Faiz Kermani

The German pharmaceutical market is a key territory for companies selling products in the EU. In terms of per capita sales in Europe, Germany is third only to France and Switzerland. According to the VFA, the trade association that represents pharmaceutical companies in Germany, the country is the third largest international market for pharmaceuticals when analysed by volume and represents approximately 4.5% of global pharmaceutical sales.

  Nevertheless, the VFA believes that the country is underperforming with respect to international rivals, citing pharmacy sales as evidence. Between 2001 and 2008, sales in the German pharmacy market increased by about 25%, but comparative growth in the UK and Spanish pharmacy markets exceeded 50%. Pharmacy sales in France and the UK were also higher than those in Germany.  

Given Germany's historical strength in the pharmaceutical sector, companies are concerned at the recent decline in the strength of the market. The high profile cost-containment policies of the government have caused many companies to re-evaluate their approach to investing in the market — this was particularly the case in 2003 when 82.1% of pharmaceutical companies reported to the VFA that they would be cutting jobs.

  The survey showed that 53.6% of companies expected sales to slump, with another 7.1% of respondents stating that sales were set to stagnate. This negative mood was linked to the finding that half the companies surveyed expected to decrease R&D spending with a quarter freezing spending at 2002 levels. This alarmed the VFA, which had already noted the increase in R&D investment in other European countries, as well as in developing economies, such as China and India. Since then, the VFA has lobbied very strongly against government policies that it believes will further damage the sector. 

Others, however, have argued that German pharmaceutical companies have themselves contributed to the decline by not keeping up with the times and making the right investments in R&D.

  Critics argue that while some international companies used aggressive strategies involving mergers and acquisitions to deal with the rising expense of developing and marketing new drugs, German companies failed to adapt. Hoechst was once a prominent German pharmaceutical company, but its incorporation into Rhone-Poulenc and then Aventis diluted its link to the country. By the time it became part of Sanofi Aventis, the company was considered to have "disappeared".

Bayer remains a famous German pharmaceutical company, but it is no longer viewed as the innovative force it once was. In 1980 the company was ranked second in the world, but by 1999 it had fallen to 16th place in rankings, with the company considered to lack critical mass in R&D and marketing, particularly in the important US market,

  and cost cutting further dented the company's ability to improve its product strategy. In addition, the company's approach to partnerships was considered inflexible in light of the management's desire to maintain a 50% stake in such ventures.  

What really damaged Bayer, however, was the 2001 Lipobay (cerivastatin) controversy. Bayer had forecast eventual annual sales of $2.5 billion for the product, but reported deaths due to rhabdomyolysis led to its rapid withdrawal from the market. The company handled the matter badly, with there being a public outcry in Germany when shareholders were informed of the situation before patients and doctors.

  The company has been forced to restructure and despite its merger with Schering AG, there is still occasional speculation in industry media that it might be a target for acquisition by a larger foreign rival.

The government has targeted spending on pharmaceuticals as a means of controlling rising healthcare costs, but companies have argued that this is unfair since the increases are linked to providing citizens with better treatment options. In 2008, pharmaceutical expenses for the statutory health insurance increased by nearly 8%.

  In total, overall expenses for medicines, including vaccines, were predicted to reach €30.5 billion in 2009.

  These calculations were based on a study called the Pharmaceutical Atlas (Arzneimittel-Atlas), which differentiates between different therapeutic indications. The author of the study explained that the additional expenses tied in well with the political goal of providing preventative therapy for citizens; for example, the increased use of vaccines in 2009 was estimated to contribute €490 million in medical spending.

 Similarly, the cost of medicines to manage the complications of chronic conditions also had a heavy impact on spending in 2009. Analyses showed that hypertension accounted for spending increases of €310 million; diabetes for increases of €60 million; immunological disorders for increases of €200 million; and osteoporosis for increases of €60 million. Separately, spending on out-patient treatment for cancer was estimated to increase by €320 million for 2009.

  In light of the study, the VFA criticised what it perceived as the government's rigid approach to healthcare, arguing that increased spending was necessary for therapeutic progress. 

Officially, pharmaceutical pricing is unregulated in Germany, but the authorities exert influence over prices through a reference system. Cost containment has been a growing feature of the German market since 2004, with the government's Agenda 2010 platform having the goal of reducing healthcare costs by €20 billion.

  A concern for pharmaceutical companies is that the German health minister, Philipp Rösler, has signalled his intention to change the pricing system in the country further.

 He has stated that drug prices are still too high and that companies will have no choice but to negotiate more favourable prices directly with the country's health insurers. They will also have to submit, at launch, a study demonstrating their drug's benefit to patients. According to media reports the changes are set to be introduced by the end of 2010. The Minister believes that such measures could save the healthcare system approximately €2 billion a year. Even though the move is unpopular with the pharmaceutical industry, market observers expect companies to comply because the alternative is the government imposition of pricing ceilings. 

Although Germany's pharmaceutical sector has a gloomy shortterm outlook, its longer term prospects are brighter. A 2008 study by the Hamburg Institute of International Economics found that a weakness in Germany was the high level of regulation and an inconsistent approval system. However, the authors stated that the country appeared to fare worse in surveys than an objective analysis of its strengths and weaknesses warranted.

  The cost cutting approach of the government in the field of healthcare appeared to influence the viewpoints of those surveyed because it created the perception that new drugs were not appreciated in the German healthcare system, that research efforts into innovative therapies would not be rewarded and that patents would not be fully respected. This contrasts with data from the VFA showing that 31 new molecular entities (NMEs) were launched onto the German market in 2008 — a dramatic recovery from the low point of 17 NMEs in 2003. Also, in 2008, Germany's pharmaceutical industry actually increased its total R&D expenditure by nearly 7%.

