Improving the

competitiveness of the

pharmaceutical industry

Dominique LimetSenior Vice-President and Area Director

Southern and Eastern Europe

G10 - recognising the need for a competitive pharmaceutical industry

G10 Recommendations: the end of a process or the beginning of a change?

Pharmaceutical R&D expenditure - a comparison

(e): estimateSource: EFPIA member associations, PhRMA, JPMA

17,49518,800 (e)

10,958

8,000

5,342

9,078

26,384 (e)

21,631

2,810

5,221

7,499

n.a0

5000

10000

15000

20000

25000

30000

1990 1995 2000 2001

Europe

USA

Japan

1990-2001 € million

0%

2%

4%

6%

8%

10%

12%

14%

16%

Sh

are

of

R&

D (

%)

Pharmaceuticals TelecommsITElectronicsCarsAeronautics Services Interm. goodsConsumer GoodsAgro-foodPetro-Chemicals Media/Comms

Research-driven pharmaceutical companies invest up to 14% of their sales in R&D, which represents a higher percentage than any other industrial sector

R&D investment - driver of the pharmaceutical industry

73% 69%59%

26%26%

34%

1% 5% 7%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1990 1995 1999

Year

Rest of the World

USA

EU

Source: EFPIA, 2000

Location of R&D spending by EU companies

1990-1999

A call for ActionA competitive environment: key to a thriving

pharmaceutical industry in Europe

Competitive pricing for non-reimbursed medicines

Benchmarking for competitiveness

Principles of the Transparency Directive are key in finding solutions to accelerate market access

Transparency and predictability in Health technology assessments

The importance of pharmaceutical competitiveness for Europe

A knowledge-based economy

Provision of high-skilled jobs

Driver for innovation and investment

Provision of medical advances

~100 Discovery Approaches~100 Discovery Approaches

1 - 2 1 - 2 ProductsProducts

1 - 2 1 - 2 ProductsProducts

High Risk Process

12 - 15 years

Cost of development +800 Mo euro on average

High Risk Process

12 - 15 years

Cost of development +800 Mo euro on average

Drug discovery is a high-risk process

DiscoveryDiscovery Exploratory DevelopmentExploratory Development

IdeaIdea DrugDrug12 - 15 Years12 - 15 Years

Full DevelopmentFull Development

Phase I Phase II Phase III

00 151555 1010

Preclinical Pharmacology

Preclinical Safety

Millions ofCompounds Screened

Clinical Pharmacology& Safety

Attrition is High in the R&D Process

Note: Data have been expressed in € million at current exchange rates - Original data in $ million: 231 (1991), 359 (1993), 429 (1997), 610 (1999), 802 (2001)

Source: Di Masi J. et al., Tufts University, 1991; Office of Technology Assessment (OTA), 1993; Myers and Howe, 1997; Office of Health Economics & Lehman Brothers, U.K., 1999; Di Masi J., Tufts University - Centre for the Study of Drug Development, 2001

187307 378

572

895

0

200

400

600

800

1000

1991 1993 1997 1999 2001

Estimated full cost of bringing a new chemical or biological entity to market- € million

Our investment in R&D is a reflection of a high-risk development process

Comparison of product portfolios launched and in development (from 35 companies - source LEHMAN - BROTHERS) on the basis of size of targeted populations in OECD markets

0%

10%

20%

30%

40%

50%

small medium large verylarge

products launched

products indevelopment

Current and future profile of pharmaceutical innovation

Stimulating research into new medicines

Pharmaceutical industry R&D investments - 1962-1996

Etat des liens que les 6 plus gros labos phamaceutiques ont tissésAu 7 Juin 2002

Pfizer

Licensing-inCo-Promotion

ALZA

Delivery Systemfor Procardia XL

for Glucotrol

Pliva

ZithromaxAgouron

Viracept

ResponseRemune

Inhale Therapeutics

Exubera

Aventis

MerckUCB

Zyrtec

Reactine

PhytopharmObesity productPrinomastat

SunPharm

Denspm

CRCT Ltd.PARP Inh.

