22 Jun 2017

Intellectual Property (IP) is at the heart of pharmaceutical innovation and at the heart of significant investment in the sector. With a stable and meaningful IP system in place, more than €30 billion[1] has been invested in pharmaceutical research and development (R&D) in Europe every year since 2012. The result is that an average of 80 medicines[2] have been approved each year and over 7,000 medicines[3] are currently in development globally.

Recent political developments show that the flourishing pharmaceutical sector may about to be slowed down. Why, despite impressive figures, do EU member states question the value of innovation in the sector in bringing benefits for patients and for public health?

Governments are worried about public debt and public health expenditure. Affordability of medicines and sustainability of healthcare systems have been in the spotlight for some time. The latest development is the on-going the study from the European Commission  on the economic impact of supplementary protection certificates, pharmaceutical incentives and rewards in Europe[4]. The study has already been named as one of the most heavily lobbied items in Brussels.

What is the likely impact of the study on the business of pharmaceuticals?

The evidence and analysis provided by the study will support the reflection on potential changes to EU legislation around pharmaceutical incentives and rewards. The outcomes are uncertain, even when we examine the precedents. The findings of a similar study in 2007 looking at cross-border healthcare in the EU were included in a new Directive that was adopted in 2011. On the other hand, the report on current practices on the provision of information to patients on medical products was a source of legal uncertainty for over seven years. The report provided the background for two legislative proposals, which the Commission eventually withdrew.

The link between incentives and pricing & reimbursement strategies is under scrutiny

As Martin Seychell (Deputy Director-General, DG Sante) has said, “the Commission needs to properly understand the role of incentives in pricing to avoid arriving at wrong conclusions”[5]. The outcomes of the incentives review could potentially lead to the revision of a number of pieces of EU legislation, including legislation related to the Supplementary Protection Certificate (SPC), orphan medicinal products and paediatric products. Industry must stand by its position, take a place at the negotiating table and engage collaboratively and proactively in the process, to avoid long-term legal uncertainty and loss of investment in the sector.

Below, we reflect on legislative changes that the Commission might propose once the final study is published, highlighting key opportunities for industry to contribute to the process.

What should orphan drug developers expect?

As a result of EU legislation on Orphan Medicinal Products (OMP)[6], therapies authorised by the Commission for the treatment of rare diseases have increased considerably since 1999, as have the number of companies of all sizes now investing in developing these treatments. The EU OMP legislation is often criticised for helping pharmaceutical companies to justify high prices for OMPs. The legislation could potentially be reviewed following the study, to restrict the incentives included within, such as reducing market exclusivity or shortening the period after which the orphan designation is reassessed by the EMA Committee on Orphan Medicinal Products. Amending the Regulation would be a long and complex process and has not been a popular option during recent years. It remains to be seen whether opinions are changing and whether a legislative proposal will be forthcoming.

For how long will pharmaceutical companies benefit from the SPC?

Pharmaceutical products, together with plant protection products, are the only products which can be granted an SPC[7].

The SPC is specifically mentioned in the Council Conclusions[8] that led to the incentives study. It is currently the only aspect of the incentives review where the Commission has a clear plan of action (see: The Commission’s Roadmap Optimising the Internal Market’s industrial property legal framework relating to supplementary protection certificates (SPC) and patent research exemptions for sectors whose products are subject to regulated market authorisations).

The discussion on the future of the SPC initially started from the need to better articulate SPC legislation with the creation of unitary patent protection in the EU. The Commission envisages the creation of a European SPC title, introduction of an SPC manufacturing waiver for export purposes and the “modernisation” of the existing SPC Regulations and “clarification” and “recalibration” of the scope of patent Bolar and research exemptions in the EU. Representatives from the generics and biosimilars sectors have expressed their support for an SPC waiver, which is strongly opposed by the European Federation of Pharmaceutical Industries and Associations (EFPIA). Adrian Van den Hoven, Director General of Medicines of Europe, has accused EFPIA of “shameful behaviour”, whose lobbying is blocking and delaying the Commission’s legislative process on the matter[9]. What does this mean for industry, bearing in mind on-going discussions on the sustainability of healthcare systems?

