AstraZeneca's market-abuse case, it was highlighted that the patent system afforded pharmaceutical  companies legal protection for the innovative drugs they bring to market. As such, the system was  designed to reward innovation and help companies generate revenues to undertake further research (8). However, the authorities stated that they took a dim view on abuses of the patent system as well as other underhand approaches by companies to extend the protection of their blockbuster products and delay generic drug entry. 			

Therefore, it can be expected that if GSK is found guilty of abusing their market position, the company will face a considerably high fine by the OFT so that the message gets through to other potential offenders in the pharmaceutical industry (6). Similarly, J&J and Novartis will be severely punished by the European Commission if a case against them is proven (7). The cost of pharmaceuticals to the public healthcare system is under tight scrutiny and authorities are keen to ensure that they are getting value for money. 

2. PM Live website, "Sanofi predicts end of patent cliff in 2013," 

3. Pharmaceutical Field website, "Patent expiry means 2012 is 'marked in red' for Sanofi," 

4. N. Neville and J. Rankin, The Guardian website, "GlaxoSmithKline accused of paying rivals to delay generic medicine," 

5. Office of Fair Trading website, "OFT issues statement of objections to certain pharmaceutical companies," 

6. European Commission, "Antitrust: Commission sends Statement of Objections to J&J and Novartis on delayed entry of generic pain-killer," Press Release, 31 Jan. 2013. 

http://europa.eu/rapid/press-release_IP-13-81_en.htm

7. European Commission, "Antitrust: Commission opens proceedings against Johnson & Johnson and Novartis," Press Release, 21 Oct. 2011. 

http://europa.eu/rapid/press-release_IP-11-1228_en.htm

8. European Commission, "Antitrust: Commission welcomes court judgment in AstraZeneca case," Press Release, 1 July 2010. 

http://europa.eu/rapid/press-release_MEMO-10-294_en.htm

As the dreaded patent cliff continues to haunt the pharmaceutical industry, some companies are resorting to desperate measures to delay generic drug entry into the market.

Responding to the Patent Cliff

In 2008, a report published by an economics professor at Johns Hopkins University, in partnership with the Association of British Pharmaceutical Industry and the UK Vaccines Industry Group, predicted that the vaccines sector had the potential to enter a new golden era (1). The early part of the 20

  century had seen vaccines play a major role in combatting infectious diseases, but since the 1970s, cost pressures, mergers between companies, production setbacks and a series of high-profile liability cases have led to many manufacturers abandoning this area in favour of more profitable alternatives.  

The potential for manufacturing issues to severely disrupt operations remains a constant headache for vaccine manufacturers. In Europe, several major manufacturers experienced such problems during 2012.  

In October 2012, several EU member states suspended the use of some anti-influenza vaccines manufactured by Novartis because of suspected quality defects. Although there was no evidence of the problems impacting efficacy and safety, the authorities acted as a precautionary measure. The Italian Medicines Agency was the first to act over Novartis' Aggripal, Fluad and Influpozzi products when it received a verbal notification from Novartis. The agency subsequently warned other member states, the European Commission and the European Medicines Agency (EMA). Although Novartis provided the Italian authorities with data it believed supported the high quality, efficacy and safety of their products, other countries followed Italy's lead in banning the products (2–5). Reports of protein particulates in some vials were enough to persuade France, Austria, Germany, Spain and Switzerland to act. Canada and Singapore also followed suit. 			

According to Novartis, the particulates reported in the vials were all "normal and necessary components" of their influenza vaccines and that the aggregation of these proteins was not considered unusual in terms of vaccines manufacturing (6). Furthermore, Novartis stated that clinical data demonstrated similar safety and immunogenicity profiles to prior years for these products. Additional data from the ongoing seasonal vaccination campaign in Europe had also not revealed any safety signals. Nevertheless, the Italian authorities sought an explanation from Novartis as to why it had taken until October to inform them of the particulate issues, despite the company identifying such problems in July (7).  

The manufacturing issues have not only proven to be damaging to Novartis' reputation, but may also represent a new financial setback for the company's vaccines unit. The unit has been underperforming financially since 2010, when it had revenues of $2.9 billion (2). In 2011, reports claimed that the company had made a $249 million operating loss on $2 billion in revenue. The 2012 manufacturing issues will inevitably dampen prospects of surpassing 2010's revenue. 

