Letter to the European Commission on the review of pharmaceutical innovation incentives

Commissioner Elżbieta Bieńkowska
Directorate-General for Internal Market, Industry, Entrepreneurship and SMEs
Building BREY
1049 Bruxelles
Belgique

18^th December 2017

Dear Commissioner

We write to voice our concern with the European Commission’s review of pharmaceutical incentives, in particular proposals under consideration to dilute intellectual property rights (IPRs).

Such proposals should be treated with caution. If the review were to result in weaker IPRs, it could undermine future economic growth in the EU, and retard the development of new treatments necessary to mitigate problems associated with ageing populations.

Innovation and IPRs are vital to Europe’s future economic growth

Innovation is a major driver of economic growth, responsible for around 50% of US annual GDP growth, for example. Yet Europe is falling behind peer countries. The Lisbon Strategy target of Europe spending 3% of GDP on R&D by 2010 is now at 2%: 0.7% less than the US and 1.5% less than Japan. China is catching up quickly, with an innovation performance growth rate five times that of the EU.

Alongside taxation, regulatory policy and support for academic science, strong protection for intellectual property rights is a fundamental driver of innovation, particularly in the life science sector.

Regions that produce the highest numbers of innovative medicines – the US, Japan, Switzerland and the European Union – have rules for the protection of intellectual property rights well above minimum World Trade Organization standards. These include five-year extensions of the normal twenty-year patent term to compensate for delays caused by drug regulators while they conduct mandatory pre-market assessments of a new drug’s safety. These extensions are known in the EU as Supplementary Protection Certificates (SPCs).

To remain a global leader in life sciences innovation, Europe must retain these high standards of intellectual property protection. If the ongoing incentives review – including on IPR incentive for the development of orphan and paediatric medicines and on the EU SPC – results in the erosion of IPRs, investment will go to more welcoming jurisdictions and future economic growth will suffer.

Developing new treatments for the diseases of ageing is particularly challenging

As European societies age, there is a pressing need for new medicines to treat diseases that are prevalent among older people, such as neurological conditions and cancer.

The drug development process for many of these diseases is extremely protracted, particularly for slow degenerative conditions such as Alzheimer’s and multiple sclerosis, or early stage cancer. For these diseases, R&D timelines typically consume up to 15 years of the standard 20-year patent term.

SPCs provide some compensation, but they are capped at five years. This means that medicines for these diseases have a far shorter period to recoup significant investments than other categories of medicines.

This insufficient incentive framework provided by the combination of fixed patent-terms and SPC could well be responsible for the relative under-investment by the private sector in R&D areas with long time horizons. And perhaps why several companies ended their R&D programs into neurological diseases in the late 2000s, citing high failure rates and long development timelines.

However, the European Commission is considering attempting to boost the EU’s generic manufacturing industry by creating a “manufacturing waiver” for SPCs. This would allow the manufacture and export of SPC-protected products to countries outside the EU while an SPC is still in force.

This dilution of a key IPR would inject even greater levels of financial risk into long-term R&D projects, and further dampen incentives to develop new treatments for ageing people.

Given the need to promote innovation in the EU and to encourage R&D into diseases associated with ageing, we the undersigned call on the Commission to:

Recognise the importance of innovation for future economic growth and prosperity.
Use the pharmaceutical incentives review to ensure the EU’s framework for the protection of IPRs retains the highest standards globally.
Reject proposals that would weaken European IP incentives.
Consider reforming and strengthening the system of SPCs to promote pharmaceutical innovation for diseases with long R&D timelines.