Pharmaceuticals in the EU

25 August 2006
by eub2 -- last modified 25 August 2006

European Union action in the pharmaceutical products sector is basically composed of two types of measures relating to industrial policy and the smooth operation of the internal market. These involve the harmonisation of technical requirements and strengthening the competitiveness of the European pharmaceutical industry.

The European-based pharmaceutical sector makes a valuable contribution to the economic, social and research life of the European Union.

The EU pharmaceutical industry:

• Employs about 600,000 people in Europe of whom around 100,000 are in research and development;
• Makes a significant positive contribution to the Union’s trade balance (EUR 24 billion in 2003) and
• Makes a substantial investment in the European science base (EUR 20 billion in 2003).

This reflects the traditional strength of Europe as a centre for pharmaceuticals. However, despite the strength of the industry, Europe’s leading role as a centre for pharmaceutical development and production has been declining. In 1992, 6 of the top 10 biggest selling medicines in the world originated in Europe with 4 from the USA. In 2002 the situation had reversed with 8 of the top selling medicines coming from the USA and only 2 from Europe.

The European Commission’s policy aims to reverse this trend and make Europe again the natural home of pharmaceuticals. On 1 June 2005, Vice-President Verheugen announced a new industrial strategy for the pharmaceutical sector. The strategy has three broad themes; competitiveness, innovation and patients. Over the next three years the Commission will take forward individual work programmes in all three areas. The overall aim is to provide the conditions where the innovative, generic and self-medication sectors can thrive supporting the Union's new strategy for Growth and Jobs and contribute to tackling Europe’s public health agenda.

The completion of the single market in pharmaceutical products

Since November 2001, the technical requirements relating to the marketing authorisation, production, labelling, classification, distribution and advertising of medicinal products for human use and veterinary medicinal products have been grouped under two Community codes. These are the Community code relating to medicinal products for human use and the Community code relating to veterinary medicinal products . These two codes brought together and repealed the directives which had been in force until then (most of which dated from 1965 and 1975) as well as their subsequent amendments.
Certain other technical provisions, which were also harmonised, were not brought under these two codes and are still the subject of specific texts. These cover the transparency of national measures on pricing and the reimbursement of medicinal products for human use , good clinical practice and the guidelines on good manufacturing practice for veterinary medicinal products and medicinal products for human use.

The appropriate development of Community legislation has made it possible to gradually eliminate technical barriers to trade in pharmaceutical products within the EU. In addition, the commitment undertaken by some thirty European countries to comply with the harmonised specifications developed within the European pharmacopoeia has also made it easier to integrate national markets.

The single market in pharmaceutical products is now in the process of completion. One major problem remains, however: that of price controls which can hamper the free movement of pharmaceutical products. In effect, the Member States, to varying degrees, use price controls as the primary means of containing public health expenditure. To solve this problem, the Commission had already raised the possibility in its November 1998 Communication on the single market in pharmaceuticals of relaxing price controls and developing effective competition. This idea was raised again in its 2003 Communication on a stronger pharmaceutical industry for the benefit of the patient for the benefit of the patient without any details being given as to how it would be put into practice.

Strengthening the competitiveness of the pharmaceutical industry

In the aforementioned communication from 2003, the Commission makes recommendations on how to improve the performance of the pharmaceutical industry in terms of its industrial competitiveness and its contribution to social and public health objectives.

This communication starts with two observations: the pharmaceutical industry in Europe generates wealth and high quality employment, and plays a major role in the development of innovation, but lacks competitiveness compared to the industry in the USA (insufficient investment in research and development "R&D" and low innovation capacity).
To remedy this situation, the Commission proposes action in four main directions:

• reducing to the absolute minimum the time taken to examine applications for marketing authorisations and the time between the granting of a marketing authorisation and pricing and reimbursement decisions.
• improving the development of innovative medicines (increasing research investment and sufficient protection of data exclusivity);
• facilitating generic penetration in the different national markets;
• boosting research activity (implementation of the Life Science and Biotechnology Action Plan, increased Community funds for research and the establishment of a true European research area).

The current reform: enhancing the effectiveness of marketing procedures

Most of the calls for action put forward by the Commission in 2003 were already on the agenda in 2001 when the major legislative reform of the sector was launched.
This launch came six years after the entry into force of the centralised procedure for marketing authorisation which gave pharmaceutical firms the choice between two different methods of obtaining authorisation for their products:

• a centralised authorisation procedure, which is mandatory for medicines manufactured using biotechnology and optional for medicines containing a new active substance which has not yet been authorised by a Member State as a medicine for human use. Under this procedure, the marketing authorisation must be obtained from the European Agency for the Evaluation of Medicinal Products (EMEA). It is issued by the Commission and is valid throughout the Community for a renewable period of five years. This procedure covers around 10% of medicinal products.
• a decentralised procedure based on the mutual recognition of national authorisations which applies to most conventional medicinal products (90% of medicines). Under this procedure, the marketing authorisation is obtained from one Member State and extended to the other Member States thanks to the system of mutual recognition. It is also valid for five years.