The influenza vaccine manufacturing issue has led to concerns that there will be a shortage of influenza vaccines this coming winter in the UK, Germany, Switzerland and Italy, although most governments should have alternative sources and strategic reserves in place. Germany, for example, has turned to GlaxoSmithKline and Abbott to help make up any shortfall, and predictions from the German Health Ministry suggest that the number of available flu vaccines available in Germany will be 14 million, which is comparable to 2011 (5). Despite these reassurances, disruptions tend to cause controversy between governments, pharmaceutical companies and healthcare professionals about why vaccine shortages occur in the first place. With respect to the situation in Germany, pharmaceutical companies and some physicians have blamed insurance companies, whom they claim negotiate exclusive contracts with vaccine manufacturers in exchange for better rates, which puts patients at risk (5). 

In October 2012, Crucell, which is based in the Netherlands and provides approximately 10% of the UK's influenza vaccine stock, halted production after discovering problems with two of its product batches. The company has stated that it is continuing to conduct quality tests before releasing any more vaccine, although it has not recalled any of the stocks that have already been distributed. The manufacturing issues at Crucell are particularly frustrating for Johnson & Johnson, which finalised acquisition of the company in 2011 for $2.4 billion, with the aim of accessing the global vaccines market. The acquisition was Johnson & Johnson's largest since 2006, when it took over Pfizer's consumer unit for $16.6 billion. For now, Johnson & Johnson will be preoccupied with resolving the manufacturing issues and reassuring their existing vaccine clients before the company can pursue its intended ambitious growth plans in the sector. 

Another company that has recently suffered vaccine manufacturing issues, although not for anti-influenza products, is GlaxoSmithKline. In October 2012, the company cooperated with Australia's Therapeutic Goods Administration for a voluntarily recall of six batches of Infanrix hexa, a vaccine product used to prevent diphtheria, tetanus, pertussis (whooping cough), hepatitis B, poliomyelitis (polio) and Haemophilus influenzae type b (Hib). Testing had revealed low-level contamination in certain batches dispatched between August 2011 and January 2012, although the company stressed that no reported adverse events had been directly linked to this issue. Later in October, the company recalled a single lot of the same vaccine in Canada, citing potential microbial contamination, but continuing to state that it was purely a precautionary measure (8). In November 2012, GlaxoSmithKline confirmed that the affected batches had originated from its plant in Rixensart, Belgium (9). Potential microbiological contamination had been identified in the environment where bulk antigens for some of its Infanrix Hexa, Infanrix-IPV and Infanrix- IPV/Hib vaccines were placed, but release tests (including sterility tests) on intermediates and on the final containers led to the conclusion that the final products released from the facility had not been contaminated (8). The company continues to resolve the issue, but the recall of these products may have an impact in up to 20 countries. As well as many EU Member States, countries such as Lebanon, Malaysia, Qatar, Brazil and Vietnam may be affected by short supplies of the vaccine (9). 

Vaccines are essential to combat a range of disease threats and the migration of companies out of the sector has worried health agencies worldwide. Efforts have been made to stimulate renewed industry interest and persuade companies that it is an ideal opportunity for them to harness scientific advances made in genetics and biotechnology. There are signs that these factors are persuading some companies to increase their activities in the vaccines sector, but as recent experience shows, manufacturers face considerable technical challenges. After a troublesome last quarter of 2012, Novartis now appears to be on the verge of resolving the manufacturing issues it has faced with its influenza vaccines. Canada and Switzerland lifted their bans in late October, followed by Singapore and then Italy in the first part of November. However, the company still needs to work with authorities in other countries to allow supplies to resume. For other companies, such as Crucell and GlaxoSmithKline, efforts to restore confidence in their vaccine expertise look likely to continue through 2013. 

What are the Prospects for a New Golden Era in Vaccines?

