Health expert: Europe should not put its dominant pharma innovation at risk

The Commission's report ends up substantially overstating the potential benefits to generic industry employment and understating the impact on the innovative industry. [YouTube]

The European Union should not create an environment more favourable to generics compared to the innovative pharmaceuticals, as it risks weakening Europe’s overall global strength in pharmaceuticals and in research, Professor Adrian Towse told EURACTIV.com in an interview.

Adrian Towse is the director of the Office of Health Economics in the UK and a visiting professor at the London School of Economics.

He spoke to EURACTIV’s Sarantis Michalopoulos in a telephone interview about the European Commission’s intention to add a manufacturing waiver to supplementary protection certificates (SPC) as part of its upgraded Single Market Strategy in 2015.

An SPC is an intellectual property right that serves as an extension of a patent right in the EU. With a manufacturing waiver, generic drugs makers can manufacture SPC-protected drugs in the EU to sell in other markets and to prepare stocks for when the SPC expires.

New Commission study fuels generic drugs industry ‘manufacturing dispute’

The European Commission launched on Thursday (12 October) a public consultation on supplementary protection certificates for pharmaceutical products and the so-called Bolar patent research exemption.

What is your personal view of the impact of the SPC manufacturing waiver on the pharmaceutical industry in the EU?

The analysis done to date is inconclusive as to what the effects will be. We highlight the strategic issue around the implications for EU trade discussions in respect of future intellectual property (IP) protection if the Commission were to go down the route of introducing a manufacturing waiver. I am saying that the evidence at the moment is inconclusive and there is an important dynamic or strategic effect has not yet been taken into account.

Do you find shortcomings in the Commission’s report (CRA) on the SPC manufacturing waiver?

We find that the CRA report has limited data. We also question some of the assumptions made, so we think CRA end up substantially overstating the potential benefits to generic industry employment and understating the impact on the innovative industry.

It basically says that more jobs will be created and that it will also increase the competitiveness of the pharmaceutical market in the EU.

The effect on the markets in the EU is more in Scenario Six, around stockpiling. Scenario Four, the manufacturing waiver, is to do with exports. Scenario Six is the one that would have the most effect in the European Union. We are essentially making two points in relation to stockpiling: firstly, unitary patents and the convergence of SPC expiries mean that we are not going to see significant IP differences within the EU; and secondly there is an assumption in the CRA report that generic companies are struggling if they are based in countries in the EU with late SPC expiry. Yet the CRA analysis shows that the strongest generic companies are in Germany, which has late SPC dates, so essentially, the logic of the analysis doesn’t hold. CRA is also making assumptions on the impact of generic entry on the prices that would be paid by European payers. The evidence for that, in our view, is not there.

And why do you think that the Commission focuses on this report as a basis for its upcoming legislation?

Our comments are focused on the weakness of the CRA report. Further analysis and more work need to be done before the CRA report could be used as a basis for any legislation. I don’t know what other reports and evidence the Commission has over and above this report and the other papers referred to in its consultation.

What is your answer to the generics industry assumption or argument that with the current state of play, they are threatened by the generics industry outside Europe? What would be a possible solution for them?

We didn’t see evidence that that was going to be the case. Are they making that argument with regard to generic markets inside Europe or in relation to their ability to compete in export markets? Because the issues are quite different. That is not an argument that CRA address. It assumes additional sales. It is not clear to me with what evidence the generics industry would support that argument.

What do you think should be the basis for the European Commission to launch legislation in this area?

For me, I would want to have some additional analysis over and above the CRA report that addresses some of the data weaknesses and assumptions in that report. And I think we would want to address the dynamic effect, what are the medium-long-term impacts of the Commission altering Europe’s stance on IP. What would that do over time to the economic and wealth generation activities of the innovative sector?

I think one would want to consider all the issues together in the context of the broader IP environment. The Commission has looked at other aspects of SPC protection but I am not sure when the Copenhagen Economics report is due. It seems to me that there is a need for an overarching, coherent position from the Commission on intellectual property rather than what appears to be a rather piecemeal approach, looking at one piece of the jigsaw at a time.

One last question: if the Commission does not take into account other studies on the issue, what will be the direct effect on the pharmaceutical industry?

This brings into play another important issue which is the underlying global competitiveness that Europe has in pharmaceuticals. And the evidence that we have seen suggests that Europe’s global position is stronger in innovative pharmaceuticals than it is in generic pharmaceuticals. If we move the environment so it is more favourable to generics and less favourable to the innovative sector then what we risk doing over time is weakening Europe’s overall global strength in pharmaceuticals and in research. That is the risk if we proceed without a proper understanding of the dynamics of the marketplace.

Background

Pharma innovation

Hit hard by austerity, the health systems of EU member states are under huge pressure. Combined with an aging population and the alarming burden of chronic illnesses, EU member states have targeted specific aspects of the incentives granted to the pharma industry in order to decrease drug prices.

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