EU Review of Pharmaceutical Incentives: Recommendations for Change

In 2016, the European Council decided it was time for a review of the incentives that the EU provides to companies that develop new medicines with a view to “strengthen the balance in the pharmaceutical system in the EU and its Member States.” This decision was prompted by the increase in medicines prices in the EU and policymakers’ concern that something had to give. This pharmaceutical incentives review is now ongoing.

The new Medicines Law & Policy series of briefing documents, European Union Review of Pharmaceutical Incentives: Suggestions for Change, aims to contribute to the discussion on high medicines prices, in particular those that result from market exclusivity. The publication makes recommendations for policy and legislative change in the areas regulating the Supplementary Protection Certificate, Data Exclusivity, and Orphan Medicinal Products.

In pharmaceuticals, the importance of striking the right balance between rewarding innovation and ensuring that medicines are available and affordable is particularly critical: Access to medicinal products can be a matter of life and death, wellbeing and illness. Many feel that this balance is lost. Only last week, Novartis announced to the world a new gene therapy for spinal muscular atrophy in children, which will be priced at US$ 2.1 million per treatment. We have also seen inexplicable and significant price increases of old medicines after they obtained an orphan medicinal product status in the EU. See here, for an example. In November 2018, The World Health Organization alerted the world to the need to tackle the pricing of cancer drugs, including through supporting generic substitution; enacting stronger pricing policies at national and regional levels; prioritising a selection of medicines with highest clinical value; and making use of TRIPS Flexibilities in case of patented medicines. The WHO report also recommends more cross-border collaboration on information and regulation and greater transparency around costs of research, development and production. Last week, the World Health Assembly followed through on some of these recommendations and adopted a resolution on price and cost transparency of pharmaceuticals. Read a full report of the WHA negotiations on transparency by Health Policy Watch.

Patents and other forms of exclusive rights, such as data and market exclusivity, are meant to stimulate innovation by rewarding innovators with temporary monopolies over their innovations. These monopolies enable companies to reap commercial rewards if they are successful and encourage yet more innovation. But when exclusive rights are granted over medical innovations, the consequences of monopoly pricing can be catastrophic if a high price means that access to the treatment is not provided to patients or is postponed until lower-priced versions of the product are available.

The market exclusivities in the EU, granted through the patent system and the medicines regulatory system are stacked atop each other, never rolled back and are adopted based on assumptions, rather than data that provide evidence for their need. The pharmaceutical industry now benefits from a web of protections in the European Union (EU) that together delay market competition for long periods and allow companies to set profit-maximising prices that are unaffordable for many. Companies obtain those rights without needing to demonstrate that their turnover is insufficient to recoup investments and make new ones. The rule-making for exclusive rights in the EU seems to be driven by a belief that exclusivity is good and more exclusivity is better. Further some of the exclusive rights granted through the medicines regulatory system hamper effective use of flexibilities in patent law such as compulsory licensing or government use of patents.

The briefing documents present the following overall conclusions:

  • Adequate incentives for research and development are important, but there needs to be a clearer link between risk and reward.
  • Historical reasons underpinning the EU’s generous data and market exclusivity system are no longer valid.
  • The idea of ‘sufficient’ profit should guide policymakers, with ‘sufficiency’ estimates driven by the transparency of cost and pricing.
  • Flexibilities inherent in patent law should not be rendered ineffective by exclusive rights granted through the medicines regulatory system.
  • The EU should not use trade agreements to demand third countries implement more stringent intellectual property protection than they are required under WTO rules.

For detailed recommendations on how to improve the supplementary protection certificate, data exclusivity and orphan medicinal product incentives see the briefing documents linked above.

Ellen 't Hoen
Ellen 't Hoen
Ellen ‘t Hoen, LLM PhD, is a lawyer and public health advocate with over 30 years of experience working on pharmaceutical and intellectual property policies.

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