The authors of the Hamburg Institute study noted that there have been real efforts to improve Germany's R&D competitiveness through the launch of dedicated research initiatives, tax incentives and the promotion of centres of research excellence; however, pessimistic respondents have cited these features as only serving to prevent Germany from falling further behind its rivals. This negative mood is reflected by the VFA, which believes that the decline in the global economy has had less of an impact on the German pharmaceutical industry than continuing the government's cost containment measures. 

Germany's Federal Ministry of Education and Research (BMBF) is currently running a 'Pharmaceuticals Initiative' as part of its high tech R&D strategy. The government has identified biotech research as a promising area for future investment; according to government statistics, products from biotech firms accounted for €4 billion or 15% of the total turnover of the pharmaceuticals industry in Germany in 2007.

  Germany is also often described as having the largest number of biotech companies in Europe, although the sector in the UK has been more successful in launching products onto the market. To support German biotech, a programme called BioChancePlus will provide up to €100 million in funding for small and medium-sized biotech companies, with the aim of improving coordination for drug development from networks of biotech and pharmaceutical companies. 

Another important area for Germany is clinical trials — the country is widely recognised as a major European centre for clinical trials. As such the BMBF wants to support translational research that can have a practical benefit in this field and has established the "Competence Networks in Medicine", which will bring together experts in different therapeutic fields to develop novel medical solutions for target diseases. At present, 17 such networks are being funded in the fields of cancer, cardiovascular disease, infectious and inflammatory diseases and neurological and psychiatric diseases. The BMBF also has a specific goal of improving the conditions for clinical research in Germany; for example, the BMBF provides funding for non-commercial clinical trials and for centres to conduct interdisciplinary clinical research.  

Germany has certainly suffered a decline in its reputation as a centre for pharmaceutical R&D and for commerce, but its position is not irretrievable. There are areas in which Germany still has an excellent reputation — identifiable areas of strength include clinical trials, biotechnology and a skilled workforce. Initiatives to revitalise the pharmaceutical sector should take advantage of Germany's strengths in these important areas and take account of the globalisation of the industry. In addition, the government needs to make a determined effort to win over skeptics who believe that the country's healthcare system does not value innovative new drugs because future progress in medicine will depend on research into novel treatments. 

is a freelance consultant and President of the Global Health Education Foundation, a charity that supports medical education and research projects in developing countries. He is a member of 

1. Statistics 2009. The Pharmaceutical Industry in Germany

2. VFA, "Red-green actionism results in a reduction of jobs, a decline in sales and shifts in research projects" (2003). 

3. Deutsche Welle, "The Decline of German Pharma Companies" (2005). 

5. BMJ, "Bayer faces shake up after Lipobay withdrawn" (2001). 

6. Marketwatch, Bayer buying Schering stake to fend off Merck (2006). 

7. BioSpectrum Asia Edition, "Is Pfizer trying to buy Bayer?" (2008).  

8. VFA, "Increase for medical reasons" (2007).  

9. Deutsche Welle, "A Quick Guide To 'Agenda 2010'" (2003).  

10. Europharma Today, "German Health Minister Attacks Drug Prices With Forced Rebates" (2010). 

Policy Check: Status and Perspectives of the Pharmaceutical Industry in Germany

 (Hamburg Institute of International Economics, 2008). 

12. Federal Ministry of Education and Research, "The Pharmaceuticals Initiative for Germany" (2007).  

Germany is the third largest international market for pharmaceutical sales by volume. 					

Sales in the German pharmacy market have increased by 25% over 2001–2008 compared with an increase of more than 50% for Spain and the UK. 					

The government's targeted spending on pharmaceuticals, as well as German pharmaceutical companies themselves who are accused of failing to adapt to changing market dynamics, have been blamed for the damage to the sector. 				

The longer-term outlook for Germany is more positive than the short term thanks to initiatives to take advantage of Germany's strengths in biotechnology and clinical trials. 

Articles

Despite being a historically strong performer in the pharmaceutical arena, Germany is now underperforming compared with the growth of other European markets.

German pharma's hopes and fears

When the European Clinical Trials Directive (2001/20/EC) was introduced in 2004, it fundamentally changed the way in which clinical trials were conducted across the EU. The Clinical Trials Directive had a number of different aims, but key among these were a desire to provide a more harmonised structure for clinical trial regulations across the EU and to ensure that patient safety was specifically addressed in EU legislation.

  Optimists predicted that as individual countries defined their national legislation to account for the Clinical Trials Directive, advantages would emerge from having standardised processes.

Efforts to implement the Clinical Trials Directive soon revealed the complexities of developing a pan-European system to the satisfaction of multiple parties in different member states. For example, despite widespread publicity, some EU member states had not implemented (such as the Netherlands) or only partially implemented (such as France) the provisions of the Directive 6 months after the deadline.

  To try and improve this situation, the EU Heads of Medicines Agencies (HMA) had established the Clinical Trials Facilitation Group (CTFG). This group attempted to coordinate the implementation of the Clinical Trials Directive across the member states at an operational level and further improve harmonisation of relevant regulatory requirements.

The delay in implementing the Clinical Trials Directive caused numerous complications for companies operating in Europe, who were already finding the new processes unclear. For companies, the introduction of the Directive was problematic because they had to adjust to a completely new system for conducting clinical trials, which required additional regulatory support to keep up with changes because of legislation in different countries.

  Advance planning was also needed for selecting and auditing manufacturers, and sponsors had to ensure that they had a presence in the European Economic Area as they would be liable for any breaches of the Clinical Trials Directive.

  For companies without such a base, a local CRO could serve this function.

Aside from companies, academic researchers running clinical trials were also affected. Many researchers, particularly those in the oncology field, soon objected to the Clinical Trials Directive because it added a new layer of bureaucracy to their work for very little identifiable reward.

