Valuing Healthcare Biotechnology in Europe: EuropaBio s perspective

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1 Valuing Healthcare Biotechnology in Europe: EuropaBio s perspective

2 The healthcare biotechnology sector The healthcare biotechnology sector includes bioscience based enterprises, which create and deliver innovative treatments and preventive interventions for the benefit of European patients and European health care systems. Healthcare biotechnology refers to a medicinal or diagnostic product or a vaccine that consists of, or has been produced in, living organisms and may be manufactured via recombinant technology. The fact that biopharmaceuticals are based on living organisms differentiates them from small molecule pharmaceuticals based on chemicals. The primary difference is that where pharmaceuticals are simple in structure, biopharmaceuticals are complex structures based on unique organisms. This makes biopharmaceuticals particularly challenging to develop and also to manufacture. The industry makes major investments in innovation in the EU. It is a diverse sector, with more than 2,000 companies in Europe ranging from large multinationals, with global annual sales in excess of 10 billion and annual R&D expenditures of 1-4 billion, to medium-sized as well as much smaller enterprises, with fewer than 10 employees running on grant-based incomes only. The industry is directly responsible for around 170,000 jobs and provided an estimated 700,000 jobs in including associated indirect employment. Europe delivers 26% of all global manufacturing of biological medicines. 1. CRA report on Valuing Healthcare Biotech in Europe

3 Biotechnology has a key role to help overcome major health, social and economic challenges The healthcare biotechnology industry can help to address the healthcare challenges facing Europe today: Biotechnology contributes to the prevention of communicable diseases. After clean water, vaccination has been shown to be the most effective public health intervention in the world in terms of saving lives and promoting good health. A number of new vaccines with a major potential for further controlling infectious diseases have been licensed to help prevent childhood and/or adolescent diseases. These include rotavirus diarrhoea, pneumococcal and meningococcal disease and cervical cancer. However, much remains to be done to face the recent rise of preventable communicable diseases in Europe (resulting from financial crisis and complacency of parents). Biotechnology contributes to reducing the health, social and economic burden of major diseases, such as cancers, chronic conditions (cardiovascular diseases, diabetes and chronic respiratory diseases) and rare diseases. Biotechnology is increasingly becoming the future of health 50% of new healthcare products are now produced using biotech methods. In recent years, this industrial sector has made outstanding contributions to medical progress resulting in dramatic improvements to the lives of European patients. Improved diagnostic techniques using biomarkers and biological medicines have significantly increased five-year survival rates for certain forms of cancers. Improved understanding of the genetic basis of many rare, severe and often life-threatening conditions, has led to effective new treatments where none existed before. In the latter case, adequate incentives in the form of the EU Orphan Medicinal Products Regulation have been key to success. Biotechnology addresses the challenges of ageing populations and contributes to the efficiency and sustainability of health systems. Preventive biotechnology keeps adults healthy and active for longer, reducing pressure on healthcare services. Many preventive biotech methods and treatments are highly cost-effective, representing a high social return for the investments made in healthcare expenditure. To exemplify this, there have been a number of successes such as the major transformation that is underway in the treatment of hepatitis C. In some other fields, such as Alzheimer s disease, progress has been more limited to date. However, current biological product development pipelines contain many novel treatment concepts, which will help address these diseases which represent high unmet medical needs.

4 Along the biotechnology value chain, companies contribute to the European economy through the creation of employment, productivity, growth and external trade: Productivity: Healthcare biotechnology contributes to a healthier labour force, with less work and school absenteeism, and higher productivity. This in turn limits the social spending of governments, such as sickness and disability spending and unemployment benefits, thereby helping to contribute to overall fiscal sustainability. By making patients healthier and reducing career interruptions, biotechnology contributes significantly to social insurance and pension funds, tax revenues, VAT, and corporate and personal contributions. Jobs and fiscal returns: economic value added per employee in the bio-pharmaceutical sector is higher than comparable industries. Hundreds of thousands of high quality permanent jobs are created at all stages of the biotech value chain approximately 700,000 in total including allied industries. Export: Another major contribution to the EU economy comes from the successful marketing and selling of innovative products from Europe into leading markets, such as the US and Japan and in meeting the growing demand from middle-income countries. Strengthening the scientific and industrial biotechnology base in Europe boosts the region s competitiveness and builds the future of Europe s knowledge-based economy: The combination of public and private research funding in academic centres of excellence and within healthcare biotechnology companies across Europe supports a crucial strengthening of the knowledge base for scientists and researchers. Another major contribution of healthcare biotechnology is through clinical trials of biopharmaceuticals in Europe, which continues to be a leading location for clinical development worldwide. Europe has substantial capability, capacity and expertise in the manufacturing of biologic products, a far more challenging and costly process than traditional pharma, and delivers products meeting the highest standards of quality and reproducibility. Europe delivers 26% of all global manufacturing of biological medicines. Significant added value for patients and health systems also depends upon substantial on-going levels of R&D investment into new uses or indications, new formulations and dosages of existing medicines. ] HEALTHCARE BIOTECH IN FIGURES 350 million patients already benefiting from treatment 50% of all medicines will come from biotech in 2015 Seeking to relieve 20 to 30 million rare disease patients Targeted treatments for many diseases Insulin, Factor VIII coagulant for haemophiliacs, antibodies for cancer, orphan medicinal products for rare diseases, vaccines, advanced therapies that repair organs, skin, bones and cartilage damage

