There is no clear evidence of a marked decline in innovation by the European pharmaceutical industry, sector leaders have told the European Commission.

“Evaluating output based on a simplistic count of the number of new molecules launched in 2000-4 is not meaningful in an industry in which product R&D spans 10-12 years and occurs at the frontiers of our understanding of human biology,” states the European Federation of Pharmaceutical Industries and Associations (EFPIA) in its submission to the Commission’s ongoing Pharmaceutical Sector Inquiry, which is widely expected to be the widest antitrust investigation ever conducted by the European Union (EU).

The Inquiry began sensationally on January 15, with a series of unprecedented dawn raids on the offices of many leading drugmakers, both research-based and generic, by investigators from the Commission and the European Patent Office (EPO) under the direction of the European Commissioner for Competition Policy, Neelie Kroes. The investigators removed from the companies highly-confidential information relating to issues such as the use of intellectual property rights, litigation and settlement agreements covering the EU because, they said, such information may “be easily withheld, concealed or destroyed.”

In its submission, EFPIA tells the Commission that it regrets the manner in which the investigation was launched and also “the implication that the use of the patent system and recourse to settlement agreements may be unlawful, and that the industry may be engaged in vexatious litigation with the apparent effect of slowing innovation and impeding generics’ market entry.”

The industry’s commitment to innovation “has never been stronger,” EFPIA assures the Commission, and adds that the apparent failure of R&D spending to keep pace with the dramatic increase in development costs is due to many complex factors that have nothing to do with alleged anticompetitive practices or abusive conduct. There are in fact three primary causes: - the biotechnology revolution, which has been a costly period of retooling for the industry and has not yet translated into a mature pipeline of products; - the rising costs of regulation, particularly of clinical trials, with a “regrettable” shift towards risk avoidance rather than a balance of risk and clinical benefit; - and, most importantly, the economic environment. “All too often, medical innovation is perceived as a threat to national health care budgets rather than a driver of economic growth and an investment in the well-being of millions,” says the Federation.

Perhaps the biggest threat to new investments in novel treatments is the inappropriate use of cost-effectiveness assessments as a tool for rationing, pricing and reimbursement, as well as therapeutic reference pricing, EFPIA tells the Commission. “By applying price and access controls, state buyers communicate to the industry that they are not prepared to fund innovative medicines. The industry reacts rationally: focusing on riskier products seeking to differentiate themselves from existing treatments; terminating, at huge cost in late-stage trials, products for which it is judged state buyers will not pay; and slowing the growth of R&D investment,” it says.

Generic entry has become “easy” and “almost immediate,” but in many cases EU member states do not appear to be using generic markets efficiently, the submission goes on. It urges the Commission to use the Sector Inquiry to shed light on the extent of the market distortions being faced by the research-based industry in Europe, and to encourage both EU and national authorities to develop further means to encourage investment in innovation.

- By early June, Commissioner Kroes’ investigators had questioned around 100 companies plus some 80 other groups, including associations of doctors, pharmacists and patients, and the drug price regulators of EU member states. “If innovative products are not being produced, and cheaper generic alternatives to existing products are in some cases being delayed, then we need to find out why and, if necessary, take action,” said the Commissioner. She expects to issue an interim report on the investigation this autumn, with a final report next spring.