Presentation by Dr. Koen Berden, Executive Director International Affairs, EFPIA

May 16-17, Milan, Italy

May 16-17, 2019 Principe Di Savoia Milan, Italy

DR. KOEN BERDEN Executive Director International Affairs European Federation of Pharmaceutical Industries and Associations (EFPIA)

May 16-17, Milan, Italy

EU-Japan Economic Partnership Agreement – Pharma perspective Author: Dr. Koen Berden, 17 May 2019

Presentation at the 2nd EUJapan EPA Forum, Milano 2

May 16-17, Milan, Italy

OVERVIEW

Structure of the presentation A.

Introduction

B.

Key elements and characteristics of the pharmaceutical industry – EU external trade and innovation

C.

The EU-Japan EPA

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May 16-17, Milan, Italy

A - KEY ELEMENTS AND CHARACTERISTICS OF THE PHARMACEUTICAL INDUSTRY

EU’s external trade: pharma largest contributor to EU trade surplus Japan: In top-5 EU trading partners for pharmaceuticals

Source: Eurostat

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May 16-17, Milan, Italy

A - KEY ELEMENTS AND CHARACTERISTICS OF THE PHARMACEUTICAL INDUSTRY

EU’s external trade: Pharma is global: Global Value Chains

China Japan Russia Switzerland Turkey USA World

Participation of EU pharma, 2014 (%)

•

Backward linkage: value added contribution of EU pharma to non-EU exports of a country;

Backward Forward GVC 2.1 1.5 3.6 0.2 3.4 3.6 0.2 0.14 0.3

•

Forward linkage: value added contribution of non-EU exports to EU pharma;

•

GVC = sum of backward and forward – measure of industry integration

2.8 0.1 6.2 11.1

7.8 0.1 20.2 14.9

10.6 0.3 26.4 26

Findings: •

Most integrated GVC for EU pharma is the US (26.4%), followed by Switzerland (10.6%), Japan (3.6%) and China (3.6%);

•

Very little GCV integration with Russia and Turkey.

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Source: WIOD, Timmer et al. (2015), Shingal (2018)

May 16-17, Milan, Italy

A - KEY ELEMENTS AND CHARACTERISTICS OF THE PHARMACEUTICAL INDUSTRY

Research and Development - Investment •

R&D expenditure and employment have been increasing constantly in the past years

•

The Pharmaceutical industry is the first sector by overall R&D intensity (R&D as percentage of net sales)

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May 16-17, Milan, Italy

A - KEY ELEMENTS AND CHARACTERISTICS OF THE PHARMACEUTICAL INDUSTRY

Innovation: Medicines development is risky and long-term Discovery and pre-clinical

Confirmation of target and biology

Phase 1

Testing safety

Phase 2 Optimal dosing and proof of efficacy in man

Phase 3

Confirmation of safety and efficacy

Approval / launch:

•

Average of 9-13 years before medicinal product reaches market (since first synthesis of active substance);

•

R&D cost for new chemical or biological estimated at $2.6 bn;

•

On average 1/10.000 or 2/10.000 substances successfully pass all stages of dev’t to a sold medicine.

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Probability of success Ph I to launch:

11.6% Time from Ph I to launch:

9 years Capitalized cost per approved drug:

$2.6B SOURCE: Paul et al. (2010) NRDD; Tufts November 2014; Pharmaprojects 2015

May 16-17, Milan, Italy

A - KEY ELEMENTS AND CHARACTERISTICS OF THE PHARMACEUTICAL INDUSTRY

Innovation: R&D spending and medicines development is long-term IP index vs availability of latest technologies (2015-2016)2,3 European countries Non-European countries Strong IP regimes

Availability of lastest technologies (score out of 7)

7

6

5

MY 4

CA

UK CH US SE JP FR SGDE

CL

3

2 0

5

10

15

20

25

30

BR CO VN CN IN DZ VE

IP index  Supportive IP environments promote an advanced technology market

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May 16-17, Milan, Italy

A - KEY ELEMENTS AND CHARACTERISTICS OF THE PHARMACEUTICAL INDUSTRY

Innovation: R&D is also high risk: Biogen-Eisai (2019)

•

Biogen and Eisai stocks at high point in Feb 2019: expectation of a fast approval of Alzheimer's drug candidate (Phase III CT) – then withdrawn: shares collapse (-31% Biogen; -33% Eisai);

•

Biogen: loss of 18 USD billion in market value.