5 Supporting the growth of the European biotechnology industry The healthcare biotechnology industry is undergoing substantial change in three main areas: 1. The influence of radical advances in its science base; 2. Increasing levels of regulation, both technological and economic; 3. Globalisation of markets and competition. Indeed, the industry faces a range of challenges along the full length of the value chain: Competitiveness of Europe to attract biotech companies Funding for SMEs Need to maintain a vibrant manufacturing sector in Europe Need for clear incentives to continued development such as the successful orphan medicines legislation and robust intellectual property regime DISCOVERY: BASIC AND TRANSNATIONAL RESEARCH PRODUCT DEVELOPMENT MANUFACTURING DIFFUSION OF SAFE AND EFFECTIVE MEDICINES CONTINUING TO IMPR0VE AND ADVANCE MEDICINES Global competition to attract clinical trials Smart spending: Budgets for healthcare biotech should be assessed as investment rather than as purely cost Discovery: The challenges facing Europe regarding discovery are that (1) other countries are rapidly expanding their commitment to basic science (2) Europe still lags behind other international jurisdictions in the effectiveness of its biotechnology clusters; it appears to have too many clusters rather than having focused on developing areas of excellence or facilitating access to funding for SMEs. Some countries outside of the EU have adopted long term strategies to sustain economic growth by establishing the science base and product development capabilities necessary to compete in healthcare biotechnology. This constitutes a real challenge to long established patterns of investment in the biotechnology sector in Europe and the USA. Product development: Clinical trials are by far the most expensive and time consuming stage in the value chain. Global competition to attract clinical trials is already a reality (in terms of creating an attractive regulatory environment and encouraging the local trials through the market access system) and it will undoubtedly intensify. As a consequence, as the potential for sales to markets outside of Europe in middle-income countries grows, some shift in the share of trials towards these countries appears inevitable.

6 Manufacturing: The biotechnology sector will face major losses of exclusivity for biological medicines between now and 2020, and maintaining a vibrant manufacturing sector in Europe is an important challenge for the continued development of innovative medicines here. Over the next five years it is increasingly important that Europe remains an attractive location for bio-manufacturing. Access: The speed and breadth of access to medicines directly determines the revenues that reward the often high risk R&D and other investments of industry. Today, access is increasingly threatened by short-term cost containment measures. Austerity policies following the financial crisis have led to severe cuts and downward pressure on healthcare expenditures, access and disproportionally on medicines. Such negative sentiment must not continue or prevail, as it would have lasting impact on ability to sustain biotechnology innovation in Europe. The crisis has exacerbated the large differences in the purchasing power of European health systems and widened health inequalities. The next generation of innovative, targeted medicines will face a significant challenge in terms of access. Innovative solutions are needed that both grant fast and sustainable access to patients in need whilst rewarding the value of innovation to allow further research and development towards solutions for unmet medical needs. Continued development: A robust intellectual property regime in Europe is an essential incentive, which encourages companies to continue developing treatments that benefit patients. However pricing and reimbursement tools such as external reference pricing and tenders can jettison this incentive. Developing a favourable environment for the European healthcare biotechnology sector There is an urgent need for a more holistic, coherent approach that integrates health, economic and industrial policies addressing the whole value chain. Bioscience policies for human health should not just focus upon research. Policies addressing the economics of supply and demand, supporting incremental innovations throughout the market life-cycle, accelerating uptake of biologics into general medical practice and attracting inward investment in all phases of the innovation process must be put in place and be coherent and supportive of one another. The developing policy environment should place greater emphasis on making Europe an attractive place for investment in innovative bioscience activities, encompassing both the supply-side and Commissionled initiatives to develop the European science base, and the member state demand-side models to fairly reward valuable innovative products entering the market. In particular, greater emphasis needs to be given to the later stages of the value chain uptake of products into general usage and their continuing technical enhancement through continuous investment in incremental innovations during the market life cycle. EU policy makers, especially in health policy, need to maintain their ambition about what EU health systems can and should deliver in terms of preventing and treating disease. We understand that this may be challenging in the face of budgetary constraints, but maintaining such an ambition will ensure that new products continue being developed, contributing to a healthier and more productive society in the future, while creating high quality jobs and adding value to the European economy. Avenue de l Armée Brussels Belgium T F