The EMEA plays a pivotal role in these two procedures. Set up in 1995, the Agency's main task is to coordinate the scientific evaluation of the safety, effectiveness and quality of medicinal products (pharmacovigilance). Under the centralised procedure, the EMEA is given the task of delivering an opinion on all issues relating to the granting, amendment or withdrawal of a marketing authorisation. It is assisted in this task by the Committee for Proprietary Medicinal Products and the Committee for Veterinary Medicinal Products. Should one of the Member States fail to recognise a national authorisation, it is the responsibility of the EMEA, under the centralised procedure, to find a compromise.

The current reform launched in 2001 by the Commission proposes important changes which aim to take into account necessary changes to the procedures for marketing medicinal products resulting from the experience gained since 1995, the rapid development of applied sciences in the pharmaceutical field (gene therapy, etc.), the increasing globalisation of the regulatory environment and enlargement.
This reform seeks to increase the efficiency of operation of the marketing procedures and thereby improve access to the whole of the European market for innovative and generic medicinal products. The debate surrounding the period of protection for clinical data forms the main challenge for the legislative work. In this respect, the Commission proposal attempts to reconcile two major trends which correspond to diametrically opposite aims:

• to protect the innovative sector from generic copies through a sufficient period of protection for data submitted in support of an application for a marketing authorisation;
• to develop generics by shortening the period of data protection for medicines copied by a generic.

This reform took the form of a "legislative package" containing two proposals for a directive amending the Community code relating to medicinal products for human use and the Community code relating to veterinary medicinal products respectively and a proposal for a regulation amending Regulation (EEC) 2309/93 which introduced the centralised marketing authorisation procedure and established the EMEA.

The main changes proposed concern the mechanisms for marketing medicinal products:

• extension of the centralised procedure to cover all new active substances. This measure would help make innovative medicines available to all European citizens at the same time;
• harmonisation of the protection period for clinical data at ten years with the possibility of a 1-year extension should a new therapeutic indication be discovered. During this period, no other company except the one holding the marketing authorisation will be able to use the data on the authorised product. This should allow the industry to recoup its investment in R&D and remain committed to producing innovative medicinal products. This measure should also adjust the different levels of intellectual property protection to avoid excessive price differentials. The protection period for data on conventional medicinal products currently ranges from 6 to 10 years in the Member States and is generally shorter in the ten new Member States.
• easier access to the Community market for generics through two main measures: applicants for a marketing authorisation for a generic medicinal product may carry out the tests necessary for submitting the file before the end of the exclusivity period for the protected product without this being regarded as an infringement of the rules on the protection of industrial and commercial property. This should allow the applicant to start marketing the generic as soon as the product copied is no longer protected. In addition, provision is made in the case of generics for which the reference medicinal product has obtained a marketing authorisation through the centralised procedure that the national agencies will be able to authorise the generic provided that it is absolutely identical;
• abolition of the five-yearly renewal of marketing authorisations: a single and definitive marketing authorisation would be issued in order to lighten the administrative load borne by the authorities responsible for issuing them. This measure will be accompanied by tighter pharmacovigilance and market surveillance;
• the introduction of a faster procedure for marketing medicinal products with a major therapeutic impact;
• improved operation of the mutual recognition system, with the arbitration process conducted by the EMEA being triggered automatically.

The other main topics relating to medicinal products for human use not tackled by the reform

In addition to this major reform covering the most widespread conventional medicines, the Commission is also actively promoting three very specific types of medicinal products: orphan medicinal products, medicines for children and herbal medicinal products.

Orphan medicinal products are medicinal products which are used to treat rare diseases or which are "not economically viable" (the market is small and/or not very profitable). Thanks to a Regulation which entered into force at the start of 2000, it is now easier to develop and market this type of product (exclusive marketing rights for a ten-year period and reduced registration costs).

The Commission plans to develop an equivalent system in 2004 for children's medicines in order to promote the development of medicinal products specifically adapted to the needs of children.

The legal and practical situation concerning traditional herbal medicines (plant-based preparations) differs widely from one Member State to the next. The Commission, in its proposal for a Directive of January 2002, aims to harmonise the marketing of these products by means of a simplified registration procedure called "traditional use registration".