It has been suggested that a means to decreasing public health expenditure is to ensure quicker access to generic medicinal products through the removal of the SPC, shortening its duration or at least restricting its granting. The roadmap has been adopted. The study examining the impact of the SPC on patient access to essential medicines and the rationale for potential legislative change is on-going. The potential impact on the future of pharmaceutical pipelines could be significant.

Any improvements for paediatrics developers?

Incentives for developers of paediatrics medicines are included in Regulation 1901/2006 on medicinal products for paediatric use,[10] adopted in 2006. The regulation introduced three types of paediatric incentives: a six-month extension of the term of the SPC; a two-year extension of orphan market exclusivity; eight years of data exclusivity followed by two or three years of market protection.

According to statistics from 2015, since the Paediatric Regulation came into force in 2007, 238 new medicines [11] for use by children were authorised in the EU. As of 2015, only 39 medicines had been granted an SPC extension or had an application pending and only three medicines had been granted orphan market exclusivity extension [12]A possible explanation for this is the restrictive nature of the Regulation or interpretation difficulties. 

In parallel to the study on IP incentives, the Commission is preparing the 2nd Report on the Paediatric Regulation. Both are likely to influence the decision as to whether to revise the current Paediatric Regulation and the potential changes to that legislation. For example, if the OMP market exclusivity provision or the SPC duration are reduced, this could then be reflected in the Paediatrics Regulation.

All stakeholders must continue to engage collaboratively in this debate, whilst bearing in mind the on-going broader study on IP incentives, which may have an impact on the final amendments to the Paediatric Regulation.


The publication of the study on pharmaceutical incentives and rewards could lead to the opening of several pieces of pharmaceutical legislation, bringing legal uncertainty for the industry and potentially leading to the reduction of investment in R&D in the EU. This should be of concern to all stakeholders, including the European Commission and those who are working towards ensuring the EU is a competitive player in the sector.

Pharmaceutical companies operating in Europe must develop and implement strategies, reach out to stakeholders and communicate the positive and concrete outcomes of their innovative activities. If the study does not lead to the opening of the relevant legislation, the perception that industry is charging unreasonable prices will remain. Even if the IP-based incentives are reformed, it may be that this would not solve pricing issues at national level, as budgetary constraints and reduction of healthcare budgets will not be addressed by eliminating IP rights.

Healthcare models are evolving radically regarding new technologies and the digitalisation of services. Governments want to implement changes but struggle due to the fragmented nature of the system and regulation that supports the status quo.

Now is the time for pharmaceutical companies to take a proactive position, to support change and demonstrate their commitment to the sustainability of healthcare systems. They must contribute to developing solutions to balance innovation and affordability. Undertaking broader strategies to rebuild trust among EU member states and other stakeholders is crucial to reassess the debate on prices of medicines and patient access to healthcare.


[1] The 2016 EU Industrial R&D Investment Scoreboard (EU 1000).

[2] The EMA Annual Report 2015, 2014, (…)

[3] PhRMA 2015 Biopharmaceutical Research Industry Profile.

[4] The Commission contracted the study to Copenhagen Economics, an economic consultancy agency with the offices in Brussels, Copenhagen and Stockholm.

[5] Discussion panel, EFPIA Annual Conference 2017: Unlocking tomorrow’s curses, 14 June 2017 Brussels.

[6] Regulation (EC) No 141/2000 of the European Parliament and of the Council of 16 December 1999 on orphan medicinal products, Official Journal L 018 , 22/01/2000.

[7] Regulation (EC) No 469/2009 of the European Parliament and of the Council of 6 May 2009 concerning the supplementary protection certificate for medicinal products, OJ L 152, 16.6.2009.

[8] Council conclusions on strengthening the balance in the pharmaceutical systems in the EU and its Member States.

[9] Generics and biosimilar experts say ‘unethical’ EFPIA lobby blocking drug access for poorer markets, APM Health Europe, 20 June 2017.

[10] Regulation (EC) No 1901/2006 of the European Parliament and of the Council of 12 December 2006 on medicinal products for paediatric use and amending Regulation (EEC) No 1768/92, Directive 2001/20/EC, Directive 2001/83/EC and Regulation (EC) No 726/2004, OJ L 378, 27.12.2006.

[11] 10-year Report to the European Commission, General report on the experience acquired as a result of the application of the Paediatric Regulation.

[12] 10-year Report to the European Commission, General report on the experience acquired as a result of the application of the Paediatric Regulation.