  In 2005, The European Organization for Research and Treatment of Cancer (EORTC), the largest independent European cancer research network, analysed the impact of the Directive. It reported that only 7 new clinical trials had been initiated in Europe in 2005 

 19 in 2004, and that a third fewer patients were enrolled.

  As further details emerged from their analysis, the negative impact of the Clinical Trials Directive was clear; for example, EORTC found that trial costs increased by 85% and trial initiation was 5 months slower in 2005 than the previous year. Paperwork and the increased workload for ethics committees were cited as contributory factors to this result.

EORTC concluded that, despite the noble intentions of the Clinical Trials Directive, patients had lost out because access to new treatments was being hindered by the new system. Another criticism was that the Clinical Trials Directive and associated rules for EUwide clinical research was under the control of the Enterprise and Industry Directorate General, rather than the EU bodies responsible for healthcare.

  Those involved in translational research therefore began to lobby for change because of fears that the Clinical Trials Directive would cripple independent research into novel cancer treatments. 

Pressure from companies in the biopharmaceutical sector and from academic researchers appeared to eventually achieve a result. In 2007, the European Commission (EC) and European Medicines Agency held a dedicated conference to examine the status of clinical development in Europe and on the evaluation of the Clinical Trials Directive in practice in member states. A wide range of stakeholders, from patient organisations through to companies, were invited to give their views. The event was considered a success in that it initiated a dialogue between the different parties involved in European clinical research. Furthermore, certain areas were identified for improvement, with different levels of priority, and progress on these fronts was to be assessed at future timepoints.

According to the official report, conference participants acknowledged that the Clinical Trials Directive had led to some improvements. It cited a common legal framework, a legal basis for compliance with good clinical practice (GCP) and improved protection for patients as positive points raised by the participants.

  Nevertheless, the report revealed the numerous problems that stakeholders had encountered relating to the efficiency of the system and the burden of additional paperwork. In some cases, these problems were linked to different interpretations and different implementation in the national legislation of the member states. 

Given the scope of the Clinical Trials Directive and the numerous opinions raised at the conference, the discussion centred on the nature of the contentious issues and how to address them. For some of the issues discussed, participants felt that some were possible to resolve within the existing legal framework and overall it was felt that work should begin immediately to resolve these issues to quickly achieve results. The main areas identified for priority were multinational clinical trials, safety reporting and monitoring, non-commercial sponsorships/trials, Clinical Trial Application (CTA) dossier and process, and investigational medicinal product (IMP)-related issues.

  In contrast, other issues (including increased transparency and availability of information on clinical trials, and the application of ethical principles and GCP standards in developing countries) were almost certain to require changes to legislation, and so more time and effort would be needed to address them.

At the conference it was reported that most of the trials carried out by sponsors had been conducted at multiple sites and multiple countries. In this context, participants detailed some of the EU-wide improvements as a result of the Clinical Trials Directive, which included the unique identifier for a clinical trial in the EU (EudraCT number) and the common clinical trial application form accepted in most member states.

  However, the participants revealed their frustration that there appeared to be little pan-EU agreement for consistency across member states when it came to amendments for clinical trial submissions.

  For non-commercial sponsors, namely academic institutions, the Clinical Trials Directive put them at a distinct disadvantage when conducting multinational, collaborative clinical trials, because of confusion over the requirement for a 'single sponsor' for a trial. A suggested improvement was that multiple sponsorship of both multinational and national trials be allowed, so that roles and responsibilities in different European countries could be shared on a contractual basis between the institutions involved.

Since 2007, there have been further efforts to address the negative impact of the Clinical Trials Directive. In 2008, the EC launched a study entitled Impact on Clinical Research of European Legislation (ICREL). ICREL was a longitudinal, retrospective, observational and comparative study to assess the impact of the Clinical Trial Directive, for the period 2004 to 2007, by examining the number, size and nature of clinical trials, and assessing workload, resourcing, costs and performance.

  ICREL concluded that overall there had been no reduction in clinical trial activity in the EU. However, it did show that conducting clinical trials in the EU had become more costly and burdensome, thereby validating concerns raised by participants at the 2007 EC-EMEA conference.  

ICREL found that, while harmonisation focused on quality standards for clinical trials in different member states, there appeared to have been no effort to standardise ethics committee systems and approval procedures in the different countries.

  Safety data reporting was also handled differently by the different member states, causing additional administrative burden. For example, different member states have different interpretations of what constitutes a suspected unexpected serious adverse reaction (SUSAR) and this has caused an information overflow for the EU central database.

  There has been a sixfold increase in the number of safety data reports lodged since the Clinical Trials Directive took effect, as sponsors attempt to make sure they are complying with safety requirements.

The benefit of ICREL was that it provided metrics for the issues that were considered to be damaging the European clinical research environment. The data should be useful when it comes to discussions about how to best revise European clinical trial legislation. At the end of 2009, the EC sent out a public consultation document and asked stakeholders whether the rules for European clinical trials should be changed.

  The deadline for comments was 8 January 2010. 

It will be interesting to see how the EC follows up on feedback received and how it uses the ICREL data. For example, the ICREL results favoured a simplification of the Clinical Trial Authorisation (CTA) process through a single CTA for multinational trials by showing that it could reduce duplication of effort and also save time and cost.

  The authors of the ICREL report have suggested that the study be repeated at regular intervals to monitor the impact of EU legislation on the clinical trials environment. Furthermore, they suggest a comparison with the clinical trials environment in nonEU regions, such as the US, Canada and Japan.

  International analyses of this nature could also be valuable in ongoing efforts to make the EU more competitive for pharmaceutical R&D. 

• The European Clinical Trials Directive was introduced in 2004, but the complexities of developing a pan-European system to the satisfaction of multiple parties and member states led to delays in implementing the Directive in many countries. 

• Companies operating in Europe as well as academic institutes found the new processes unclear. 

