Innovation in Europe's pharmaceutical industry
A European Innovation Monitoring System (EIMS) report entitled "Europe's pharmaceutical industry - an innovation profile" has recently been published. The report was written on behalf of the Commission by researchers from the University of Sussex's Science Policy Research Unit. The pharmaceutical industry is one of Europe's most competitive sectors, as demonstrated by comparative surveys with the USA and Japan. However, it must respond to the challenge posed by five key trends if this success is to continue. These are: cut-backs in health care budgets, the rising costs of R&D, the globalization of R&D, the increasing importance of external sources of knowledge, and the increasing influence of biotechnology. The report looks at a number of measurements of innovation in the sector, such as R&D spending, patents granted, and the number of drugs in the top-50 sellers. By looking at these measurements, both by countries and by individual companies, the researchers hoped to identify key factors in sustaining the success of the European pharmaceutical industry. However, they found that correlation between the measures was limited, and therefore innovation in the sector is very difficult to measure. According to the research, the USA is the strongest player in the industry, with significant exports and the largest share of the 50 top-selling drugs. In Europe, the UK is the strongest country, while Germany has declined. Both France and Italy have strong R&D performance but are not responsible for any of the top-selling drugs. The report suggests that measures of R&D spending and patenting are inaccurate representations of innovation, since much R&D spending goes on duplicating the work of other companies, while much patenting is defensive. Measuring the numbers of top-selling drugs is possibly the best indicator, but this tends to measure past innovation rather than current. The report also suggests that European firms have been slow in incorporating biotechnology into their drug development, to complement chemistry, however most are now moving in that direction, often through establishing links with specialist American biotechnology firms. Policy measures to support innovation in Europe should concentrate on creating an environment conducive to innovation, according to the researchers. In particular they note the need for the European research base to receive continued support, and for encouragement to companies to exploit it at a European level. These measures should be complemented by a European rather than national regulatory system, the reinforcement of the Single Market, and the easing of restrictions on venture capital financing.