Of Mice, Mountains, and Magma

The mountain heaved and brought forth a mouse. After almost a year of investigation, the EU's antitrust authorities delivered their preliminary report in late 2008 on their investigation into the pharmaceutical industry's supposed sabotage of competition through collaboration, collusion, and conspiracy. Even with 426 pages of the report behind them, officials responsible still do not feel in a position to level any specific accusations, still less to name names or press charges.

Peter O'Donnell

A mouse

The interim report on the investigation by the EU's commissioner for competition, Neelie Kroes, concluded that "competition in this industry does not work as well as it should." But she has adduced little evidence to support that any failings are the consequence of improper activity.

The hollowness of the case was instantly underlined by the European Federation of Pharmaceutical Industries and Associations (EFPIA). It said it was "disappointed" that officials had tried to "mischaracterize the industry as anticompetitive," particularly by the use of "selective quotations" from material seized from companies in the course of dawn raids.

"Those quotes simply show how innovators have rightly sought to protect their inventions and illustrate the highly competitive nature of innovation in this sector...They are not evidence of competition law infringements, as the report itself recognizes," retorted EFPIA.

The industry analysis of the report is uncharacteristically harsh for a sector that has always preferred the velvet glove to the mailed fist for its European diplomacy. "The report acknowledges that patents are key to pharmaceutical innovation and should be protected. It then contradicts itself by questioning the right of the industry to use perfectly lawful practices—such as patent portfolios, patent litigation, and the release of improved medicines," says EFPIA. "Furthermore, the report does not establish that such activities deter generic entry because the facts on generic entry tell a different story."

Amid the magma

Those who wish to make their own assessment of how far the EU document validates its claims of subverted competition can do so at http://ec.europa.eu/comm/competition/sectors/pharmaceuticals/inquiry/index.html. For Applied Clinical Trials readers, it is perhaps more valuable to trawl through the magma of this voluminous report for information of more specific interest to the clinical trials community.

The report's presentation of the current state of the sector in Europe offers some insight into how officialdom views the industry and its attempts to create new products. It says the sector is "vital to the health of Europe's citizens" because "Europe's patients need access to safe, innovative, and affordable medicines."

It values the EU market for prescription and nonprescription medicines at €138 billion ($200 billion) ex factory and €214 billion at retail prices—retail expenditure of approximately €430 for each EU citizen in 2007. The market for prescription medicines was worth around €120 billion at ex factory prices, it estimates.

The inquiry covers 2000–2007, and focused on 43 originator companies and 27 generic companies that "cooperated actively," representing, together, over 80% of the Rx market.

R&D spending

Findings include calculations that originator companies spent on average 17% of their turnover from Rx meds on R&D worldwide in 2000–2007, with 1.5% of turnover spent on basic research, and the rest mostly on preclinical and clinical trials and tests. "According to the submissions received by the respondent companies," preclinical and clinical trials "are generally financed by the companies' own resources...and financial support received from governments or other sources is not significant." And "the development phase, in particular Phase III trials, is the most expensive."

For large firms, "research is an international activity in the sense that it can be located wherever a suitable research environment exists. Once a potential compound has been identified, there seem to be some synergies for the development phase (preclinical and clinical trials), although certain trials need to be carried out nationally or regionally."

An average of five years is reported for "a potential medicine to go through the three clinical trial phases," as the report expresses it, with a range of two to 10 years. For the 20 best-selling molecules, it calculates the period between first patent application and market launch at between six and 10 years, and for a wider sample of 141 products for which complete data was available, the average was 8.6 years.

Somewhat skeptically, the report observes: "The originator industry claims that the cost of a new medicine from basic research to launch amounts to between US $800 million and US $1 billion (this figure includes the costs of failed projects)," adding "Some respondents have suggested, however, the costs are closer to $450 million."

Expenditure on marketing and promotional activities is estimated at 23% of turnover—"thus about one third more than they spent on R&D as a whole," the report adds with an unmistakably censorious air. Similarly, the report cites industry figures indicating that as few as one in 5000–10,000 compounds tested are successfully launched, before going on to remark: "In the course of the sector inquiry it was not possible to verify this data, as many companies claimed that they were unable to provide the requested information."

Reengineering

In a changing environment—in terms of competition, health care technology, and economics—originator companies are, according to the report, "reengineering their business strategies" to concentrate particularly on patient-focused personalized medicines and on biopharmaceuticals. It states that two-thirds of the companies consulted said they are involved in, or intend to extend their activities to, biopharmaceutical-based medicines in the immediate future in expectation of growth faster than the traditional market.

Companies also indicated that the success rates for biopharmaceutical-based medicines are twice as high as those of chemical molecules in preclinical and clinical development, and have fewer side-effects, greater potency, and better selectivity for specific diseases and patient groups, the report notes.

The investigation observed that originator companies rely heavily on innovations from third parties: More than one third of all new medicines in the marketing approval phase were acquired from outside the company, it found. Large pharmaceutical companies are increasingly in-licensing new products, the report adds: "Currently 25% of the molecules in clinical development have been acquired from other companies"—including smaller firms, which it concludes "shows the importance of smaller firms for maintaining the innovative character of the pharmaceutical sector."

Some sympathy

The report is not entirely dismissive of industry's concerns over the difficulties of developing and launching effective new medicines. "Discrepancies between different regulatory agencies as regards to the assessment criteria are of concern for companies," it notes, without any perceptible incredulity.

"Despite the European regulatory framework, companies reported the increasing volume of data requested during the evaluation procedure and the need for duplicative assessments for certain national agencies. A number of companies suggested that more coordination should be developed among agencies...some originator companies specifically expressed a need for Europe-wide consolidation of the requirements in the design of clinical trials."

It faithfully cites verbatim some of the observations it has gathered on these difficulties during the course of the inquiry. Examples include: "The conduct of multicenter, multinational clinical trials in Europe remains difficult and [the company] would welcome the earliest possible introduction of an optional centralized procedure for European multinational clinical trials," and "Implementation of the Clinical Trials Directive requirements is cumbersome, creates a great drain on resources, and is not consistent across member states...so the benefit of a single approach has been partially negated."

Equally, it cites companies' concerns over the lack of international harmonization, including "increasing differences between scientific advice from the USA and Europe," and different requirements expected for the clinical trials of the same product between Europe and the United States.

The debate over these preliminary findings is just beginning. This spring the EU authorities will publish a final report. Some of the debate may prove helpful in exposing and even remedying difficulties in developing medicines, some may prove less helpful, complicating the process of protecting innovations. In this respect, Kroes has made clear that she is still on the antitrust warpath.

Peter O'Donnell is a freelance journalist who specializes in European health affairs and is based in Brussels, Belgium.