 Pharmaletter website, "Novartis' flu vaccines suspended in several countries on suspected quality issues", 

 Fiercepharma website, "Italy bans Novartis vaccines even after company assures their safety", 

 Reuters website, "France halts sale of Novartis flu vaccine", 

 Deutsche Welle website, "Germany moves to cut off vaccine shortage", 

 The Globe and Mail website, "Canada suspends distribution of Novartis flu shots", 

 Fiercepharma website, "Novartis plant delay, vaccine woes steal spotlight", 

 Health Canada website, "Health Canada Endorsed Important Safety Information on Infanrix Hexa", 

 In-pharmatechnologist website, "GSK pulls vaccine batch in Canada over contamination concerns", 

Vaccine manufacturing was predicted in 2008 to be on the cusp of a golden era, but instead the industry has experienced cost pressures, high-profile liability cases and production setbacks.

Manufacturing Misery in Vaccines

To fulfil its duties, EMA works closely with several European organisations, including the European Commission, the European Parliament, the Council and Presidency of the EU and numerous national bodies in individual member states. EMA also cooperates with decentralised agencies of the EU, such as the European Centre for Disease Prevention and Control, the European Food Safety Authority, the European Environmental Agency and the European Monitoring Centre for Drugs and Drug Addiction. In recent years, however, EMA has placed a growing emphasis on collaborating with international pharmaceutical regulators in areas such as inspections, safety of medicines and exchange of information on issues of mutual concern (1, 2). This focus is to ensure a more global approach for the manufacture and supervision of medicinal products in the long term.  

EMA's collaboration with the US FDA tends to receive the most media attention, but the European regulator has also been increasingly interacting with its counterparts in Japan at the Ministry of Health, Labour and Welfare (MHLW) and the Pharmaceutical and Medical Devices Agency (PMDA). 

Growing collaboration with Japan boosts drug applications and reviews

The Japanese regulators have been very committed to improving their relationship with both EMA and FDA following criticism from the pharmaceutical industry regarding a perceived time lag in Japan in the approval of new drugs and medical devices compared with the EU and the US (3). These perceptions have led some manufacturers to delay their submissions to Japanese regulators. For example, applications for an estimated 69 new active substances were submitted between 2002 and 2011 to regulators in the US, EU and Japan. Approximately 77% of these were submitted to PMDA more than one year after submission to EMA or FDA (4). Japanese regulators seem to have realised that it is imperative they improve their international standing.  

Confidentiality agreements between EMA and its Japanese partners have been in place since 2007, and were recently extended for a further year in July 2012. Such agreements facilitate the exchange of confidential information between the agencies as part of their regulatory and scientific processes. Shared information may include advance drafts of legislation and regulatory guidance documents, as well as non-public information related to ensuring the quality, safety and efficacy of medicinal products. EMA personnel also meet regularly with their counterparts from the MHLW and the PMDA.  

In November 2009, Japan sent a Liaison Official to EMA's offices as a pilot exercise. In July 2012, a report was published by EMA concerning the progress in collaboration that had been made since the appointment (5). The Japanese representative meets weekly with EMA's International Liaison Officer to discuss ongoing activities and areas that need to be addressed. Interactions facilitated by Japan's representative have covered a number of different specialist areas, including advanced therapy medicinal products, pharmacogenomics and biomarkers, paediatrics, orphan drugs and nanomedicines (5–7).  

It was concluded that the placement of the Japanese representative at the EMA has been extremely beneficial in terms of education, proactively raising awareness of possibilities for collaboration and the general timeliness of inter-agency communication. Although the EMA has not yet appointed a Liaison Officer to PMDA or MHLW, such a move seems likely in the future.  

Cooperation between Europe and Japan has been particularly beneficial in the area of advanced therapy medicinal products. Staff from PDMA attended EMA's Committee on Advanced Therapies (CAT) Workshop on Stem-cell based Therapies, followed by the CAT plenary, in May 2010, and provided input from their perspective on a draft reflection paper on stem cell-based medicinal products. Since then, PDMA has proposed additional collaboration in the area of cell therapy (5). Through a joint EU–FDA–PMDA regulatory mechanism, PMDA has also participated in scientific advice regarding renal toxicity biomarkers. 

Rare diseases have also seen much interest from both regulators. MHLW sent an external expert to EMA as part of a visiting expert programme between September 2010 and March 2011 (5). The representative was embedded in the Orphan Medicines Section of EMA and provided information to EMA's Scientific Committees and staff members. This initiative has led to better information exchange between the agencies on the outcomes of orphan medicine designations in each region (7). It has also focused attention on practical measures, such as the provision of information from the Japanese regulator in English. Regular telephone conferences are now held, usually on a quarterly basis, to discuss orphan drug topics. 