The specific features of the veterinary sector

The current reform proposes amendments to the Community legislation on veterinary medicinal products which are identical to those proposed for medicinal products for human use. It also suggests other changes aimed at tackling the problem of the shrinking range of veterinary medicinal products which Europe has experienced over a number of years. The limited availability of veterinary medicinal products is mainly due to the application of the legislation on maximum residue levels (MRLs) . These MRLs indicate the maximum threshold for traces of veterinary medicinal products which may be contained in foodstuffs from animals to which these substances have been administered. The purpose of this legislation is to protect the health of the consumer of foods of animal origin.
Faced with the cost of the scientific studies required to establish these MRLs, veterinary pharmaceutical firms have lost interest in certain market segments which are not profitable enough. Added to this problem of the absence of medicinal products for so-called "minor" species or less common pathologies is the fact that, since 1 January 2000, the legislation on MRLs has placed a ban on treating food-producing animals with medicinal products containing active substances for which no MRL has been established.
The combination of these two factors has gradually led to shortages in the veterinary sector.
The proposals contained in the current reform attempt to come up with answers to remedy this situation through three measures:

• in cases where no authorised medicinal product is available for a given species or disorder, the reform proposes that other existing products be used (another similar veterinary medicinal product, one which is authorised in another Member State, or a medicinal product for human use);
• in addition, it is proposed that economic incentives be introduced to encourage new veterinary medicinal products by increasing data protection, thus ensuring that the return on investment for the pharmaceutical industry is more attractive;
• the Commission also suggests adapting the marketing authorisation system to allow the use of certain medicinal products which have not been authorised for certain categories of animals or for serious epizootic diseases.

Access to essential medicines for the world's poorest countries: WTO agreement and the EU's development policy

The international dimension of EU policy on medicinal products is seen in its desire to give the world's poorest countries easier access to essential medicines at affordable prices.

As part of its policy on development and combating HIV/AIDS, tuberculosis and malaria, the EU has set up a system enabling pharmaceutical producers to sell developing countries essential medicines at reduced prices while ensuring that these products do not find their way back into the EU. Thanks to this system of tiered prices and the ban on importing such products into the Community, the EU seeks to give developing countries greater access to the essential medicines they need to fight the major communicable diseases.

Within the WTO, the EU has always defended the possibility of allowing countries without a pharmaceutical industry to be able to obtain compulsory licences . It eventually secured an agreement in August 2003 which, by the end of 2003, would allow a country which was facing a health crisis but had no production capacity to obtain cheap copies produced under compulsory licence in another country.

Glossary:

Parallel imports: Wholesale importers obtain supplies of standard brand-name medicines in countries where these products are cheap and sell them in countries where the market prices are higher.

Compulsory licences: governments can issue compulsory licences when they authorise a third party to produce the patented medicinal product or use the patented procedure without the consent of the patent owner. This authorisation may be issued when there are health emergencies, for example.

Orphan medicinal products: medicinal products which are intended to treat rare diseases, or are "not economically viable" because the market for them is small with little prospect of a significant return on investment, and do not therefore attract adequate investment by the pharmaceutical industry.

Generics: Medicinal products which are copies of other products whose patents have expired. Generic producers are allowed to use clinical data on the medicinal product which is no longer protected in order to create cheaper copies using a formula based on the original product.

EMEA (European Agency for the Evaluation of Medicinal Products): Set up in 1995, the Agency's main task is to coordinate the scientific evaluation of the safety, effectiveness and quality of medicinal products (pharmacovigilance). Under the centralised procedure, the EMEA is given the task of delivering an opinion on all issues relating to the granting, amendment or withdrawal of a marketing authorisation.

Centralised marketing procedure: under this procedure, the marketing authorisation is obtained from the European Agency for the Evaluation of Medicinal Products (EMEA) and issued by the Commission. It is valid throughout the Community.

Decentralised marketing procedure: the marketing authorisation is obtained from one Member State and extended to the other Member States thanks to the system of mutual recognition.

Pharmacovigilance: monitoring activity conducted by the Member States and the EMEA to enable Member States to benefit from more information about adverse reactions to the use by the general population of a medicine.

Maximum residue levels (MRL): Maximum admissible threshold for residues of veterinary medicinal products contained in foodstuffs of animal origin.

Good clinical practice (GCP): These are guidelines for the design and conduct of all clinical trials. The latter should enable the testing and assessment of medicinal products on human volunteers before they are made publicly available.

Five-yearly renewal: In both the centralised and decentralised procedures, the marketing authorisation is awarded for a renewable period of five years. At the end of this period, the medicinal product has to be re-submitted for analysis in order to extend the authorisation.

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Source: European Commission