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May 16-17, Milan, Italy

B – THE EU-JAPAN ECONOMIC PARTNERSHIP AGREEMENT

The pharma perspective Overall relevance of FTAs for industry: - Predictability and stability for doing business (long-term!)

- Far beyond traditional (tariff) trade only - EU-Japan relative to other trade agreements (trade developments/uncertainties) i. Intellectual Property Rights ii. Regulatory cooperation iii. Market Access iv. Tariffs, Customs, Rules of Origin v. Implementation 10

May 16-17, Milan, Italy

B – THE EU-JAPAN ECONOMIC PARTNERSHIP AGREEMENT

Relevance of EU-Japan EPA for the pharma industry: EPA elements Rules of Origin and Customs elements include: •

Conditions of manufacture to enable a change in origin status;

•

The list rules for both chemical and pharma chapters have been enlarged;

•

Change of customs tariff at level of subheadings of customs nomenclature will suffice to confer origin;

•

Some manufacturing processes grant new origin to the products: chemical reaction, purification, change in particle size, production of standard materials, isomer separation or biotechnological processing;

•

Value added criterion also used to determine origin: using the Free on Board (FOB) value of the product sold to 3rd country customers (not just manufacturing costs);

•

But note: industry uses most stringent RoO provisions across all EU FTAs – focus on one system.

Intellectual Property Rights •

Provisions on protection of patents, RDP and SPC – not much changed, but now enshrined in FTA;

•

High Level IP Dialogue.

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May 16-17, Milan, Italy

B – THE EU-JAPAN ECONOMIC PARTNERSHIP AGREEMENT

Relevance of EU-Japan EPA for the pharma industry: EPA elements Regulatory cooperation (in general): •

Transparency: “a transparent regulatory environment, which is effective and predictable for persons, including economic operators” (Ch. 17.2);

•

Good regulatory practice: due process (Ch. 18).

Mutual Recognition Agreement (MRA) on Good Manufacturing Practice (GMP): •

EU-Japan already had this MRA (goal: reduce duplicate inspections) – but now expanded in scope;

•

Business rationale: savings of Euro 350.000 per removed duplicate inspection;

•

Inclusion of: sterile medicines, biological medicines, vaccines and immunologicals, and active pharmaceutical ingredients (APIs);

•

3rd country cooperation potential;

•

Not included: investigational medicinal products (IMPs) and advanced therapy medicinal products (ATMPs).

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May 16-17, Milan, Italy

B – THE EU-JAPAN ECONOMIC PARTNERSHIP AGREEMENT

Relevance of EU-Japan EPA for the pharma industry: EPA elements Provisions on Non-Tariff Measures (NTMs) •

The EPA addresses diverging standards and technical requirements

•

Aims at: aligning administrative issues; reducing costs & regulatory burdens for firms;

•

Japanese alignment with International Standards on pharmaceuticals

Improved innovation and R&D climate •

EU-Japan environment: safer and more predictable for investment of pharma industries

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May 16-17, Milan, Italy

B – THE EU-JAPAN ECONOMIC PARTNERSHIP AGREEMENT

Relevance of EU-Japan EPA for the pharma industry: SMEs and PPP

PPP=public-private partnership; SME= Small and medium-sized enterprises; source: 1. Lincker et al. ‘Regulatory watch: Where do new medicines originate from in the EU?’. Nature Review Drug Discovery (2014); 2. FiercePharma. ‘Top 15 pharma companies by 2016 revenue’ (2017); 3. Rickwood. ‘Which way now for mid-sized European pharmas’ (2015); 4. EMA. ‘2016 SME report’ (2017); 5. EC. The EU Framework Programme for Research and Innovation

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May 16-17, Milan, Italy

B – THE EU-JAPAN ECONOMIC PARTNERSHIP AGREEMENT

Where can we still improve/go further?

Improve MRA on GMP Inspections • Further improve recognition of inspections; • Reduce paper-based inspections; • Include IMPs and ATMPs in the MRA; Expand to MRA on GCP Inspections • Explore possibilities for an MRA on Good Clinical Practice (GCP).

Supportive domestic policies in Japan to foster innovation • Revise negative PMP reforms of 2017; • Health technology Assessment (HTA) – only based on the cost and efficiency analysis, on the Incremental Cost efficiency ratio and on the willingness to pay: more focus on innovation;

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May 16-17, Milan, Italy

THANK YOU

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