• Pressure from disgruntled researchers and companies led to a meeting in 2007, held by the EC and European Medicines Agency, to examine the status of clinical development in Europe and the Clinical Trials Directive in practice. 

• Since 2007, efforts have been made to address the negative impact of the Directive — the EC is currently reviewing feedback from a public consultation document, as well as data from its own research, to assess whether changes need to be made to the Directive. 

2. Pharmaceutical-int International, "The EU Clinical Trials Directive — One Year On" (2005). 

3. A. Hemminki and P-L. Kellokumpu-Lehtinen, 

4. European Medicines Agency, "European Commission-European Medicines Agency Conference on the Operation of the Clinical Trials Directive (Directive 2001/20/EC) and Perspectives for the Future. Report on the European Commission–European Medicines Agency clinical trials conference" (2007). 

5. European Commission, "Assessment of the functioning of the "Clinical Trials Directive" 2001/20/EC. Public consultation paper" (2009). 

6. MedNous, "Should EU rules for clinical trials be revised?" (2009). 

Though many advantages are associated with the European Clinical Trials Directive, complexities have emerged since its introduction in 2004. Since 2007, efforts have been made to raise the issues and address the negative impact of the Directive.

Change is in the air for the European Clinical Trials Directive

An important point to understand is that the European Medicines Agency is not supposed to be a European equivalent to the FDA, although the two agencies do enjoy a high level of cooperation.

  The European Medicines Agency has a unique set-up because the EU regulatory system combines national viewpoints with regional viewpoints, which means that it works with national competent authorities in individual EU member states, as well as the EEA-EFTA states (Iceland, Liechtenstein and Norway). In effect, the European Medicines Agency is almost a virtual entity in that it works as an interface between different national agencies, enabling coordination of regulations across Europe as a whole.

  To achieve this, the national agencies agreed to pool their sovereignty for the authorisation of medicines and use the European Medicines Agency as a forum for achieving consensus.  

At present, the European Medicines Agency works with a network of 40 national competent authorities in 30 EU and EEA-EFTA countries, involving more than 4500 European experts.

  The main scientific work of the agency is coordinated through six scientific committees, which feature members from all EU and EEA-EFTA states, with some including patients' and doctors' representatives.

  Although further improvements can still be made, there can be no doubt that the European Medicines Agency has helped improve regulatory harmonisation across Europe and beyond. 

Most people tend to think of the launch of the European Medicines Agency as representing the start of European regulatory harmonisation. However, initiatives to achieve this started much earlier, defining elements that are now well known features within the European Medicines Agency set-up. In 1965, a European directive laid the foundations for authorising medicinal products for human use.

  In 1975, a second directive covered technical principles and outlined the creation of a scientific committee for medicinal products for human use.

  The origins of the Committee for Medicinal Products for Human Use (CHMP), which represents the agency's opinions on all questions concerning medicines, lie in this directive. In 1985, a European single market project was launched and by 1993 the foundation of the European Medicines Agency as an organization was well on its way with a formal regulatory system having been described.

  This sequence of Directives allowed the agency to launch in 1995 and introduce its centralised and decentralised approval procedures. 

The EU regulatory system now covers three main activities in relation to medicines regulation: scientific assessment, monitoring of authorised medicines and harmonisation of the technical requirements for the evaluation and supervision of medicines. While the system still allows for different licensing routes for human (and veterinary) medicines — sometimes because of regulatory circumstances that pre-date the formation of the European Medicines Agency — there has been a move to reduce some of these options by extending the scope of the centralised procedure (

Table 1: Authorisation of medicines in the EU			

A distracting issue for the agency following its launch was confusion over its former corporate acronym — EMEA. Originally, EMEA stood for the European Agency for the Evaluation of Medicinal Products, but over time the agency dropped this lengthy title to become known simply as the European Medicines Agency. A number of stakeholders and partners expressed dissatisfaction with the acronym — the main comments being that the second 'E' did not quite match the full agency name and that EMEA was also a term used in the business community to refer to Europe, Middle East and Africa.

While the acronym issue might be considered a trivial issue to some observers, the agency is concerned that confusion over names will lead to misunderstandings over the agency's role and set-up.

  As of 2010, the agency is attempting to move beyond this issue by using its full title in corporate material, although it has recognised that it cannot use this approach for its website and email addresses, which now incorporate the EMA acronym following the launch of a new corporate identity programme in December 2009.

  However, the agency has stated that it is not averse to considering the EMA acronym in the future, if this evolves naturally as an accepted acronym.

The European Medicines Agency has a challenging task; the EU continues to expand and the scope of the agency's activities needs to keep pace with these developments. The agency has acknowledged that with every wave of expansion in the EU, the integration of new national agencies into its network increases the complexity of operating an efficient European regulatory system. This was particularly the case in 2004 when 10 new member states joined the EU.

  Unlike most other regulatory agencies, the European Medicines Agency also has to deal with coordinating information in a range of different languages, which places considerable pressure on the agency's resources and makes it difficult to meet expectations. Many pharmaceutical companies are frustrated by the fragmented nature of the European market and are looking to the European Medicines Agency to introduce standardisation across the region. Equally, patients want to see quicker access to new medicines across the region. Many patient and consumer groups have been engaged in dialogue with the European Medicines Agency since its creation in 1995,

  but despite these issues, the European Medicines Agency also sees its changing role as an opportunity because it will be given greater responsibilities in the future. This will result in rapid expansion and give it greater prominence in international regulatory affairs. 

The European Medicines Agency admits that since it operates on a networking model, its strength and efficiency will be determined by its weakest link. To identify and eliminate weaknesses, it has committed to publishing a plan every few years detailing its priorities and how it intends to achieve them.

  In 2004, the agency published an action plan to take it through to 2010.

