Missing Numbers: Seeking to Substantiate The Leaked EU Pharmaceutical Review

Pharma companies are currently assessing how the Pharma Review will affect their portfolios. Maarten Meulenbelt and Maria Koutsoupia discuss the need for analysis from the EU to support the Review’s claims, for example on the allegedly ‘invisible’ effect of losing €640 million in annual orphan drug revenues.

The European Commission’s January 2023 draft proposal to reform the EU’s rules for medicines, the Pharmaceutical Review package (the Review), claims to “promote innovation, in particular for unmet medical needs” (UMN), leading to “more medicines with a public health benefit”, by means of across-the-board reductions of regulatory data protection (RDP) and Orphan Market Exclusivity (OME) periods, with potentially smaller losses for UMN products. The EU’s Regulatory Scrutiny Board had requested that the Commission provide dynamic analysis on how this would impact “the sector’s capacity to finance future innovations and international competitiveness”. However, stakeholders should be aware that the leaked Review contains no such analysis.

No lack of source material. The lack of dynamic analysis is not due to a lack of source material. The Commission has been assessing the EU incentives schemes since 2016, with studies on paediatrics (Technopolis and Ecorys 2018); patents and Supplementary Protection Certificates (SPCs, Kyle 2017, Mejer 2017, Commission Evaluation 2020); SPCs in combination with RDP, OME, and paediatric rewards (Copenhagen Economics 2018); orphan medicinal products (OMPs, Technopolis 2019); and Paediatrics and OMPs jointly (Commission Evaluation 2020). The Review builds on several data sets, including large IQVIA/MIDAS data sets of products authorised between 2002 and 2020.

There is no lack of studies showing how incentives relate to new products dynamically. Several studies demonstrate how incentives affect company decisions on whether to develop new products, for example via the industry-standard risk-adjusted Net Present Value (rNPV) model. This model calculates the business case for a product, taking into account the amount of the investment, the time horizon for return on investment in the light of exclusivities and incentives, and the risks of failure at every stage, from Phase I clinical trials to pricing and reimbursement (OHE 2020 and Dolon 2020). The latest example of this is a study by Copenhagen Economics demonstrating how the introduction of RDP in Brazil would increase the number of products available for patients.

There is less analysis for orphans and none for RDP loss. A previous working document from 30 May 2022 contained a piece of dynamic analysis which predicted the likely impact on the number of new orphan drugs of cutting OME, and of largely abolishing OME for new orphan indications. This analysis has now been removed from the Review. In its place is a brief statement that the predicted reduction of annual EU orphan drug ‘gross profits’ of €640 million would only lead to a ‘likely invisible loss’ of new products, given total global R&D spend. This assertion raises some difficult questions. No dynamic analysis is provided to support the Review’s two-year across-the-board RDP reduction, despite the projected impact (28% reduction in non-contested sales of RDP-protected products, and a 15% decline in gross profits).

Other missing numbers. Effects analyses are missing for several more of the Review’s proposals. Which proportion of products in the data sets would have qualified for the newly defined UMN or ‘High UMN’ status, and be eligible for the corresponding ‘smaller losses’ of regulatory incentives? What is the effect of giving 27 EU Member States a veto on declaring whether a product has been launched (making it eligible for a one-year reduction in RDP loss)? What are the rNPV effects of forcing pharma companies to pursue new indications requested by third parties, and of opening up the authorisation process to third parties? What of the increased possibilities for ‘replacement pharmacy compounding’ for weekly hospital supplies, and for routine manufacturing of cell and gene therapies without a marketing authorisation? What is likely to be the cumulative effect on innovation of the different losses in exclusivity, also given the forthcoming Patent Package which could link the Review’s rules on product shortages to EU-wide compulsory licensing? Hopefully, the final versions of the Review, which will be published in the coming weeks, will contain additional analysis and data.

See also our blog, Six surprises in the leaked European Pharmaceutical Review. The Patent Package will be discussed in a forthcoming blog.

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