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Pharmaceutical Technology Europe
In Europe ... the onward rush of time has imposed no change at all during the last 25 years. Anyone could step back in at any point, at any moment, and find the same depressingly familiar debates, interminably failing to reach any real conclusions.
Mystics would have us believe that "you can never step into the same river twice." The onward rush of the water imposes change even where no change is apparent. But had mystics contemplated the European approach to pharma politics, they may have altered their perceptions dramatically.
For here, in Europe, it could reasonably be maintained that the onward rush of time has imposed no change at all during the last 25 years. Anyone could step back in at any point, at any moment, and find the same depressingly familiar debates, interminably failing to reach any real conclusions.
This reflection is prompted in part by the premature departure of Erkki Liikanen, the genial Finn who has been largely responsible for EU pharma policy during the last 5 years in his role as Commissioner for Enterprise. In what was more or less his swansong, he chaired a forum on the European pharmaceutical sector in high summer in Brussels. The meeting was the final fling of the so-called G10 process of pharma policy planning — a 4 year high-level review of options that has in reality achieved practically nothing.
Liikanen is going not because he has been fired — that hardly happens in the comfortable circles of senior EU policy making — but because he has been summoned back home to take over as chairman of his country's central bank. He only had 6 months to go anyway as Commissioner: all these senior jobs are up for grabs again, since a new Commission is due to take over from 1 November.
But like water down the stream bed, the Commissioners come and go, and leave so little behind. The Liikanen-inspired G10 was intended to, in his own words, "establish consensus between key stakeholders on ways to improve the competitiveness of the pharmaceutical sector in Europe in a manner that was compatible with achieving our public health objectives." More simply put, it was a mechanism to bring pharma industry economics centre-stage in EU policy making, and to help make drug-pricing and reimbursement systems more realistic.
This is where Liikanen's departure sets up resonances that echo down the long reaches of past decades. There have been some legendary predecessors in his post — a roll-call that includes the untiringly loquacious Martin Bangemann ("I always dreamed of being able to make speeches like Fidel Castro," he used to joke, and then go on to make speeches like Fidel Castro), or the somewhat waspish figure of Karl-Heinz Narjes (who never forgave the European pharma industry for jilting him after he offered support for its economic arguments, and the industry then declined to provide him with the supporting data).
Each of them, in their own way, fought the same battle, to help keep the European pharmaceutical industry vigorous and vibrant, without precipitating violent reactions from the national governments that have always held the purse strings for health care. Each of them, in their own way, set up mechanisms to bridge the gulf between industrial and social security imperatives. And each of them, in their own way, failed to make any real headway.
The industry still exists, of course. And it still makes money and provides jobs and new medicines. But it is hardly any longer a European pharma industry. Even the European Federation of Pharmaceutical Associations and Industries (EFPIA), the sector's principal lobby group, has long since abandoned its mission of defending a European pharmaceutical industry. In the face of the inevitable, it now seeks merely to promote pharmaceutical industry activity in Europe, irrespective of ultimate ownership.
And even the level of activity, whatever the ownership, has consistently declined as a proportion of world pharmaceutical activity. The economic and regulatory constraints in Europe, and the perennial failure to establish a strongly entrepreneurial climate, have driven manufacturing and research away to more conducive locations.
In 2002, EU-based pharma companies had an output of some 160 billion, 20 billion in R&D spend, and employment near 0.6 million, of which 90000 were engaged in R&D. But between 1990-2002, R&D investment in the US rose more than fivefold while in Europe it only grew by 2.5 times. In the 10 years from 1990, the major European research-based companies cut back the share of their worldwide R&D expenditure within EU territory from 73% to 59%.
The US is now the leading inventor of new medicines, generating eight of the top ten worldwide products in 2002, compared with just two from Europe. And 70% of the sales of new medicines launched on the world market in 1998-2000 were made in the US compared with only 18% in Europe.
The EU fiction about fixing the situation continues, however. The much-lamented decline in European pharmaceutical innovation is compensated for by the apparently limitless innovative capacity of bureaucrats to invent new forms of camouflage for their inability to intervene effectively in this protracted decline.
The G10 is only the most recent example, after years of round tables, seminars and conferences, and task forces that also proved inadequate to the challenge. And what a miserable example it is. Even Liikanen himself, the progenitor of the process, could not find much to say about it when he summed up its achievements during its epilogue this summer. He claimed there had been "some national initiatives in the spirit of G10," offering the fact that "national medicines agencies have all agreed to participate in a benchmarking exercise on their regulatory activities."
For those who do not inhabit this strange world of invented terminology, and may not be aware what benchmarking is, or why it should amount to a breakthrough, it may be helpful to set out just what Liikanen said about it. "We set out a first set of competitiveness performance indicators. The objective of these indicators is to establish an EU-wide tool for measuring the impact of EU and national G10-related measures. The process has started and we are currently updating the indicators." Stirring stuff, indeed.
