Medical innovation: Changing an ailing system

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The system for medical innovation is broken. The number of people struggling to obtain or afford essential medicines is rising at a dangerous pace. There must be a radical overhaul, said experts at a European Parliament hearing on Thursday (18 November).

At a time when governments are cutting public spending but face rising healthcare costs from an ageing population, new models need to be found to ensure a flow of innovative products, accessible to all.

Proposals at the hearing ranged from pooling patents to a prize fund model.

The status quo ''not only fails to promote innovation, but has also become far too expensive for both developed and developing countries,'' noted French Green MEP Eva Joly. ''Health is not a luxury – it is a basic right.''

The price of medicines is a key factor: EU governments have moved to curb prices of patented medicines, but pharmaceutical firms complain they cannot spend on research and development (R&D) without the incentive of making a profit on new products.

In May, health ministers from the 27 EU member states called for new models to break the link between R&D costs and medicine prices. The World Health Assembly has also adopted a resolution encouraging new models of biomedical innovation that ensure global access.

An unsustainable model

The recent medicine price cuts by EU countries – notably Germany and Spain – are proof that governments cannot afford the current model, observed David Hammerstein from the Transatlantic Consumer Dialogue, a consumer group.

Patenting medicines took centre stage at the hearing. In July 2009, the EU completed an investigation into alleged anti-competitive tactics in the pharmaceutical sector amid allegations that generic drugs were being delayed from reaching consumers.

The EU found that large pharmaceutical companies were applying for multiple patents for the same medicine to prevent competitors from developing rival drugs.

The report stressed the need for patent reform and a single judicial system, which the European Federation of Pharmaceutical Industry Associations agreed would cut costs and reduce legal uncertainties. But the industry group said the report "failed to substantiate" allegations that patenting strategies dampen innovation and illegitimately delay generic entry.

Yet for Sophia Bloemen of the NGO Health Action International, the business models of large pharmaceutical firms are not conducive to innovation because they focus too much on marketing, ''defensive'' patents and litigation. They do not have the incentives to innovate, she argued.

Raminta Stuikyte of the European Aids Treatment Group painted a worrying picture of access to medicines in Eastern Europe. Bulgaria, Romania, Poland and the Baltic states have the lowest health budgets in the EU and the highest death rates, with patients forced to pay half or more of the costs of vital treatments.

On joining the EU, prices of essential drugs in these countries rose sharply because of an EU-wide system that aims to equalise prices between member states. This means that HIV patients in these countries must pay up to 19 times more than in the Ukraine, outside the bloc, to get first-line treatment. In Latvia, only 15% of AIDS sufferers can afford the treatment they need, she added.

Towards a demand-driven system

New models are clearly needed to foster an ''innovation ecosystem'' that begins with at the research stage and continues through to market launch, stated Ruxandra Draghia-Akli from the European Commission's research arm.

The challenge is how to establish a demand-driven system that puts consumers and patients first while providing pharma companies with the incentive and money to conduct new research into future products, she said.

One initiative is the Medicines Patent Pool Initiative, a UNITAID programme aimed at lowering the cost of drugs for HIV/AIDS, malaria and tuberculosis by persuading companies to allow generic production of their patented drugs in poorer countries. A system of shared royalties could help persuade firms to sign up to the scheme, suggested programme head Ellen t'Hoen.

She called on governments and the European Commission to back the initiative and help provide incentive for patent holders.

James Love, director of Knowledge Ecology International, presented the 'prize fund' model. The idea is to bring innovation in drug development without making the customer pay higher prices.

Prizes could be designed in novel ways to reward products that improve treatment options and reduce marketing costs. The system could involve proportional rewards, for example. Companies could receive more money back than others based on the impact of their innovations, he explained.

Michelle Childs from Doctors without Borders said policymakers must come up with ways to break today's ''vicious circle'', whereby industry charges high prices to recover the costs of their research and production. The most effective approach is through generic competition from third parties. Generic competition, however, could be limited by current EU free-trade agreements, she said.

Ruxandra Draghia-Akli from the European Commission's Directorate-General for Research stated that medical innovations to date may have been successful in improving quality of life in developed countries – but not in developing countries. In Africa, life expectancy and mortality rates are nothing like in the developed world, she noted.

A set of coherent European priorities is needed along with a culture of ''open innovation'' – which does not mean no patents or no protection for companies, she said.

The role of the EU in global health with feature in a 2011 communication from the Commission on the 8th Framework Programme for research, she added.

Speaking for industry, Robert Sebbag from sanofi-aventis insisted that pharmaceutical companies should be seen as partners, not as enemies. For instance, pharma firms implement programmes to tackle not only neglected diseases but also chronic diseases, he said.

"For that purpose, sanofi-aventis set up a dedicated 'Access to Medicines' department and has developed, in partnership with the Drugs for Neglected Diseases Initiative (DNDi), an antimalarial treatment with no patent," Sebbag said.

At a briefing on innovation and pharmaceutical price regulation in the European Parliament on 26 October, Austrian MEP Paul Rübig (European People's Party) called for an EU regulatory body to monitor pharmaceutical price setting as one way to improve health care across the member states.

Price regulation is done at national level and loosely monitored by the EU under the 'Transparency Directive', now over twenty years old. Rübig believes a Brussels authority would bring more transparent and efficient systems, which would ultimately benefit consumers. ''A European regulatory authority would give [EU] politicians a chance to understand better what national governments and national systems are doing and what are the positive effects of different models,'' he said.

The briefing focused on a study, commissioned by pharma firm Novartis, which found that cutting drug prices can hamper the number of new medications making it to markets. Carried out by the European School of Management and Technology (ESMT), it devised a model that shows a ''direct link between strict regulation and low innovation''.

Hans Friederiszick from the ESMT said the study ''shows the consequences that pricing and reimbursement regulation can have on pharmaceutical innovation''. ''It also shows that, incorrectly applied, regulation can reduce the value of pharmaceutical projects and curtail the resources available to carry them out,'' he added.

New products likely to be hit hardest under tough price regulation include antibiotics and drugs for heart disease, multiple sclerosis and chronic meningitis, stated Friederiszick.

Reconciling the need for an innovative healthcare sector against the urgent spending controls in many states constitutes a major challenge.

Prices in the medical industry are climbing faster than in any other sector in the EU as an ageing society exerts increasing demands. 

Public authorities are concerned that demand for the newest medicines and latest high-tech devices will send costs soaring, while the industry argues that investment in research and development is futile if they cannot make a profit on their new products.

This feeds into the wider question of equality and access to innovative health care. Globally, the gap is growing between those who struggle to receive basic health care and the developed world, where far more patients have ready access to life-saving medication.

Within EU member states, disparities are also opening up between rich and the poor. Some countries where many people can pay for the best available care from their own pocket or through expensive private health insurance have a major advantage over those who cannot.

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