  As part of this, the agency consulted with more than 65 stakeholders in a 3-month exercise. Comments from diverse parties, such as EU institutions, national health authorities, patient groups, pharmaceutical companies, trade associations, and academics, all influenced the final report. With respect to human medicines, the priorities to be achieved by 2010 included top-quality scientific assessment, timely access to safe and effective innovative medicines, continuous monitoring of medicinal products and improved access to medicines. As part of this, the European Medicines Agency also decided to benchmark its performance against that of other non-EU regulatory agencies.  

In January 2010, the European Medicines Agency drafted its "Road Map to 2015", which represents an extension of the goals it sought to achieve with the 2010 version.

  The release of this document is set to be accompanied by public consultations, and comments from these will be used to publish a final version. In its 2010 document, the European Medicines Agency outlined how it intends to strengthen the partnership between all national EU regulatory authorities to improve its networking model. For 2015, it has extended this concept to include other EU institutions relevant to the regulatory environment, such as the European Centre for Disease Prevention and Control (ECDC). It has also placed greater emphasis on international cooperation, citing the confidentiality agreements it has signed with the US, Japanese, Canadian and Australian health agencies. Although the European Medicines Agency has always had an international outlook, this has become much more central to its plans for the future. The agency is currently developing a defined international strategy plan that will support the authorisation and supervision of medicines on a global scale.

Another trend is improving the contribution from academics and scientific societies to the agency's work, as the European Medicines Agency would like to better support the development of regulatory science as a defined discipline. Similarly, integrating patient viewpoints into benefit/risk discussions is of interest to the agency because it would like to hear the views of those affected by its decisions.

  The agency still believes it can improve the process by which patients become involved in its activities. 

The European Medicines Agency is unique among global regulatory agencies because it operates on a networking model and because its area of geographic influence does not remain static. While this would appear to create numerous difficulties for the agency, it appears confident about its future and is already planning to extend its activities. Its expanding European responsibilities and wide range of contacts through its networking arrangements should tie in well with its desire to become a stronger force in international regulatory affairs. 

is a freelance consultant and President of the Global Health Education Foundation, a charity that supports medical education and medical research projects in development countries. He is a member of 

1. P. Le Courtois, Introduction to the EMEA (1st EMEA Workshop with Patient Organisations, 2002). 

2. EMA, "About Us — Structure" (2010). 

3. EMA, "New visual identity, web/e-mail addresses and organisation chart of the European Medicines Agency" (2009). 

4. EMA, "The European Medicines Agency Road Map to 2010" (2004). 

5. EMA, "EMEA and patients' and consumers' organisations" (2009). 

6. EMA, "The European Medicines Agency Road Map to 2015: The Agency's Contribution to Science, Medicines, Health. Draft for Public Consultation" (2010). 

In 1995, pharmaceutical regulation in Europe underwent a dramatic change with the emergence of the European Medicines Agency. The agency's 15-year history has been eventful, with it having to adapt to a changing regulatory landscape and new expectations from those relying on it for guidance.

The changing face of European regulatory affairs

Despite its importance to Europe, there is a feeling that the pharma industry is not as innovative as it once was and has lost ground to foreign rivals. This shift has been exacerbated by ambivalent attitudes from regional governments towards the industry; on the one hand, governments value the industry's economic contribution and its role in providing medicines, but they are also preoccupied with the rising cost of healthcare. As a result, pharma companies are under pressure to reduce their product prices.  

European companies believe that government cost containment measures have damaged the region's competitiveness, and point to R&D investment figures as evidence. In 1990, pharmaceutical R&D investment in the US was less than in Europe; however, R&D investment in Europe now is only approximately 70% of the US figure.

  Between 1990 and 2008, R&D investment in the US grew by 5.6 times compared with 3.5 times in Europe.

  To compound the situation, Europe also faces competition from further afield because of the rapid growth in the research environment in emerging economies, such as China and India. The European Federation of Pharmaceutical Industry Associations (EFPIA) has expressed its concern that this trend has led to the closure of European R&D sites. 

Government policies alone, however, cannot be blamed for the difficult R&D conditions. Because of the inherent risks of drug development, many companies have adopted a conservative attitude to using new technologies that may add extra risk to the process, but the steady decline in new drug output suggests that this cautious approach is undermining innovation. However, although there is recognition that bottlenecks exist in the current R&D process, few solutions have been found to ease them.  

EFPIA's analysis of the period 2004 to 2008 shows that, while European companies have experienced a decline in new drug output, their US counterparts have become the world leading inventors of new molecules.

  This trend is worrying — particularly as the US pharma industry has expressed frustration at its own low level of innovation!

  Similarly, the emerging markets of China and India are also considered to be far from optimal environments for R&D.

Many in the industry believe that there is no reason why Europe should not be able to keep pace with the US, given the existence of highquality research resources. Many also believe that the way to reinvigorate Europe's R&D lies in a collaborative approach, featuring both public and private parties. This thinking has led to the development of the Innovative Medicines Initiative (IMI), a public–private partnership designed by the European Commission (EC) and EFPIA, to find clear, practical paths to accelerating drug development and stimulate regional R&D.

  The initiative's Strategic Research Agenda will centre on addressing the problems identified with regional R&D by fostering collaboration across the region. This cooperative approach should reduce the risks for all those involved — particularly small companies.  

The IMI's governing body is composed of ten board members — five from EFPIA and five from the EC, representing the European community. Although the IMI does not have a specific membership structure, it has a pan-European focus, with stakeholders across the region being eligible to participate in research. Once a year, the IMI also holds a stakeholder forum to disseminate information on activities and give participants the opportunity to provide input on the future direction of the organisation. In addition, the IMI holds consultative workshops with work through associations that represent participants concerned; for example, to better serve small companies, the IMI has said it will work with the European Biopharmaceutical Enterprises and EuropaBio. 

