21st Mar 2018


Intellectual property protection - the cure for Europe's ills

  • The Commission risks giving a 'sweetheart' deal for generic drug companies - which does nothing for research and development (Photo:

Like it or not, Europe is getting older, thanks to a combination of falling birthrates and increasing lifespans: from 2006 to 2016, the proportion of European Union citizens aged 65 and up increased from 16.8 percent to 19.2 percent, while the share of under-15s slipped from 16 percent to 15.6 percent.

By 2080, three in ten Europeans will be 65 or older.

Our ageing population isn't a bad thing.

Most people would probably agree it's good to live longer, while smaller family sizes are associated with a higher standard of living and social mobility.

Nevertheless, it presents a looming health challenge in the form of more serious and chronic diseases, including cancer, diabetes, hypertension, and dementia.

Chronic diseases already account for the lion's share of health expenditures, at four-fifths of the European total, in addition to costing an estimated €115bn per year in lost productivity from deaths among working adults.

So it is puzzling to see Europe's governing bodies considering measures that would undermine the incentives for scientific innovation needed to treat these illnesses, along with countless other future remedies – all in the name of marginal cost savings that can undoubtedly be found elsewhere.

For almost two decades, Europe has used a system of intellectual property protections and incentives to encourage research into treatments for a range of diseases, for example by guaranteeing longer market exclusivity for drugs to treat rare conditions, or granting extended patent protection that partially compensates innovators for the long regulatory approval process involved in bringing a new medicine to market.

The system works

Thanks to R&D incentives, the number of new treatments for rare diseases approved by the European Medicines Agency under the program soared from just eight in 2000 to 136 today.

But protections are needed now more than ever. Over the years, the science of new medicines development has become more difficult, and the scope, complexity and cost of conducting clinical trials has increased dramatically.

However with national budgets under pressure and healthcare costs increasing, in June 2016 the European Commission began considering the possibility of rolling back medical research incentives, on the faulty assumption they are somehow driving higher drug prices.

But not only is that premise flawed – the proposed fix will do nothing to benefit ordinary health consumers.

In fact, Europe is not spending dramatically more on drugs, and only modest increases are forecast in coming years.

According to the World Health Organization, retail expenditures on medicines in the EU-15 decreased steadily as a proportion of total healthcare spending from 2004 to 2014, while per capita expenditures on drugs remained stable.

Looking to the future, European drug spending is predicted to grow at a compound annual rate of just one percent to four percent from 2016-2021, roughly in line with the predicated rate of inflation for Europe over the same period.

As these numbers indicate, drug costs have not played a significant role in rising overall healthcare expenditures, which grew from an average of 8.8 percent of GDP to 9.9 percent across the EU from 2005-2015.

Rather, increasing healthcare costs are largely the result – in Europe as in the rest of the developed world – of growing demand for long-term care (expected to double to 3.6 percent of GDP by 2060), as well as new technology and stagnant productivity.

The researchers who discover and develop new treatments and cures may be easy political targets.

Drug prices aren't the problem

But since drug prices aren't actually the problem, it's worth asking what's really behind the move to weaken incentives.

The answer might lie with a proposal to limit extended protections Europe provides for some medicines. According to the European Commission's own background paper, the proposal is intended to enable generic drug makers on the continent to begin selling copies of these medicines overseas during the period of extended protection.

This might be a sweetheart deal for generic drug companies – which spend virtually nothing on R&D for new drugs. But it would do nothing for European patients or national health systems, while putting the kind of R&D jobs the EU needs more of at risk across the continent.

The European commission should recalibrate its approach. We should strive to encourage innovation, not undermine it. Our market-based system has yielded practically all medical advances to date, and with an ageing population beset by chronic disease, we urgently need better treatments and cures.

Pietro Paganini is president of Italian think tank Competere, serves as an adjunct professor at John Cabot University in Rome and Fox School of Business at Temple University of Philadelphia, and a columnist for the Italian daily newspaper, La Stampa.

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