Unigen

Oral Calcitonin

GSK

Shionogi

S 8510S 0139

S 1746

NeurocineBiosciences

CRF Pgm

Yuhan

CRF Pgm

Adolor

Alvimopan

Tanabe

TR 14035

Alkermes

Delivery system HGS

repifermin

TaishoZybanJapon

Sepsicure LLC

GR270773

VertexAgenerase

Shire

TrizivirEpivirCombivir

GW810781

Gilead

adefovir

Relenza

RelenzaCoutler

Bexxar

Immunogen

SB 408075

Cytokinetics

NobexOral Insulin

TexasBiotech

Argatroban

Scios

NatrecorEU

Unigene

Oral hormone

FIC Niesseria Vaccine

Powderject

Corixa

MPLHer-2Mammaglobin

Prostate Tuberculose

Chlamydia

Kyorin

Noroxin

AstraZeneca

SGP

SingulairJapon

Claritin

Biogen

Anti VLA

SibiaSIB 1553

SIB 1508

Bany

KRP 297

GLX ZomigNIcOx

AZD3582NOSAID-II

Oxis Tubuhaler

device

SkyePharma

pulmicourt

Matastron

Matastron

Sugen

Iressa

Sepracor

AllergaInflazyme

IPL512602Transkary

otic

Dynepo

Yakut Honsha

Campto

Genta Genasense

Therion

Alvac

ViroPharma

Picovir

Pralnascan

Axys

cathepsinMilleniumTechnology

transfert

Noven

Combipatch

Peptide therapeutics

Helico...

Karo BioStrat. All.

BMS KosNistat

AvaproJapan

Dura

Azactam

Toyama

Garenoxacin

Imclone

ErbituxOtsuka

apipriprazole

Oncologytherapeutic

Network

apipriprazole

Joint VentureCo development

Légende

The pharmaceutical industry’s investment in the life-science sector

Increasing competitiveness: a dual approach

Meeting the pharmaceutical sector’s needs:

– Rewarding innovation and improving the science base

– Addressing structural issues

– Improving market access

Creating the right conditions for a competitive industry

Increasing competitiveness: a dual approach

Meeting society’s health objectives:

– Bringing innovative approaches to healthcare

– Addressing health gaps and priorities

Operating in a manner that responds to Europe’s health needs

Europe’s ageing population

Denmark

Germany

Spain

Spain

France

France

Italy

Netherlands

Finland

United Kingdom

United Kingdom

0

5

10

15

20

0-4 5-9 10-14 15-19 20-24 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64 65-69 70-74 75-79 80-84 85-89 90-94 95+

Age groups

Av

era

ge

ex

pe

nd

itu

re p

er

he

ad

ex

pre

ss

ed

as

a s

ha

re o

f G

DP

pe

r c

ap

ita

(%)

Source: Economic Policy Committee (2001) “Budgetary challenges posed by ageing populations”

The limits of cost-containment

An increase in pharmaceutical spending largely due to ageing and the launch of innovative medicines

Pharmaceutical spending is an easy target but only represents a part of overall healthcare spending

A continuous focus on short-term cost-containment will not resolve long-term structural issues and challenges of healthcare systems in Europe

Avoiding the vicious circle

Ad hoc emergencymeasuresshort-termism

Access delays

Healthcarerationing

Budgetary pressures

Less access for patients to innovative treatments Higher costs in other healthcare budget silos, i.e.hospitalisation

Pharmaceutical industry must take measures to deal with abrupt changes

Renewing the ‘social contract’

Managing healthcare budgets

Ensuring access for patients toinnovative treatments

Optimising healthcare intervention

Predictability, communication, transparency

R&D investment in medicinesthat count

Business Planning for long-term supply ofmedicines

Recognising the benefits of innovation

Next steps

Cost considerations are key

Long-term value is critical

Balancing the relationship to ensure that European pharmaceutical industry meets Europe’s needs in a changing world