The operation of the IMI is similar to that of a nonprofit organisation, with research grants being awarded to European public–private collaborations. While public money will be used to fund academic and patient participation and support SMEs, large biopharmaceutical companies will fund their own contributions.   

The IMI has already identified the R&D bottlenecks as predicting safety, predicting efficacy, bridging gaps in knowledge management, and bridging gaps in education and training. From data collected, it was found that the likelihood of a drug candidate reaching the market was <6%.

  The most common factors for failure were lack of efficacy (25%), clinical safety concerns (12%) and toxicological findings in preclinical evaluation (20%).

  The best way to avoid these problems is to predict failure at the earliest stage possible in the R&D process, which necessitates placing greater importance on predictability and not becoming too dependent on promising preclinical data. 

Between 1990 and 2001, predictability in the R&D process was enhanced through the development of drug metabolism studies. With time, 

 absorption and metabolism screens were validated by correlation with clinical data. The IMI aims to achieve similar clinical correlations for the factors that have been identified as the major causes of attrition. To do this, it is supporting panEuropean public and private sector collaborations so the research is not focused on products themselves, but generates tools, information and data that can be used by all companies. In this way, it is hoped that companies will be not be averse to their competitors having equal access to the results, as they stand to benefit from the outputs and sensitive product data are not being shared. 

In 2004, the EC organised an initial consultation of stakeholders in Brussels (Belgium) where the need for better information exchange between those involved in European R&D was identified. A preliminary list of research issues to be addressed was also agreed upon. Following this initial consultation, the EC and EFPIA organised a series of workshops to further define the IMI's Strategic Research Agenda. As such, the agenda has evolved to include recommendations for the entire R&D process, as well as additional areas such as pharmacovigilance. Targeting all of these areas for improvement is a highly ambitious exercise, but those behind the IMI believe that the collaborative approach is why the initiative stands to succeed where others have failed.  

To maintain control over work in these diverse fields, the Strategic Research Agenda has been organised around four strategic areas or 'four pillars' (

). A total of 38 multidisciplinary recommendations, involving a combination of both new and traditional scientific approaches, have already been developed based around these four pillars. 

Table 1: The IMI Strategic Research Agenda. 

Despite the fourpillar structure, those behind the IMI are anxious to avoid a "silo mentality" and have stressed the interrelationships between the different strategic areas. By coordinating the activities within each of the four pillars, the IMI hopes to create synergies from the new scientific knowledge gained. For example, Pillar IV, concerning education and training, is considered essential for the safety and efficacy pillars to be supported effectively. 

The IMI has stated that all "foreground" research will be owned by the participants concerned and that they may access and commercialise the outputs. However, it does not want to restrict access to this work and will seek to make it available to third parties as appropriate ("under fair and reasonable terms"). Although bigger companies might be able to make use of the information generated from the IMI projects without necessarily being involved, they probably stand to gain more from participating. Collaboration would allow the bigger players to contribute to the scientific direction of the IMI projects, which would allow them to better determine how to use the information generated. This set up will probably be too enticing for the major companies to pass up on. Besides, if they don't participate then there is always a chance that their rivals will. 

The European pharmaceutical industry has long expressed its concern that the R&D environment in which it operates is less than ideal; however, the factors hampering innovation cannot be solely attributed to government policies, such as cost-containment initiatives. If European companies want to justify the high prices of their drugs and have a valid argument to counter cost-containment policies, they will need to make major medical advances — a continuing output of 'me-too' products and line extensions will do nothing to help the industry's case. 

With the launch of the IMI, it looks as if many of the factors holding back innovation will finally be addressed. Those behind the initiative have emphasised the project's urgency, particularly as the US already has its own initiatives to promote innovation, such as the US Biomarker Consortium and initiatives under the FDA's Critical Path. What stakeholders will be looking for is a deadline for the IMI to deliver upon its promises. However, it will be up to the companies themselves to make the most of its outputs. 

The European pharma industry has lost ground to foreign rivals — R&D investment in Europe is now only approximately 70% that of the US. 

To reinvigorate R&D, the Innovative Medicines Initiative (IMI) has been established to find clear, practical paths to accelerating drug development and stimulating regional R&D.

The IMI will help to foster collaborations across the region, which should reduce the development risks for all those involved.

The IMI's Strategic Research Agenda is organised around four areas: predictability of safety evaluation, predictability of efficacy evaluation, knowledge management, and education and training.

1. EFPIA, "The pharmaceutical industry in Europe: key facts and figures" (2008). 

2. Pharmaceutical-Technology, "Lilly CEO Criticises Lack of Biopharma Innovation" (2009). 

3. The In Vivio Blog, "Innovation Is the Pharmaceutical Industry's Only Salvation" (2009) 

4. Private Sector Roles in Global Public Health, "Shaping incentives for private sector biotech innovation in China" (2009). 

5. RNCOS, Indian Pharma to Get Rs 2,500 Crore Investment (2009). 

6. IMI, The Innovative Medicines Initiative: Scientific Priorities/Research Agenda (2009). 

Could a collaborative approach involving both public and private parties offer a solution to Europe's lack of innovation?

Reinvigorating European R&D innovation

The EU consists of 27 member states representing a population of nearly 500 million people. This offers a huge market to the pharmaceutical industry, and with Croatia, the Yugoslav Republic of Macedonia and Turkey being candidates for future membership, there will be even more opportunities for business. Despite the size of the market and a continuing demand for new medicines, however, pharmaceutical companies claim that the EU has intrinsic characteristics that hamper profitability. 

According to the European Federation of Pharmaceutical Industry Associations (EFPIA), North America accounts for close to 46% of world pharmaceutical sales compared with approximately 31% for Europe.