And on the key question of pricing — "one of the most controversial areas in our G10 communication" — all he could claim was that "our objective is to reflect first on the necessary conditions and second on possible pricing mechanisms that would allow faster, wider and better secured access to medicines for all European patients without sacrificing any national control over health care budgets." How far has the reflection advanced? Wait for it: "Work has also begun in this area. A working group of stakeholders had its first meeting on 24 May. We will need to see what comes out of this process, but it is clear that, with many member states examining their own pricing procedures, this is a good time to examine this issue."
And this is the sum total of the years of high-level thinking — despite the fact that, on Liikanen's own admission, "the wide variety of national schemes is having a significant impact at the European level." Similarly, its extended review of the question of relative effectiveness of medicines, G10, and Liikanen, can report little more than broad agreement that there are benefits in examining, along with national governments, existing national relative effectiveness systems. "Last year, we established a working group that is currently analysing these systems to see what approaches there are," the outgoing Commissioner boasted. But the objectives are limited. "The aim is not to develop a European system of relative effectiveness and, indeed, we firmly believe that this must not become part of the authorization process. However, it must be in everyone's interest to ensure that, whatever systems member states choose to use, there is greater transparency, speed and consistency."
And this despite the fact that systems for measuring the effectiveness of medicines "have become an increasing feature of national systems," and that "these various national systems are having an important impact on competitiveness at a European level." It is a disappointing outcome in light of the unambiguous conviction — with which "everyone agrees" — that the European-based pharmaceutical sector "plays a vital role in the life of the EU ... not just an economic contribution, although this is substantial, but also in social terms with the provision of high quality employment, support for our science base and, of course, to our public health objectives." It is disgraceful in light of the rallying cry of the Commissioner that "our key objective is to tackle the relative decline in competitiveness of the European-based pharmaceutical industry when compared with its American-based competitors." The undisputed evidence is already on the table, and has been growing for years, that "as a whole, Europe is lagging behind in its ability to generate, organize, and sustain innovation processes that are increasingly expensive and organizationally complex" (as a key commission study concluded 3 years ago). And it is bordering on the dishonest alongside the Commissioner's clear statement that "For an area that used to lead the world in pharmaceutical innovation this is unacceptable," and his recognition that "without investing in innovation now we will undermine the long-term future of the industry."
Liikanen is not personally to blame for the failure — other, perhaps, than for the failure in honestly acknowledging that efforts so far have been a failure. The G10 deficiencies are just another stage in a continuum of conspiracy to pretend that effective action is being taken. As the Commissioner himself conceded, "Many of you will know that, given the history of unproductive discussions in this area, this was a very challenging objective."
The problem lies in the divided responsibilities within the EU — with member states retaining most of the power for the price of medicines, which inevitably subverts or even vitiates the discussion at EU level of industrial policy. So little serious improvement can be expected no matter how often Liikanen (or his predecessors, or his successors) repeat mantras about a new future, such as Liikanen's assertion that "our long-held objective is to create a 'Standort Europa' where Europe, once again, becomes the favoured location for pharmaceutical research and innovation. We want to do this in a way that meets the specific challenges facing this sector while also tackling the risks of deindustrialization and delocalization."
The Deputy Prime Minister of Ireland (which has chaired EU business in the first half of 2004) maintained the same fiction at the same meeting. Mary Harney, who is also Irish Minister for Enterprise, Trade and Employment, ritually intoned her "firm belief" in "the need to regularly reiterate and highlight the importance of the pharmaceutical sector to the European economy." She too noted that "the productivity gap vis-Ã -vis the US is widening in the high tech areas," because of "Europe's comparatively poor performance in R&D and innovation." And she was under no illusions as to the principal cause: "The constraints that stifle economic growth and innovation do not come from outside, but rather from inside the EU economies themselves."
But the recognition of the problem — and the identification of the solution — remained at a theoretical level. "Investment decisions of firms operating in a global market place are influenced by the economic climate that exists in the EU and in the member states," she said. So "Europe is not at the mercy of competition from lower-cost locations; it is very much the master of its own destiny." Her recipe, for which she claimed the backing of EU ministers responsible for industry, was clear and direct. "What is required is lighter regulation of industry and business, particularly for those sectors operating in a global market place where competition is intense, and we must be more supportive of innovation. Better regulation is crucially important for competitiveness." There are, she insisted, "compelling economic reasons for undertaking regulatory reform."
Which is all very well. But if all the EU is able to do is to talk endlessly about the problem, rather than act, then the problem remains. And the G10 exercise demonstrates again that talk is the maximum output, obfuscating rather than clarifying what needs to be done.
The new European Commission that will take up the reins of EU business in November faces many challenges. Prominent among them will be the urgent need to boost EU competitive capacity. It will be a step forward if the new chiefs of EU policy making abandon the pretence that benchmarking, innumerable working groups and long paragraphs of meaningless bureaucratese constitute a solution to the dilemma facing the pharmaceutical sector. For the pharmaceutical industry still being swept along in Europe's turbulent stream, it could be a matter of sink or swim.