Long-standing relationships continue with US and others

EMA's most long-standing and well-documented relationship is with the FDA, with which it has had confidentiality arrangements in place since 2003. These arrangements became effective for an indefinite amount of time in September 2010. The increases in interactions between the two agencies have been driven by the Transatlantic Administrative Simplification Action Plan, which was established in 2007 to remove the administrative burden involved in interactions between regulators in Europe and the US (8). The initial plan outlined several projects, including collaborations on inspections (including in third countries), combating counterfeit medicines, safety reporting from clinical trials, exchange of information regarding policies to promote innovation in drug development, the development of biomarkers and joint agency validation of these with respect to product development and recommendations for advanced therapy medicinal products. An additional boost to cooperation was the appointment of a permanent representative from FDA to EMA's office in London in 2009. In 2010, the EMA followed suit with a permanent representative at FDA. One of the most recent initiatives was launched in January 2012 to share work on inspections of manufacturing sites in each other's territories. The general approach will use information exchange for sites and will generally focus on sites that are known to both agencies and that have a history of satisfactory GMP compliance (9). 

In addition to the US, EMA also has long-standing agreements with partner regulatory bodies in Canada, Switzerland, Australia and New Zealand, and supports the European Commission's collaboration on pharmaceuticals with China, India and Russia. In 2010, EMA and the Chinese State Food and Drug Authority (SFDA) also agreed to cooperate on GMP and GCP inspections. In addition, EMA provides SFDA with support for training and capacity building activities at their request.  

Another important partner for EMA is the World Health Organisation (WHO), with whom it works on projects concerning medicines intended for markets outside of the EU, the quality of medicines and the development of international non-proprietary names (INNs). EMA provides support to WHO to assist in capacity building for regulatory bodies in emerging markets, and also participated in the WHO's "make medicines child size" initiative, which first launched in December 2007 (10). Few essential medicines exist in child-size dosage forms and there is often insufficient information about the paediatric use of such medicines. The EMA-backed initiative has identified certain research, development, regulatory, legislative and supply gaps that need to be addressed to ensure that children receive appropriate medicines, at the right dose and with enough supportive information for the prescriber. The priority areas for the initiative are HIV/AIDS, malaria, pneumonia, tuberculosis and diarrhoea.  

In India, EMA works with regulators for the application of international standards in manufacturing and clinical trial activities with Indian regulators are invited to the agency's annual good-clinical-practice (GCP) inspector training. Indian regulators are under considerable domestic pressure to improve clinical trial standards in the country. In 2011, it was estimated that there were 438 deaths associated with clinical trials (11). Indian regulators have been attempting to strengthen their clinical trial regulations as a result, but critics continue to argue that their efforts are insufficient (11). Because many of the clinical trials in India have foreign sponsors, including some of the world's major pharmaceutical companies, Indian regulators are seeking advice from EMA and other bodies with long-standing experience in the field.  

The EMA's work with Russia is part of the European Commission's existing arrangements with the country in the area of pharmaceuticals. In 2007, a dedicated EU–Russia regulatory dialogue subgroup on pharmaceuticals was launched and the EMA gets involved when there are scientific or technical issues to discuss. 

Looking forward, EMA says that it views international cooperation as a core activity (2). Its current international strategy aims to improve communication and create synergies through collaboration with its partner regulators (2). Important international activities, in particular, include forming mutual-recognition agreements (MRAs) and other complementary arrangements. 

As drug development occurs in an international environment, regulatory agencies must collaborate and there is renewed focus on such interactions through dedicated strategies formalising the processes involved. Regulators in all regions are also under increased pressure to improve their performance, but as public bodies they have limited resources at their disposal. Another reason, therefore, for the interest in regulatory collaboration is the ability to learn from the experiences of counterpart agencies, as well as avoiding duplication of work and facilitating synergic activities. 