  The EFPIA has also highlighted that the pharmaceutical industry is the leading contributor to the EU 27 trade balance of any hightechnology sector, with approximately  €38 billion contributed in 2008.

  As a result, it has been calling for the establishment of a more business-friendly environment for its member companies. 

To an extent, pharma feels that it must differentiate pricing across the EU to deal with the nuances of each market, as well as to minimise profit losses that can come from countries with low sales potential. Therefore, there has never been a great desire by companies to establish a single European price for their products. Although the introduction of the euro eased business by having a common currency across a number of countries, it has also led to unexpected complications, particularly as European prices are now much more transparent to consumers and healthcare providers. Although it has always been an easy task to convert currencies, the pricing differences among member countries could previously be defended because of "currency fluctuations". It could also be argued that pricing comparisons were invalid because they depended on which rates were used for the analyses. However, such arguments can no longer be used now the euro has been established — or at least not to the same degree. 

A major irritation for Europe's pharma industry is the attitude of national governments to pricing. Although governments acknowledge that a vibrant pharmaceutical sector is both beneficial and necessary, they are struggling with rising healthcare costs, which has seen them target pharmaceutical pricing as a means to drive down expenditure, much to the displeasure of pharmaceutical companies. Different member states have devised different systems to control spending. Some of the main methods include reference pricing, procedural barriers, restrictions on dispensing and prescribing, and reimbursement. In several countries, different systems may be applied depending on the type of product. While some EU countries previously only considered national aspects of the pharmaceutical market for their pricing and reimbursement decisions, it is becoming increasingly popular to incorporate information on pricing elsewhere in the EU. 

Most companies are unhappy with current pricing systems that exist across the EU because they believe they stifle their ability to innovate. Furthermore, as changes are routinely introduced by governments, companies must constantly monitor pricing systems. Unfortunately, there is no clear official guidance on how to harmonise the different pricing systems across the EU, and perhaps improve them. The EC Transparency Directive (89/105/EEC) simply states that the member states' procedures regarding the regulation of prices for medicinal products must be "based on objective and verifiable criteria" and justified accordingly.

  The Directive also sets the time limits for pricing and reimbursement decisions at a maximum of 180 days, but a number of countries have failed to meet this target. Perhaps the only positive point for the pharma industry is that the Directive also states that decisions "must be open to judicial appeal at national level".  

To make matters worse for the industry, European governments have been known to impose dramatic price cuts. For example, in 2006, the Italian government decided to impose a 5% price cut on drugs used by the country's public health service, Servizio Sanitario Nazionale, to recoup money because of a 2005 spending deficit. This angered the national pharmaceutical association, Farmaindustria, which claimed that some products ended up being 40% cheaper than in other EU markets.

  Recently, the UK has experienced similar direct government intervention; in 2009, prices of prescription drugs to the UK's National Health Service were reduced by 3.9%, with an additional 1.9% price cut set for February 2010.

During the past decade, a new headache has emerged for companies in the form of cost-effectiveness reviews, often referred to as 'fourth hurdle requirements'. These consider factors other than safety, efficacy and quality in approving new drugs for marketing or reimbursement. Manufacturers must submit scientific dossiers and economic reports, and are increasingly being asked to show price data from other countries. Much of this information is a repeat of data used for product approval and as a result, companies consider the process to be bureaucratic and lengthy. The systems differ from country to country, but it is put in place to control product pricing; if a product is not deemed to be costeffective, pressure is placed on the company to reduce its price. 

The UK was the first EU member state where this type of system had a major impact. In 1999, a pharmacoeconomic body – the National Institute for Clinical Excellence (NICE) – was established in the UK as part of the country's National Health Service (NHS). Its stated role is to provide patients, health professionals and the public with authoritative, robust and reliable guidance on current best practice. The institute conducts technology appraisals on the use of new and existing medicines, and other treatments within the NHS in England and Wales, based on a review of clinical and economic evidence. 

NICE's creation was an immediate concern for pharmaceutical companies. The industry claimed that although the organisation was a good idea in principle, it had been set up with unrealistic timescales that would affect patient choice and doctors' freedom. There is still a feeling within many pharmaceutical companies that NICE guidance is premature as many companies believes that the full economic review of a drug cannot be conducted until it has been used over a period of time in a wider population than in the numbers involved in clinical trials. 

Companies have frequently challenged decisions by NICE, with the support of patient groups. For example, Eisai and Pfizer challenged NICE's negative decision to ban certain anti-dementia medicines, including Eisai and Pfizer's Aricept, for NHS patients with newly diagnosed mild Alzheimer's disease — a move that has received strong backing from patient groups, such as the UK's Alzheimer's Society. The legal challenge forced NICE to reveal full details of the economic model it used to make the assessment. Subsequent independent analysis revealed the model to have errors, but NICE did not alter its ruling. As new economic data are reportedly being considered for NICE's next review, the companies have opted not to appeal and instead have asked for an expedited decision.  

As cost containment is a healthcare policy being pursued by many European governments, there has been speculation that an EU equivalent of NICE could be established,

 which is often referred to in the press as 'EuroNICE'. However, it is unlikely that such an organisation could be formed in the foreseeable future; one initial obstacle is politics as EuroNICE would involve redefining EU responsibilities for healthcare. Currently, healthcare is controlled by each member state's own government, but for Euro-NICE to work in the same way as the UK organisation, a European government and an EU Minister of Health would need to be established — a move that is likely to be strongly opposed by many Europeans. Even if this highly controversial step took place, there would still be numerous problems in ensuring that the EU-wide analyses yielded comparative data, because approaches to diagnosing and treating disease vary widely across the EU. When it comes to economic analyses, there is also the problem that not all member states in the EU use the euro.  

With the EU constitution already having posed a problem for many European politicians, who are seeking reelection, it is highly unlikely they would suggest establishing EuroNICE, which would prove highly damaging with their electorates. There would also be technical problems in ensuring that EuroNICE could work, but the principal concern would be running healthcare policy through a central EU body. 

