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The festivities marking the late 2019 holiday season in Europe have been spoiled by a disconcerting message about the declining efficiency of investments in pharmaceutical research, in the shape of a lengthy report from the European Union on industry’s innovative capacity.
The festivities marking the late 2019 holiday season in Europe have been spoiled by a disconcerting message about the declining efficiency of investments in pharmaceutical research, in the shape of a lengthy report from the European Union on industry’s innovative capacity.1
The report’s analysis shows that a substantial increase of R&D investment in the biotech & pharma sector over the last 10 years has been accompanied by a decline in the number of patents filed per year. Taking a simple input-output model, where R&D investments are regarded as input and patents as output, the long-term development shows a widening gap between investment and patent activities, it says. And because pharmaceuticals and biotechnology are among the most R&D intensive industrial sectors, “the long-term development of the R&D investment, and particularly the question, how efficient are these investments, is becoming of crucial importance.”
The fall in out-turn is not so much a matter of incompetence but more a reflection of “sector specific issues,” it suggests-citing the greater difficulty in development and in winning regulatory approval as investigation moves from small molecule drugs to biologic drugs. Despite R&D growing by around 60% and sales by around 50% over the last decade, alongside significant increases in capital expenditures, number of employees, profits, and market capitalization, “these industries, and in particular drug development, are facing serious challenges that seem to result in a decreasing efficiency of the R&D investments, i.e. significantly higher investments per each new medicine approved. Indeed, the development of new medicines are facing ever higher effectiveness requirements, stricter approval regulations, complex market issues and high uncertainties involved in the R&D&I processes.”
To add to Europe’s yuletide woes, the report also highlights particular weaknesses in the EU industry by comparison with its US counterparts. The low number of European biotech companies in the EU compared to the U.S. “is a main challenge for the EU, as this subsector is the basis of more and more new drugs” intensified by the trend among many of the larger U.S. pharmaceutical companies to acquire smaller US biotech firms to strengthen their new drug pipelines. In addition, U.S. pharma and biotech companies spend in R&D around 1.5 times more than their European counterparts. “The U.S. is leading the world in biotechnology and hence in the development of more complex biologic drugs. For example, the recent breakthroughs in cancer immunotherapy, gene therapy and stem cell therapy are all being led by U.S. companies. There are European companies active in cancer immunotherapy such as AstraZeneca, Novartis and Roche, but there are many more US companies in this field.” And just in case any European readers might have been distracted by the holly and the ivy, the report adds: “The EU has very few of the larger biotech companies and none to compare with the large US biotechs such as Amgen, Biogen, Celgene, Gilead.”
Father Christmas has not provided any instant solutions to the problems identified. Instead, the conclusion is just the standard plea from every self-respecting health economist for more funding for more studies. “Definitely, further research is needed to analyze in every aspect the role of the different factors - such as industry specific factors, the role of the regulatory environment, the market structures-in order to get the whole picture”, the study says. What might be regarded by anyone wanting more valuable gifts as a mere stocking-filler.