3. K. Tadano, "PMDA's International Strategic Plan and its Implementation" (PMDA website), 

4. Centre for Innovation in Regulatory Science (CIRS) website, "May 2012 Slide of the Month," 

5. EMA website, "Report on interactions between the Japanese Ministry of Health, Labour and Welfare (MHLW)/Pharmaceuticals and Medical Devices Agency (PMDA) and the European Medicines Agency (EMA)," 

6. Y. Hayashi, "EU, USA and Japan (II)– Reports from Regulators on Exchange Assignments" (PMDA website), 

7. EMA website, "European Union — Japan orphan medicines cooperation". 

8. EC website, "Medicines Regulation: Transatlantic Administrative Simplification Action Plan," 

9. EMA website, "Enhancing GMP Inspection Cooperation Between the EMA and FDA," 

10. WHO website, "Essential medicines for children". 

11. E. Silverman, "Clinical Trial Deaths In India Dropped" (Pharmalot website, 2012), 

EMA has been increasing its interactions with other regulatory agencies across the globe. The agency's most talked about collaboration is with FDA, but EMA has also been intently focused on bolstering its relationship with its counterparts in Japan, India and Russia.

EMA Focuses on Greater International Collaboration

Paediatric-drug development is an area that has lagged in terms of regulatory attention in the EU, partly because of the difficulties in establishing consistent regulations between the different member states. The US introduced its Pediatric Rule in the late 1990s, but the EU's own Paediatric Regulation (Regulation (EC) 1901/2006) only came into force in January 2007. The European Commission is preparing to report back to the European Parliament in 2013 on the 5-year experience with the Paediatric Regulation.  

Many drugs currently used for children in the EU have not been specifically tested in paediatric populations (defined in Europe as 0–17 years of age) during development because of the ethical concerns of involving children in clinical trials. In the EU, research papers have suggested that this is the case for over half of paediatric medicines (1). Most products are tested in adults, but not necessarily in the same indication as used for paediatrics because they are often prescribed to children off label at the discretion of physicians. The decision over what medicines to prescribe to children may also vary between member states because of differing national laws and regulatory systems.  

The Paediatric Regulation provides harmonised guidance and incentives for developing safe and effective paediatric medicines in Europe. The regulation requires all applications for marketing authorisations submitted to EMA to include either a product-specific waiver or a paediatric investigation plan (PIP) approved by the EMA's Paediatric Committee (PDCO). The PIP must contain a full proposal all paediatric studies, including their timings, the age groups concerned and all the age-appropriate formulations. In some cases, it is possible to defer the start of some or all of the paediatric studies until after a marketing authorisation has been granted (based on studies in adults).  

The regulation also offers incentives for paediatric development. Upon completion of an agreed paediatric plan, to the satisfaction of regulatory authorities, the medicinal product will be granted an extra 6 months patent protection through an extension of the duration of its Supplementary Protection Certificate (SPC). This incentive applies if the product is authorised in all EU member states and the relevant information from the paediatric studies (whether negative or positive) is incorporated into the summary of product characteristics. Interestingly, if such conditions are fulfilled, the extension will apply whether the data generated support a paediatric indication or not. Once a PIP is completed and has been validated by the regulator, a compliance statement is issued, which can be presented to the National Patent Offices. 

Another aspect of the EU's Paediatric Regulation was the establishment of a new type of marketing authorisation, the paediatric use marketing authorisation (PUMA), which was intended to encourage the development of off-patent products for use in paediatric populations. Only medicines intended solely for use in children are eligible for a PUMA, which, if granted (via the EU's Centralised Procedure), may lead to a new period of market exclusivity of 10 years (1, 2). 

In July, EMA presented a routine report to the European Commission (EC) on the companies that benefited from the Paediatric Regulation in 2011 (3). For 2011, EMA reported that its Paediatric Committee (PDCO) adopted 107 positive opinions on paediatric investigation plans (PIP), a similar number to 2010. The Agency is planning to reveal full details of these decisions later in 2012 (3).  

Statistics show that the introduction of the Paediatric Regulation has prompted greater drug development with children in mind. In 2008, 81 PIPs were agreed by the PDCO, but by 2009 this jumped to 122 (4). In a 2011 published analysis, it was documented that the highest number of PIPs were for endocrinology (13.4%), oncology (11%) and infectious (10.8%) and cardiovascular diseases (7.1%) (5). Overall, the proportion of paediatric trials as a percentage of all clinical trials was only considered to have increased to a modest extent, although it was suggested that this might be because more than 80% of paediatric trials had been deferred until after adult drug development (5). 

