Recent pharmaceutical price cuts, especially in Germany and Spain, are proof that governments can no longer afford the current industry innovation model which links R&D costs with prices, the European Parliament has been told.

These recent price reductions for patented medicines show that the sustaining the current innovation model is a real problem, not only for developing countries but also for European Union (EU) member states, Members of the European Parliament (MEP) heard, at a hearing held late last week.

The current model “not only fails to promote innovations but has also become far too expensive for both developed and developing countries,” noted French Green MEP Eva Joly, one of the organisers of the hearing, while Sophia Bloemen told the legislators that drug majors’ current business models do not incentivise innovation because they are too focused on marketing, litigation and defensive patents.

Worldwide, there is now a lack of public health-driven medical innovation and access to essential medicines, while at the same time, governments are no longer capable of facing the growing costs of health care, of which medicine prices are an important factor. Therefore, “new models of affordable and socially-useful medical innovation are needed,” said the organisers.

Delegates were reminded that in May, the EU Council Conclusions on Global Health had called for further exploration of innovation models that de-link the cost of R&D from the price of medicines. At the same time, a resolution was adopted at the Word Health Assembly (WHA) calling for the development of new models of biomedical innovation in order to assure both access and innovation.

Ruxandra Draghia-Akli of the European Commission's Directorate-General for Research told the MEPs that new models are necessary to foster an “innovation ecosystem” that begins at the research stage and continues through to market launch, plus a set of clear priorities at EU level and a culture of “open innovation.”

Initiatives currently underway include the UNITAID Medicines Patent Pool Initiative, which aims to cut the costs of HIV/AIDS, malaria and tuberculosis drugs,through persuading patent holders to share their intellectual property so that generic versions can be manufactured in poorer countries. The Initiative’s head, Ellen t’Hoen, urged governments and the Commission to support the Pool and develop incentives for patent holders to become involved.

Another MEP, Austrian European People’s Party member Paul Rubig, has called for pharmaceutical price-setting across Europe to be monitored by an EU regulatory body, instead of the current method of regulation, which is at the national level and monitored by  Council Directive 89/105/EEC, commonly known as the “Transparency Directive” and which dates from December 21, 1989. 

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," said Mr Rubig, and he pointed to the findings of a study conducted by the European School of Management and Technology  (ESMT) which shows that reducing drug prices severely reduces the number of new medicines making it to market.

Incorrectly applied, regulation can reduce the value of pharmaceutical projects and curtail the resources available to carry them out, says the study, which adds that new products which are likely to be hit hardest under tough pricing regulation include antibiotics and treatments for cardiovascular disease and immune system disorders such as multiple sclerosis and chronic meningitis.

Rational investors will naturally look for the most profitable investment choices, which is why regulation has a direct impact on the number and characteristics of the medications developed, say the authors of the study, which was commissioned by Novartis.