Rainer Westermann, chairman of the Life Sciences Acceleration Alliance e.V. (LSAA), which lobbies on behalf of European venture capitalists in the life sciences space, launches a critique of current pharmaceutical policies across the EU, arguing that constant cost-containment measures, over-regulation, and bureaucracy are leading to drug shortages and acting as a bottleneck for the continent’s R&D output.
“As part of the EU Medicines Strategy and building on the lessons learned from the COVID-19 pandemic, the Commission plans to evaluate and revise the general EU legislation on medicines for human use in order to ensure a future-proof and crisis-resistant EU medicines system.” So reads the European Commission’s website. Among other things, this is intended to ensure access to affordable medicines, promote innovation, including in areas with gaps in medical care, and improve supply security – so far, so good.
However, what we are currently experiencing in the EU should be a warning to the policy makers in Brussels: There is a supply shortage for more than 400 drugs in Germany alone – especially in segments like pediatric drugs, antibiotics, and cancer drugs. France’s Minister of Industry Roland Lescure is calling for a reshoring of pharma manufacturing to France as a measure against shortages. This situation should not be a surprise. As long as all goes well and nothing interferes with the constant gradual squeeze on drug prices, the public does not care. When suddenly parents notice the lack of antibiotics for their children, when increasingly pharmacists tell them they don’t have the drug needed in stock and do not know when it will be available again, the public wakes up. Media begins to write about it and politicians feel the squeeze from their voters. They hastily produce measures meant to fix the problem. Germany created an emergency fund, temporarily lifted price limits, and allowed imports of certain drugs that do not have market approval in the EU.
Last year, the German parliament approved the Finanzstabilisierungsgesetz, a Financial Stabilization Act, for the statutory health insurance system in Germany. Another cost containment measure, that will worsen the supply situation and does nothing to attract life sciences investments in Germany. It introduces additional complexity and uncertainty, something that investors fear and shy away from. The Life Sciences Acceleration Alliance e.V. is focused on the contribution of venture capital to drive life science innovation in the EU and is, of course, particularly concerned about the negative impact of new measures on raising and investing risk capital in drug development. If those measures do nothing to encourage drug manufacturers to move production to or increase output in Germany, or in the EU for that matter, they weaken the life sciences industry in the EU in general.
If one asks about the reasons for this unacceptable situation for patients, doctors, and pharmacists, one quickly comes to the subject of expensive regulation and ever new cost-containment measures. How else could one explain the decision of the statutory health insurance funds to raise the prices paid by the system for 180 affected drugs? This is intended to motivate pharmaceutical companies to increase or resume production in areas that have been cut back for economic reasons.
Of course, the trigger was the COVID pandemic and the supply chain disruptions. Protectionism in other countries and an increased need for raw materials play as much a role as less available air cargo and container space. Priority shipments to support Ukraine also had an impact. However, it is clearly not in the interest of Europeans to be so vulnerable in such a sensitive sector as healthcare. And make no mistake, it is patients that suffer.
Now policy makers are trying to patch up what they have visibly torn to shreds over the years: a functioning and secure supply of medicines. And it will probably remain a patch-up job since the measures announced in Germany are only valid for three months. That alone shows how unrealistic the view of the situation is. Worse still, while unprecedented gaps in care are opening for the population, which are tangible and perceptible for everyone, a new drug strategy is being discussed in Brussels, which is in fact likely to have a negative impact on the development of future drugs. The proposed cutbacks on regulatory data protection, coupled with hard to obtain incentives, will not improve the funding situation for risk capital. Shortages in established drugs, like ibuprofen-containing antipyretics for children, will become shortages in innovative new drugs and treatments. Investments will be made elsewhere, availability will decline, and needed drugs will be introduced first in other markets. Investments in innovative therapies and medicines will decline, as investment decisions must be re-evaluated, especially in the early, high-risk phase.
The situation is exacerbated by the fact that raising risk capital in the EU is harder, funds are smaller and even in China there is now more capital available to finance innovative new medicines. Consequently, early-stage life sciences companies leave the EU (or dry out financially) and introduce new drugs first in other markets. Between 2017 and 2021, companies in the US have brought more than twice as many new molecules to the market as in Europe. In 2020, almost 12,000 new patents were registered in the US compared to about 6,000 in Europe.
The responsible European bodies need to ensure that researchers are less burdened with bureaucracy and regulation. They must improve the overall conditions for venture capital operating in the EU to drive life-saving innovations forward more quickly. BioNTech has shown us the importance of speed and scalability in this area. So why wait to remove hurdles when there are already bottlenecks and gaps in supply? The point is to sustainably shape the conditions in such a way that in the future, if possible, we will never again have to hear on the news that people have to fear for their and their children’s health because the necessary medicines are missing. The new proposed EU pharma legislation is an opportunity to deal progressively and successfully with the many challenges that addressing the healthcare needs in the EU today and in the future presents. Incentives – realistic and obtainable ones – play a crucial role in attracting risk capital to drive innovation. Reducing the regulatory burden and increasing the capital pool available for venture capital to invest in life sciences is an important factor as is creating a liquid capital market and better incentives for innovators. The proposed legislation does not consider the latter factors and falls short in providing answers for a secure pharma regime in the EU.