It has been suggested by independent observers that the impact of the Paediatric Regulation should be closely monitored to assess whether it meets the needs it originally set out to address (1). 

Authors in the US have expressed concern about the effect of the US Pediatric Rule because the paediatric studies reported to FDA did not necessarily address the most urgent needs in paediatric drug development (6). In the US, some of the major areas that received attention in terms of paediatric drug development were antidepressants and mood stabilisers, lipid-lowering preparations, HIV antivirals, and nonsteroidal antiinflammatory and anti-rheumatic drugs. These areas were identified as having more in common with the largest commercial markets for adult medicines rather the needs of the paediatric population. In particular, the authors reported that among the drugs granted paediatric exclusivity, there were 5 out of the "Top 10" prescription drugs with the highest sales figures in North America in 2005, generating combined sales of $24.1 billion (6).  

The authors also looked at the European situation and suggested that the EU approach to stimulating the development of off-patent drugs for paediatric use, through a PUMA, might go some way to counteracting industry's desire to focus only on drugs that were already generating considerable sales in the adult market. In general, they remained concerned that attempts by US and EU regulators to stimulate paediatric drug development may not have the desired effect and would be merely seen by pharmaceutical companies as a commercial opportunity to expand sales in existing adult market areas (6). 

In its July report, EMA commented that several companies had failed to comply with the Paediatric Regulation (3). In 2011, the number of delayed PIP applications was 44, which was an improvement over the 65 noted in 2010. However, the length of delay was greater in 2011 than it had been the previous year. Out of the 44 delayed PIP applications, only 4 were considered to have a valid justification for the delay. Twelve applications did not include any justification at all. While noting these delays, it is unclear from the report what action the EMA intends to take now against the offending parties. Apart from repeating the requirements that a PIP must be submitted in a timely manner, no potential punishments are actually detailed. The regulators only hint that the Commission Regulation on financial penalties (Commission Regulation (EU) No 488/2012) may be a future deterrent. 

European regulators are actively working to make progress on practical issues with respect to paediatric clinical trials. The setting up of the European Network of Paediatric Research at EMA (Enpr–EMA) in May 2010 was a key development (3, 7). Although it does not perform clinical trials, fund studies or research, or decide on areas for paediatric research, Enpr–EMA contributes to greater scientific understanding in the field and improves administrative competence at a European level. Enpr-EMA has members both inside and outside of the EU to represent various therapeutic areas, age groups and specific activities in paediatric medicine, such as pharmacovigilance. Enpr–EMA also holds annual workshops to discuss progress, with the last one being held in March 2012. At is 2012 meeting, Enpr–EMA discussions were still focused on how members could best collaborate and what approaches could be used to ensure representation from different stakeholders. Membership of the network is based on self assessment. According to the EMA's latest figures, 34 networks have submitted their self-assessment reports. At present, there are two networks that potentially fulfil all minimum criteria, but clarification over some issues is required before they can become members. Fourteen others still to meet the minimum qualifying criteria (3). The original deadline for networks to complete the self-assessment procedure was July 2010, suggesting that progress at Enpr–EMA is occurring slowly and it is too early to document an impact on paediatric development. 

The introduction of the EU's Paediatric Regulation has led to an increase in clinical trials involving paediatric subjects, but it is unclear whether the effects are what regulators initially desired. In particular, there is concern that the pharmaceutical industry is viewing the incentives as ways to expand sales for products that are already serving adult markets, rather than determining what paediatric medical needs are and prioritising these areas for drug development. From a practical perspective, Enpr–EMA promises much in terms of improving understanding of the field of paediatric drug development and ensuring that Europe has administrative processes conducive to approving such research. The EC is due to report to the European Parliament in 2013 on the impact of the Paediatric Regulation. This time may also be an effective point at which to assess progress with Enpr–EMA. 

