Strengthening the Walls of Fortress Europe?

Pharmaceutical Technology Europe

Pharmaceutical Technology Europe, Pharmaceutical Technology Europe-04-01-2004, Volume 16, Issue 4

Perils are perceived as pressing ever more intensely on the health of the evolving Europe. The reports of Europe's death may, however, be somewhat exaggerated.

Europe is under siege - and will have to struggle to defend itself against death, disease and destitution. This alarmist conclusion may come as a surprise to the 400 million citizens of the European Union (EU), who, by and large, live rather comfortable and healthy lives. But those who know better tell us we should be scared - and should be reaching for panic buttons to find a solution.

The latest initiative from the EU - the creation of a European centre for disease control to protect us from the imaginable and the unimaginable - is moving towards realization. And, the European Parliament gave the proposal a wholehearted welcome in February.

Its report on the plan highlighted the dangers Europe faces. One in 10 of new HIV/AIDS cases diagnosed in Europe are now drug-resistant strains - twice the level in the US and "just one menace for millions of our citizens," said the Parliament. And, it went on, multidrug-resistant tuberculosis (TB) and methicillin-resistant staphylococcus aureus are also on the increase. There is a growing threat of major disease epidemics throughout the world - the voluntary and forced movements of people, globalization, wars, famines, and environmental and social changes, all contribute to greater opportunities for the spread of disease. The experience of the SARS (severe acute respiratory syndrome) virus has highlighted the danger of complacency. Such dangers "demand effective surveillance and rapid co-ordinated response," the Parliament said.

But it is not just naturally-occurring dangers that are causing apprehension in the EU. The Parliament's report on the centre for disease control cited another justification - in almost apocalyptic terms: "Over us is the dark shadow of the threat of bioterrorism," it said. As the Parliament's powerful budget committee observed in the run up to the vote: "The recent spread of SARS and the anthrax alerts of late 2001, which were thought to be because of bioterrorism, reinforced the need to provide European citizens with adequate prevention and control structures." So the Parliament concluded that "public health authorities throughout our Union know they must be prepared to respond to very real health threats, crises and emergencies."

A wall instead of a fence

The EU already has in place some co-ordinating mechanisms for disease surveillance among its member states, but they might be described as fences rather than the wall-like structures that are now under consideration. A communicable diseases network has been operating for 5 years, and a number of dedicated surveillance networks have been conducting epidemiological surveillance and an early warning and response system for specific diseases or groups of diseases (including HIV/AIDS, legionellosis and TB).

But this can be seen only as "an effective first step," said the European Parliament. "Its limitations are acknowledged by the Commission and participants," and it "needs substantial reinforcement to offer a structured, swift, flexible and efficient co-ordinating role in the EU during the longer term."

The tasks of the planned new centre (to be located in Sweden) will include rapid action in emergencies; harmonization of surveillance methodologies (including better comparability and compatibility of the surveillance data collected in the member states); epidemiological training; and independent scientific advice to relevant EU agencies. The total annual costs in its first year of operation - scheduled to be 2005 - would be approximately €12 million, rising to around €48 million by 2010. This budget is seen by the European Parliament, however, as "tiny and, probably, inadequate."

The bricks in the wall

In the legal text voted by the Parliament, the new centre is described as a response to a widening EU responsibility. The EU, it says, "is committed as a priority to protect and improve human health by prevention of human disease, in particular communicable diseases, and to counter potential threats to health with a view to ensuring a high level of protection of health of European citizens."

The EU "should address European citizens' concerns about public health threats" - not just through "preparedness and control measures," but by "prevention of human diseases." And, it stresses, "the danger of deliberate release of agents also requires a coherent EU response." The centre's mission should be to identify, assess and communicate current and emerging threats to human health from communicable diseases. For outbreaks of illness of unknown origin, it should be empowered to act on its own initiative until the source of the outbreak is known. And, "as emerging health threats may have mental as well as physical health consequences, the centre should … gather and analyse data and information on emerging public health threats and developments for the purpose of protecting public health in the European Community by preparedness."

The centre is intended, according to the legal text, "to maintain scientific excellence at all times through its own expertise and the expertise in the member states, and should foster, develop and steer applied scientific studies." It should also foster the exchange of best practices and experience on vaccination programmes. This, it anticipates, will enhance the visibility and credibility of scientific expertise in the EU. And "where independent scientific expertise is not available from existing dedicated surveillance networks, the centre may set up independent ad hoc scientific panels." It also intends to support EU planning for disease response, strengthening links with clinical and public health sectors, reinforcing the public health laboratory capacity for rapid diagnosis, and co-ordinating training programmes.

Holes in the wall

The weaknesses of Fortress Europe - and the perils of holes in its walls - were also the subtext of a health-related meeting of the influential Kangaroo Group in February. Very few associated with this group would be ready to accept the "fortress" terminology: the Kangaroo Group, formed in the 1980s to support the EU attempts to create a single market, is dedicated to facilitating trade by leaping over internal borders and the protectionism they embody - hence its name. But leaping should have its limits, at least as far as pharmaceuticals are concerned, the group concluded at its February meeting. Europe is threatened by products leaping into it from abroad, and by researchers leaping out of it to more attractive countries.

