The Changing Economics of Medical Technology (1991) / Chapter Skim
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8. European Policies Influencing Pharmaceutical Innovation
8. European Policies Influencing Pharmaceutical Innovation
Pages 123-140
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From page 123... ...
The possibility of making a suitable return and it should be remembered that most drugs fail commercially will be influenced by the time that it takes to register a product and the effective patent life remaining. What a manufacturer can charge in its major markets will determine its cash flow; most European countries have price controls, and, in practice, drug prices vary widely.
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From page 124... ...
Discover candidate drug Establish safety and efficacy ~-~ Set requirements Obtain product license—- -- -- -- -- - - -- - Operate licensing authority Market product a -- -- -- -- -- -- -- -— · Cashflow Ha -- - -- - - -- -- - - Control marketing effort Define patent protection Control p~icestprofits Encourage/discourage generics FIGURE 8.1 How government actions may affect pharmaceutical innovation. official attitudes toward generic products will also be important.
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From page 125... ...
of Dollars) Home World Capacity Belgium 1,250 + 160 10 < 1 Moderate Denmark 920 +430 50 < 1 Moderate France 10,520 +1,310 51 6 Moderate West Germany 11,750 +2,240 54 11 High Greece 310 -60 16 <1 Low Ireland 400 + 120 10 < 1 Low Italy 8,450 -550 42 3 Moderate Netherlands 1,170 +45 12 1 Moderate Portugal 450 -60 17 < 1 Low Spain 3,360 -80 30 < 1 Low United Kingdom 8,000 +1,370 37 8 High European Community 46,500 +5,100 66 30 Mixed Switzerland 3,360 +2,030 40 7 High United States 26,500 +960 80 37 High Japan 22,500 - 1,500 80 20 High aAt manufacturers' prices and 1987 average exchange rates bl986 CAt manufacturers' prices Per capita consumption/average price
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From page 126... ...
They are of varied nature, those of Table 8.2 referring specifically to the pharmaceutical industry and those of Table 8.3 to national indicators of scientific inputs and outputs. As far as pharmaceutical innovation is concerned, they show that no single European country has the strength of the United States or, less certainly, Japan.
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From page 127... ...
The Thatcher administration chose to stress the applications of science and was less sympathetic to the needs of basic research. It also urged industry to pick up a larger share of the basic _ _ science bill, a suggestion firmly rejected by the pharmaceutical companies (21.
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From page 128... ...
The requirements of national authorities have converged gradually as a result of directives by the European Commission, and there is a high degree of apparent uniformity within the Community. Common standards for pharmacological and toxicological tests in animals and for the conduct of clinical trials have been adopted, together with common forms of documentation.
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From page 129... ...
Spain, where patent protection formerly was weak, has adhered to the convention and has been granted a transitional period to bring its practices into line.5 The main concern, of course, is effective patent life. For good reasons patents normally are taken out toward the end of the discovery phase of a new medicine.
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From page 130... ...
The added patent protection is to start from the date of first marketing within the Community and not the date of authorization in any particular country. Moreover, as mentioned previously, the average period of effective patent life is not far off 10 years already.
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From page 131... ...
The main emphasis, however, is on direct control of pharmaceutical prices. The majority of states in the European Community regulate the prices of individual drugs.
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From page 132... ...
Under the Treaty of Rome, such matters are left to individual governments, each of which has its own ideas about the balance between the interests of producers and consumers. Thus, despite continued pressure from the international industry, successive French governments have kept drug prices low, arguing that the French propensity to consume drugs is so great (Table 8.1)
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From page 133... ...
European firms fear that the use of generics would be combined with price controls and that their combined effect would therefore be larger than in the United States.9 SUBSIDIES FOR R&D Many European governments have wished to encourage the development of a strong domestic pharmaceutical industry. At first, the objective was import substitution, especially in the remote days of the dollar shortage.~° Later, a modern, science-based drug industry was seen as desirable in itself, generating a substantial contribution to the national income, the balance of payments, and employment opportunities for skilled and highly educated personnel.
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From page 134... ...
There is no guarantee that such a profit will be obtained.~3 The recent Transparency Directive of the European Commission, which came into force on January 1, 1990, will probably have a significant effect on incentives for R&D. Put briefly, it stipulates that member countries must publish full details of the methods they use to classify products for reimbursement, to control pharmaceutical prices and profits, and to operate positive and negative drug lists.
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From page 135... ...
Similarly, differences in patent protection are small. The Drug Price Competition and Patent Term Restoration Act has given the United States a slight edge, but, when implemented, the proposals of the European Commission should shift the advantage back to Europe.
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From page 136... ...
Incentives in the form of better prices for local investment discriminate between companies and may distort policies concerning the location of R&D facilities. Opportunities to exploit economies of scale and scientific critical mass may be lost.
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From page 137... ...
As far as the European pharmaceutical industry is concerned, this will initiate yet another stage in a process of changing economic dynamics. Many issues, notably prices, remain unresolved.
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From page 138... ...
The provisions particularly affecting the pharmaceutical industry are articles 30, forbidding quantitative restrictions on imports; 85, prohibiting restrictions on competition; 86, relating to abuse of a dominant market position; and 92, governing the provision of state aid to industry. The European Court of Justice is the Supreme Court of the Community.
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From page 139... ...
9. Under the Drug Price Competition and Patent Term Restoration Act researchbased United States companies received a qualified extension of patent life; in return they had to allow the information in their original new drug applications to be available to generic companies when the latter applied for marketing authorization.
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From page 140... ...
The Cost of Fragmentation in the European Community's Pharmaceutical Industry and Market. Brussels: European Community 1988: 52-67.
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