1. M. Watzl, "The New Paediatric Regulation in the EU – Development, Implications and Comparison with US Experiences in Paediatric Drug Development" (German Society for Regulatory Affairs website, 2007), 

2. MHRA, "Medicines for children. Medicines and Healthcare products Regulatory Agency" (MHRA website, 2012), 

3. EMA, "Report to the European Commission: EMA/480331/2012" (EC website, 2012), 

4. P. Tomasi "The Paediatric Regulation as an instrument for European paediatric research. ENPREMA" (EMA website, 2011), 

7. EMA, "European Network of Paediatric Research at the European Medicines Agency (Enpr-EMA)" (EMA website, 2012). 

Regulators in both the EU and the US have attempted to stimulate paediatric-drug development with incentives offering extended periods of patent protection, but are these actions having the desired effects?

Regulatory Intervention in Paediatric Medicines

Germany's pharmaceutical market is currently valued at around €38 billion, making it the largest pharmaceutical market in Europe (1). Historically, the country has been attractive for launching new medicines because companies were largely free to set their own prices. In addition, Germany possesses comprehensive pharmaceutical coverage and a high level of public funding. In general, most pharmaceuticals are eligible for reimbursement through Statutory Health Insurance, which covers about 90% of the German population. 

In 2008, German pharmaceutical prices were described by the Organisation of Economic Cooperation and Development as the highest among its 30 member countries (OECD now has 34 member countries), for both patented and generic drugs (2). Not surprisingly, in 2008, the number of products possessing a marketing authorisation in Germany far exceeded that of any other European market. Physician freedom in prescribing has helped drive pharmaceutical sales as well and even when measures were introduced to set volume targets for physicians, they had limited impact. In particular, it was difficult to hold physicians to account because the collection of data to convincingly prove overspending was problematic and because physicians would claim exceptional circumstances for their choice of prescribing (2). Similarly, in 2002, measures were introduced to allow pharmacists to substitute a cheaper drug whenever possible, but physicians still retained the right to oppose the decision. 

Despite market successes in Germany, the pharmaceutical industry expressed concerns that there were unnecessary delays in the approval of medicines. In 2003, a task force representing both industry and the government was convened to look at enhancing innovation in the German pharmaceutical market by examining steps to accelerate the national marketing authorisation procedure. Following recommendations in 2007, structural changes were made to the Federal Institute for Pharmaceuticals and Medical products (Bundesinstitut für Arzneimittel and Medizinprodukte, BfArM) to make it more independent and efficient in its decision-making. Some of the outcomes were, however, unfavourable for the industry, such as proposals for increased private funding of BfArM's activities, mainly coming from application fees related to the applicants' turnover (2). Pharmaceutical companies complained about the measures, but the changes appear to be representative of the steady shift in government decisions that do not necessarily align with industry viewpoints. 

The key sign that times were about to get tougher for pharmaceutical companies in Germany came with the introduction of a new healthcare bill known as AMNOG (Arzneimittelmarkt-Neuordnungsgesetz) in 2010. AMNOG formally signalled the end to the free pricing era in Germany, much to the displeasure of the pharmaceutical industry, which has complained that the reforms will lead to €2 billion in lost revenue per year (3). 

In contrast to the previous freepricing environment, companies are now required to demonstrate the benefits of their drugs early in the development process. Following an independent appraisal, these benefits are factored into the permitted price. AMNOG reforms required these data for all new reimbursable drugs and combination therapies launched after 1 January 2011. Although pharmaceutical companies have constantly opposed the measures, they are now firmly established.  

Under the new system, companies must compile a cost–benefit dossier comprising a variety of information about their product that must be submitted within three months of product launch. The Federal Joint Committee (G–BA), a group featuring representatives from the medical profession, insurance companies and hospitals, examines the evidence for the product to decide whether any added value will be recognised (3). The G–BA may decide that another body known as IQWiG (Institut für Qualität und Wirtschaftlichkeit im Gesundheitswesen) should conduct the cost–benefit analysis. The resulting outcomes for a product can be major added benefit, significant added benefit, unquantifiable additional benefit, or no added benefit. Although the evolving German system may seem to bear some resemblance to the work of the National Institute for Health and Clinical Excellence (NICE) in England and Wales, IQWiG has refuted such comparisons. Unlike NICE, IQWiG does not use the quality-adjusted life year (QALY) measure in its assessments. 