Although, in principle, the pharmaceutical market in Europe has grown as the EU has expanded, the pharma industry believes that the region is underperforming because of different pricing regulations and a high level of bureaucracy among member states. There is no sign that this is going to change and so companies will need to be prepared for further government interventions to drive down spending on pharmaceuticals. 

1. EFPIA, The pharmaceutical industry in Europe: key facts and figures (2008). 

2. European Commission, Transparency Directive 89/105/EEC (2009). 

3. HIS Global Insight, National Health Service Price Cuts Rattle Drug-Makers in Italy (2007). 

4. Pharmaceutical Field Magazine, Budget's price cuts are bad news for branded pharmaceuticals (2009). 

5. Anon., European Health Technology Assessment: time for Euro-NICE? Eurosante/Euro-health (2009). 

Although representing a huge market, the EU also presents problems that hamper profitability- particularly when it comes to differing price regulations across member states.

EU pricing dilemmas

Population ageing is an issue often discussed in the media, but its impact on all facets of life has been poorly characterized. Globally, population ageing has occurred at an unparalleled rate in human history and all the signs are that this demographic pressure is taking countries by surprise. Decreasing fertility coupled with lengthening life expectancy has altered the age structure of the global population and shifted relative weight from younger to older age groups.

The UN recently produced an in-depth report on this trend and concluded that it will not return to the young populations that our ancestors knew. It predicted that by 2050, the global population aged 60+ years will expand by more than three times to reach nearly 2 billion. Furthermore, in most countries the 80+ age group has been growing faster than any younger segment of the older population.

  By 2050, six countries alone (Brazil, China, India, Indonesia, Japan and the US) will account for 57% of all those 80+ years in the world. 

Ageing will have a tremendous impact on healthcare. While this is well known, the scale of the impact continues to be underestimated and its implications are not always viewed objectively. In 2007, the Council of Europe Parliamentary Assembly issued Recommendation 1796 stating that "old age must be regarded not as an illness but as a highly complex progressive process requiring a new approach to social policies." In the EU, the population aged 65+ years is set to reach 27.5% by 2050, while the population aged over 80 years is expected to reach 10%. Eurostat, which provides the EU with statistics at a European-wide level, calculates that this trend will require an increase in public expenditure on health care by 0.7–2.3 GDP points in the run-up to 2050. 

Population ageing offers tremendous opportunities to pharmaceutical companies. The USbased National Care Planning Council estimates that, on average, a person older than 75 years uses five prescription drug medications and is using at least two overthecounter medications. 

Most pharmaceutical companies have been quick to recognize the demographic implications and have tailored their R&D programmes to focus on diseases that have greatest impact in the elderly. For example, the US 

 database currently lists close to 600 studies focusing on Alzheimer's disease, illustrating the high R&D intensity in this therapeutic field. Approximately 7.3 million people suffer from Alzheimer's disease in Europe, and an estimated 4 million patients in the US.

 The global pharmaceutical market for Alzheimer's disease therapies is predicted to reach up to $7.8 billion by 2010

  and has been predicted to grow 15% annually. Despite this, some analysts believe that the real market for Alzheimer's disease therapies still remains untapped.

Although population ageing will create market opportunities for pharmaceutical companies in the long term, companies will need to plan their strategies to make the most of them and be responsive to the public's viewpoints regarding healthcare costs. One of the problems is that population ageing is placing tremendous pressure on governments' finances to provide the elderly with the highest quality healthcare. New medicines, although innovative, are generally expensive and governments are reluctant to pay for them. It has been known for a long time that healthcare demand will outpace per capita growth, but most governments have been slow to react and have been resisting calls to increase healthcare budgets. As a result, many governments have shifted the focus back to pharmaceutical companies to justify the prices of their medicines.

In the UK, for example, Eisai and Pfizer have been locked in a legal dispute with the National Institute for Health and Clinical Excellence (NICE) over its appraisal of their Alzheimer's disease drug, Aricept (donezepil). In its original decision, NICE decided not to recommend the reimbursement of Aricept, Novartis' Exelon (rivastigmine) and Shire's Reminyl (galantamine), for patients in the early stages of Alzheimer's disease.

  Officially, drugs are approved if they cost the UK's National Health Service less than about £30000 per qualityadjusted life year. This is taken to mean that for every £30000 spent prescribing them, the benefit enjoyed by patients must add up to the equivalent of a single patient living an extra year of goodquality life.

  Unhappy with NICE's ruling, Eisai and Pfizer submitted a legal challenge and forced the organization to reveal the model it had used to evaluate the drugs. As part of the legal challenge, Eisai commissioned United BioSource Corporation to independently review NICE's model. Although some inconsistencies were found, NICE was still able to keep to its original decision and Eisai and Pfizer have decided not to continue with their appeal.

With respect to the battle between NICE, Eisai and Pfizer, the pharmaceutical companies received support from patients and their advocacy groups, but this type of scenario is not always the case. In the US, the pharmaceutical industry is often criticized by groups that represent seniors for charging high prices for its products. In 2003, AARP, which has 35 million members aged 50+ years, accused companies of funding senior groups to influence them to issue industryfriendly political messages.

  During and after the 2008 US election, the pharmaceutical industry came under regular attacks for being intransigent regarding its prices. Under pressure, in June 2009, a number of companies agreed to reduce prices of medicines for elderly Americans. The deal was expected to address medication costs of senior citizens between about $2700 and $6100 a year that are not covered by the Medicare part D plan. In the longer term, the deal is expected to be part of an $80 billion reduction in Medicare drug costs for senior citizens. 

Population ageing is an issue often discussed in the media, but its impact on all facets of life has been poorly characterized.