"During the last decade, Europe's leadership in the pharmaceutical sector has lost ground, with a steady transfer of R&D activities to the US, where conditions are more favourable to pharmaceutical innovation," warned Tom McKillop, president of the European Federation of Pharmaceutical Industries and Associations (EFPIA) and chief executive of AstraZeneca. Pharmaceuticals remain Europe's most regulated products, and - despite their contribution to scientific progress, public health, Europe's society and its knowledge-based economy - "the core problems faced by the R&D-based industry remain," he stressed. McKillop called on Europe to encourage pharmaceutical innovation, attract R&D investment and stimulate industry's competitiveness: "Europeans increasingly depend on pharmaceutical R&D conducted elsewhere. And if current trends continue, Europe will further lose on all fronts: public health, public finances, employment, growth and education." And veteran German Euro-MP Karl von Wogau, a longstanding member of the Kangaroo Group, also expressed his preoccupations that research is moving more and more to the US.

Extending the fortress

The enlargement of the EU on 1 May will extend the walls of the fortress still further. Bringing in 10 new countries - Poland, the Czech Republic, Hungary, Slovakia, Estonia, Latvia, Lithuania, Slovenia, Cyprus and Malta - will make the area covered by the fortress larger, but will involve some tricky adaptations in the new terrain, and also require thousands of kilometres of new walls to be created and patrolled on the enlarged EU frontiers to the east and south.

The prophets of doom have been hard at work on this scenario too. Even hard-headed commercial organizations with no political axe to grind have perceived some risks for the pharmaceutical industry from enlargement. A new study from the UK market analyst Datamonitor suggests that the upside of the pharmaceutical industry's access to relatively untapped markets with long-term revenue potential has to be set against the uncertainty of product success. Changes in regulatory practice, increasingly complicated pricing and reimbursement policies, and economic disparities between the current EU member states and the 10 new members all represent threats, says Datamonitor.

The industry is under ever-mounting pressure to decipher the growing maze of regulations post-accession - a necessary component of gaining rapid access to prescribers. And in any case, average government health care expenditure per capita in the acceding countries is about 2.5 times lower than that in the current EU states, explained Datamonitor. The choice and availability of new drugs entering the accession markets is bound to be influenced by their national governments' ability to pay for them, it adds.

Worse, several of the acceding states are moving towards a regulated pricing system, with the aim of cost-containment in their health care budgets. Datamonitor cites the example of Slovenia, "currently reforming its pricing policy into a formal reference pricing system, weighted towards 'cheaper' imported generics." Post-accession, it is anticipated that key accession markets will also remodel their pricing systems following Slovenia's example, it adds.

That isn't the worst scenario, either, suggests Datamonitor. "EU expansion may also encourage some current EU states to take into account accession countries' drug prices when assigning health care budgets. If these countries continue to use the average lowest prices set in the EU, this parameter will be influenced by drug prices set in accession countries. Importantly, if downward pressure on drug pricing continues post-accession, its impact on pan-European pricing will affect companies' decisions to launch innovative drugs, since there is no incentive to maximize drug revenues."

The only bright spots Datamonitor perceives in this gloomy outlook are the enhanced prospects for generics and for parallel imports - two developments that are guaranteed to depress executives in the innovative pharmaceutical industry even further, and to fuel their sense of impending disaster.

The inclusion of the Central and Eastern European pharmaceutical industry will boost the growth of the European generics market, as generics traditionally forms a major part of their business models. These companies are currently undergoing re-organization and repositioning strategies to ensure their competitive advantage is increased to capitalize fully on post-accession revenue opportunities. It is anticipated that importing 'cheaper' generic drugs from accession countries, because of lower operating costs, would provide increased incentives for western European governments to implement measures promoting generic substitution even further. The lowering of generic drug prices by EU governments (such as in Germany and Italy) will also place more pressure to lower the price of branded products because of the existence of reference pricing systems.

And, continues Datamonitor, parallel trade is expected to escalate post-EU accession. Lower operating costs in the accession countries will escalate drug price differentials between the EU's new and current members. The impact on the pharmaceutical industry after accession will be a shift of parallel trade from the central and eastern European region to the higher priced 15 EU markets. Furthermore, the growth of parallel imports for branded and even generic products will be encouraged by the recent EU government-endorsed initiatives to reduce overall drug costs. Germany, for example, introduced a parallel import quota requiring pharmacists to dispense at least 5.5% of drugs as parallel imports after April 2002. This quota was further increased to 7% from January 2003, indicating that parallel imports remain a strong focus of cost containment.

The protection that the western European industry was supposed to be provided by the toughly-negotiated Accession Treaty is unlikely to function well, warns Datamonitor. "From a legislative perspective, the EU has done little to address the issue of parallel importing with regards to accession," and the pharmaceutical industry is "expected to have great difficulties in securing the protection it requires." Successful integration of the 10 new member states with current EU health care provision policies is dependent upon each accession country's timely implementation of regulatory and intellectual property laws relating to prescription drugs - and the current picture, just weeks before enlargement takes place, is far from complete.

Against this sombre background, students of siege history may recall that one of the stratagems used by attackers was to catapult dead and diseased bodies into the fortress, to spread alarm, despondency and germs. And if Europe is really in as parlous a condition as some forecasters suggest, it may be that Europe's only remaining defence would be to reverse the process and start catapulting victims of its own decay outwards towards the attackers. Albedo does not subscribe to this pessimistic scenario and is not volunteering for catapult duty.