One of the irritations for the pharmaceutical industry is that it believes it has already demonstrated the value of its product by receiving regulatory approval in Germany, and yet is now being asked to compile an independent set of information to convince another official body to obtain a price. Companies see the measures as additional bureaucracy and a means by which the government can steadily pressure the industry into reducing its prices to curb spending. Now when companies prepare for product launch in the German market, they must also plan ahead and invest in the compilation of a cost–benefit dossier, as well as construct value arguments to satisfy the designated experts at the G–BA and IQWiG. They must proactively source a range of information, which they may be called upon to justify, from clinical therapeutic data and product costs through to information on potentially comparable products. For smaller companies, this process is particularly burdensome and there is little experience that they can draw upon. A further complication is that there continues to be legal debate in Germany about whether the new cost-benefit methods are consistent with federal social law (4). 

According to the current system, if it is decided that a product does not demonstrate medical value, then the reimbursement amounts are set by the G–BA at prices for a selected "comparably effective drug." If the G–BA decides that a product demonstrates medical value then companies must enter into negotiations with the Federal Association of Statutory Health Insurance Funds to set the price. Although full details of the pricing negotiations are not made public, it can be presumed that a higher level of benefit being granted by the G–BA should give companies greater negotiation power in such discussions. This is likely to have been the case for AstraZeneca's antiplatelet treatment Brilique (ticagrelor), which was deemed cost-effective for people with acute coronary syndromes. 

If agreement is not possible in pricing negotiations then the decision goes to arbitration, during which period the price is capped at a level dictated by the price in other European markets. This aspect is worrying because many other European countries use Germany as a reference when considering what is appropriate for their markets. In the past, with free pricing, companies benefitted from inclusion of the high German price. However, if a product is capped during arbitration, other countries could use the lower price as a reference rather than waiting for a final German pricing decision. 

In June 2012, the European Federation of Pharmaceutical Industry Associations (EFPIA) called for a revision of the new German system after consultations with its member companies (5). EFPIA stated that Germany had previously been a leader in Europe in providing quick access to new treatments and that the new system was threatening this benefit (5). It cited its members' opinion that early experience with AMNOG had been disappointing and that the underlying law around this legislation was flawed and ambiguous (5). EFPIA also called AMNOG inflexible and stated that there was unwillingness on the part of the authorities to consider creative solutions for the problems it was creating. A particular criticism centred on the choice of comparators needed to convince assessors in the cost benefit dossiers. EFPIA noted that this often differed from the comparator selected after consultation with the EMA when planning ahead for regulatory approval. They argued that by choosing comparators that had little relation to those selected for a drug's development programme, the German authorities were in effect trying to drive prices of innovative products down towards those of generics. EFPIA has called for more consultation and discussion on how decisions are reached. 

The change in the German pricing environment brings the country in line with developments elsewhere in the world, where prices are being linked to cost–benefit analyses. Companies have become concerned that these systems bear no relation to requirements in seeking regulatory approval for a product, but have a huge bearing on the success of a product when launched. They consider these measures to be bureaucratic and confusing. At an early stage in a drug's lifecycle, the availability of information on a product's benefit in different populations is limited, but companies are being asked to generate this information almost in parallel with regulatory approval. Furthermore, if Germany reaches an unfavourable pricing decision then this may have a bearing on the prices in countries that use the German market as a reference point. Critics, however, will point to the benefits that companies can derive from the system. If they can impress the assessors in Germany, as may be the case with AstraZeneca and Brilique, they will have a powerful argument in convincing other countries that their drug is of value and merits a higher price. 

1.  Business Monitor International, "Germany Pharmaceuticals and Healthcare Report Q3 2012" (Business Monitor International, 2012).  

2. V. Paris et al., "Pharmaceutical Pricing and Reimbursement Policies in Germany" (Organisation for Economic Co-operation and Development website, 2008). 

3. vfa, "AMNOG: Key Issues and Consequences" (vfa website, 2010). 

4. The International Society for Pharmacoeconomics and Outcomes Research (ISPOR), "Germany – Pharmaceutical" (ISPOR website, 2009). 

5. EFPIA, "EU Pharmaceutical Industry Leaders Call for Revision of German Model for assessment of New Medicines" (EFPIA website, 2012). 

Germany has shifted from a market where the pharmaceutical industry could enjoy considerable pricing freedom to a sensitive market influenced by cost-containment policies.