Competitiveness in Europe innovation, industry policy and health policy working in tandem

1
Competitiveness in Europe innovation, industry
policy and health policy working in tandem

• Sir Tom McKillop
• 27 May 2004

2

• Competitiveness is fuelled by successful
  innovation
• Innovation is founded on a strong science and
  research base
• Innovation is critical for the success of
  industry in Europe
• Innovation contributes to the health of patients
  and the wealth of society

3
Innovation in Europe the picture today

• ?US spend on research as of GDP(2.4 risen to
  2.8 in 20 years)
• ?EU spend on research as of GDP (fallen to 1.9
  from 2.4 in 20 years)
• The Lisbon target for Europe?3 GDP spent on
  research by 2010

4
The European pharma industry

• 5th largest industrial sector(3.5 of the total
  manufacturing production in Europe)
• 582,500 highly qualified jobs (91,500 of them in
  RD)
• 19.8 billion invested in RD (almost 20 of all
  industrial RD in Europe and a higher percentage
  than any other industrial sector)
• Trade surplus of 40 billion Europe still a net
  exporter of medicines - Pharmaceuticals make the
  highest contribution among high-tech industries
  to Europes trade balance

5
EU Trade balance - High Technology sectors
(million) - 2002
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Percentage of World Pharmaceutical RD Spend
60
US
Japan
UK
Germany
France
Switzerland
50
Others
40
30
20
10
0
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
Source Data from national trade associations
7
Location of RD spending by EU pharma companies
(1990-1999)
Source EFPIA, 2000
8
European research success is declining

• 8 out of the top 10 NCEs in 1980 were discovered
  in Europe
• 8 out of the top 10 NCEs today were discovered
  in the USA

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• Why are we losing ground?
• Under investment in research

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EU investment in research

• US N.H. alone 27 bn p.a.
• EU framework VI 4.5 bn over 5 years

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Why are we losing ground ?

• Underinvestment in research
• Poor reward for innovation

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Breakdown of the world pharmaceutical market
1990 - 2003
Total pharmaceutical market value 1990 135,900
million Euros 173,000 million Dollars
Total pharmaceutical market value 2003 412,290
million Euros 466,300 million Dollars
Source IMS World Review 2004
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Innovation Market penetration
Geographical breakdown (by main markets) of sales
of new medicines launched during the periods
1998 2002 and 1995 2000
57
25
5
13
70
18
4
8
Source EFPIA, 2000 - IMS Health, 1999
14
Delays From Pricing/ReimbursementApplication To
Reimbursement
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Why are we losing ground ?

• Underinvestment
• No reward for innovation
• Europe is not functioning as a single market

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Europe is not functioning well

• Fundamental split between member state
  responsibility for health care and Commission
  drive for a Community market
• No integrated strategy or priorities for
  biomedical research at European level
• Underinvestment in education and training
• Over-regulation e.g.
• EU clinical trial directive
• Chemicals directive (REACH)
• Slow or no decision making on issues which drive
  competitiveness
• IP

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Why are we losing ground ?

• Underinvestment
• No reward for innovation
• Europe is not functioning
• Huge market distortions

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Market distortions

• Too many national controls on both supply and
  demand
• Parallel trade
• Enlargement will change the market environment
• Huge challenge ahead in the EU

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Some positive EU Initiatives

• Lisbon agenda and Barcelona target
• Competitiveness Council endorsement of innovation
  and enterprise objectives 2003/4
• Industrial policy and health policy G10
• Restructuring of Framework VI VII to drive R
  D
• UK, France Germany driving competitiveness
  agenda
• But still a lack of coherence and commitment
• Will a new, enlarged Commission, Council
  Parliament drive change?

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In conclusion

• Innovation crucial to Europe
• Pharmaceutical innovation brings benefits to
  patients and wealth to society
• Governments have a role to play - welcome and
  reward innovation - regulate less and better
• Keep the right balance between industrial policy
  and health policy
• A challenge for us all

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• The competitiveness of Europe depends, to a
  large extent, on its industry. But the Community
  institutions and the Member States must
  contribute to creating a favourable environment
  for business. The combination of the activities
  announced should help Europes industry, in
  particular in the new Member States, to meet
  successfully the challenges of structural change
  and to contribute, therefore, to meeting the
  objectives that the European Union set itself
  four years ago at the Lisbon European Council.

Commission Communication Fostering structural
change an industrial policy for an enlarged
Europe April 2004
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Supplementary Material
23
Share of Parallel Imports in Pharmacy Market
Sales () - 2002

Note Denmark, Germany, The Netherlands,
Norway, Sweden, UK Data 2002 Norway
share of total market sales (estimate)
Source EFPIA Member Associations
24
Import penetration 2001-2002
5 of the total European market
of drug sales
31
16
14
12
10
60
8
6
4
2
0
Total PI sales 2001
2000m
400m
100m
220m
50m
1300m
30m
Norway
Ireland
Sweden
Germany 2002
UK 2002
Netherlands
Denmark
5 year CAGR
3 year CAGR
Source IMS, MIDAS and others