It is encouraging to see that the European Commission has charged former Italian Prime Minister Mario Draghi to prepare a report on Europe’s declining competitiveness, particularly in relation to the U.S. and China, and provide options on how to reverse the trend.
As an industry, we echo the call by European heads of state for a new European Competitiveness Deal. Considering the sector contributes more to the positive EU trade balance than any other, a dedicated health and life sciences strategy should be an integral part of the EU’s industrial strategy.
Such a move would send a hugely positive and much-needed signal to global investors that Europe wants to compete for research, development and manufacturing investment. It could turn around Europe’s fortunes that have seen not only a 25 percent drop in Europe’s global share of R&D investment in the past two decades, but also a steady decline in its clinical trial activity. China and the U.S. now carry out three times and twice as many trials for advanced therapies (ATMPs) as Europe, respectively.
Health care and life science companies choose carefully where to invest, and decisions are based on a number of factors. Availability of strong science, funding and venture capital; ease of carrying out clinical trials; good patient access and how countries value and reward innovation and critically, how stable and competitive a region’s intellectual property framework is.
Yet today — on World IP Day — there are four policies at various stages of implementation at EU level that will hinder our region’s ability to compete.
1. Weakening regulatory data protection in the Pharmaceutical Legislation
A proposal by the European Commission aims to reduce a form of IP in Europe — regulatory data protection (RDP) — at a time when ambitious nations are prioritizing competitiveness.
A competitiveness check carried out by the economic research agency, Dolon, found that the original Commission proposals to reduce a product’s RDP by two years and make its recovery dependent on factors outside of a company’s control, would see Europe lose out on the research and development of about 50 of the 225 expected new treatments over the next 15 years — medicines which may not be researched elsewhere. It also showed that such a reduction in RDP in Europe would cost €2billion a year in lost R&D investment. The amendments in Parliament would reduce RDP by six months — an improvement over the Commission proposal, but still a step backward rather than forward.
2. Implementing an EU-wide compulsory licensing policy: Allowing Europe to forcibly appropriate R&D, trade secrets and health technology platforms
The European Commission is proposing to introduce a pan-EU compulsory licensing policy that allows governments to forcibly license patents at a time of ‘crisis’ — and mandate disclosure of confidential research. This would put Europe’s competitiveness at risk in this crucial area and jeopardize our ability to tackle future health threats. Without a proper definition of crisis, the proposed system is open to abuse and is sending a signal to global investors that Europe’s IP regime is unpredictable.
Covid showed the importance of a healthy society to a healthy economy, as well as the importance of the innovative pharmaceutical industry to Europe’s health and resilience. Europe’s ability to carry out R&D and scale up global vaccine production in record time to tackle the pandemic, was only made possible thanks to the life science infrastructure, strong partnerships and voluntary sharing of IP and expertise.
Had compulsory licensing been used during Covid, it is likely that instead we would have seen a lack of, and competition for resources — raw materials, active pharmaceutical ingredients and skills, expertise and technology platforms — which permitted the scale-up of vaccines in a coherent way.
3. Supplementary Protection Certificate pre-grant opposition: Introducing uncertainty into a critical incentive
Medical innovation is extremely complex, and it often takes 12-15 years to develop a new therapy.
Recognizing that this long timeframe often eats into the standard patent term, Supplementary Protection Certificates (SPCs) were introduced (in 1993) to restore — within strict guidelines — some of that time back to the innovator company before the medicine goes off patent and can be copied freely.
At the same time, EU legislation already allows generic manufacturers to take the relevant data and reproduce the originator drug during the SPC term for export purposes and where the original patent has expired, which ensures that patients can receive generic medicine quickly after a patent expires.
However, new rule proposals would allow pre-grant, third-party challenges to SPC applications, which in the vast majority of cases are not in dispute. Due to a lack of safeguards to prevent abuse, patents are likely to expire before SPC protection takes hold, creating legal uncertainty for innovators and generics, as well as potentially unpredictable drug availability for patients.
Such an addition is misguided and would only serve to make the EU environment more unpredictable compared with other parts of the world, which are already increasingly viewed as more attractive for investment.
4. Bolar exemption extension: More gaps to operate in while patents remain in place
The Bolar exemption currently permits generic companies to use data from innovators to submit their own applications for marketing authorization to the European Medicines Agency, while protection for the originator medicine is still in force. Studies show that the existing regime works well, with generics already entering the market shortly after loss of protection; after a median of five to six days over the past five years in France, Germany, Italy and Spain.
Recent proposals contained in the revision of the pharmaceutical legislation would expand the Bolar exemption further to include carrying out health technology assessments and obtaining pricing and reimbursement.
Putting in place such an extension — while objectively unnecessary given the above — would require sufficient safeguards, currently missing from the proposal, to ensure clarity and respect for the actual date of loss of IP protection. As it stands, it would only undermine the integrity of the IP system innovators rely on to continue investing in R&D for novel therapies for European patients.
The cumulative effect of the above-mentioned policies would lead to ambiguity and uncertainty for companies investing in Europe and further reduce the attractiveness of our region.
This World IP Day, we need to consciously and collectively respond to the call made by European heads of state in March 2023 to strengthen incentives for innovation in health care rather than weaken the ecosystem and make the right decisions when it comes to these proposed legislations. It is important not to simply assess the individual merits of these proposals, but the cumulative impact and signal that sends to the global investor community about Europe and its attitude to innovation.
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