Europe at a cross-route

The upcoming revision of the EU pharmaceutical legislation is a once in a generation opportunity for Europe to strengthen its biotechnology innovation ecosystem, to grow as a competitive and attractive region for R&D, and to reap the wider societal and economic benefits of biotechnology and pharmaceutical inventions. However, the recent disclosure by Politico of the new rules does not bode well in terms of their ability to contribute to this goal.

The previous revision, back in 2004, brought significant improvements to support innovation and R&D activities in Europe by ensuring that there is a regulatory approval framework in place to approve therapies as efficiently as possible. Tools like the conditional marketing authorisation, the orphan designation, accelerated assessments, and the Advanced Therapy Medicinal Products (ATMP) Regulation have all supported innovation and access to ever-better therapies.

We share the objectives of the Pharmaceutical Strategy to update and future-proof Europe’s Pharmaceutical regulatory systems. We also share the Commission’s difficult triple objectives; ensuring equal access for all patients and ensuring Europe remains an innovation-stimulating region while healthcare budgets remain sustainable.  However, we also know that Europe’s ecosystem is complex and fragile.  A blunt approach to achieving policy aims for healthcare may deliver the exact opposite, by degrading Europe’s ability to identify and develop therapies itself and becoming a secondary market for therapies developed outside Europe.

In recent years Europe’s own innovation strength has steadily fallen behind the United States and, increasingly, the Asia-Pacific region. This downward trend is exemplified by the fact that U.S. -headquartered companies account for 44% of the total pipeline while the share of EU-headquartered companies has fallen to 25% of the innovation pipeline.[1]

The revision is an opportunity to ensure Europe can continue to be a region of innovation for key enabling technologies like biotechnology. The revision should build on Europe’s strong research base to translate science more efficiently into treatments to better address the health needs of European patients and to regain EU’s global leadership in R&D and cutting-edge industry.

Looking at the entire ecosystem

The discourse surrounding the revision has been focused almost entirely on “big pharma receiving too many benefits from the EU pharmaceutical structure” with little consideration given to the major contributions of small and mid-size biopharmaceutical companies in pushing the boundaries of therapeutic innovation. This discourse not only overshadows the interdependencies of the ecosystem but, importantly, increases the risks of wrong policy choices being taken.

Some of the first biopharmaceutical treatments were developed by small companies and brought to market in partnership with large companies. Partnerships between academia, small and mid-size companies, and large companies continue to drive therapeutic innovation. This is the reality of healthcare biotechnology.

Small and medium-sized enterprises (SMEs) are often described as the backbone of Europe’s economic fabric, yet policy interventions rarely address SME’s needs to enable them to grow in Europe. The recently disclosed proposals of the revision of the general pharmaceutical legislation are telling in that most policy choices have little evidence backing up the expected benefits or completely overlook the capacities of most of the ecosystem.

The combination of punitive modulation and conditionality, reduced intellectual property protection, additional requirements, and limited regulatory improvements will severely impact the sector’s ability to secure investments and weaken EU competitiveness. It will disproportionally affect small to mid-size companies by lowering their ability to attract investments that enable them to bring innovation to patients, whether directly or through partnerships. Down the line, this will limit patient access to medicines as innovators invest in other regions and Europe becomes a secondary market.

Far from a balanced approach, in their current form, the proposals would upend the stability and predictability of the EU incentives framework, fail to achieve the objectives of the Pharmaceutical Strategy for Europe, and further widen the gap that already exists between the U.S. and the EU for new medicines approvals, deteriorating patient access.

An ecosystem unlike any other

Unlike other sectors, where product development is more predictable, the healthcare biotechnology industry invests in projects with typically long development times of over 10 years and high rates of failures. Developers, small and large, may invest billions in a R&D programme that may fail, or only yield a result a decade later. Strong incentives and regulatory protections are essential to guarantee return on investments and the sustainability of the system.

Biopharmaceutical companies, especially small to mid-size companies, rely on leveraging incentives to attract private investment for growth. Diluting incentives will lessen the attractiveness of Europe for biomedical research advances and the pipeline of innovative medicines in the EU.

This would have a chilling effect on the entire ecosystem, whether it would be pushing the boundaries of healthcare innovation, or patient access to novel treatments. That effect would not only be European but global as the biotechnology industry, just as the wider pharmaceutical sector, is highly competitive as companies can choose where to invest and conduct their R&D.

Opening growth pathways

Healthcare biotechnology innovation is part of Europe’s fundamental economic fabric. Companies have a significant research and manufacturing footprint in Europe, bringing direct and indirect benefits to our economy. It is a critical sector to support and strengthen Europe’s resilience.

Yet, European innovators are often “swept-up” by investors outside of the EU, subsequently leaving the EU and launching innovative treatments in other regions first. The revision is an opportunity to improve the ability for start-ups, spinouts, SMEs, and companies growing past mid-size in Europe.

We should ensure that our home-grown, cutting-edge biotechnology research translates into innovative therapies within Europe. Europe should be leveraging its R&D and manufacturing footprint to strengthen its own resilience and economic development and thus patient access.

Europe’s choice

The revision of the pharmaceutical legislation presents Europe with an opportunity to create the right conditions to turn the situation around. Europe can choose to reward innovation to incentivise scientific progress. Europe can choose to foster investments in R&D, skills, and infrastructure. Europe can choose to open growth pathways for small and mid-sized companies.

Europe has an opportunity to deliver on all the objectives of the Pharmaceutical Strategy.

[1] IQVIA, Global Trends in R&D (2022), p. 12.