Research & Development of the european pharmaceutical industry

1. Introduction

The health of their population has always been a great concern for governments of Post-War Europe. In order to achieve their goals they had to work closely together with the pharmaceutical Industry.

With the phenomenon of the aging population the importance of development of new drugs is increasing. The increasingly old population of Europe creates a big market for pharmaceutical companies.

The pharmaceutical Industry is a very complex sector with close links to other Industries. The chemical Industry for example is an important supplier for materials needed in the process of creating new drugs. Furthermore is the market for pharmaceuticals characterized by extremely little concentration and a huge variety of products. Globally in 1998, the 300 best-selling products held a share of less than 45% of the worlds market. The top two products held 1.3% of the market each. 1

This fact creates a necessity for the companies to research new, so called “Blockbuster drugs” to succeed on this market with a high competition. The data on the various methods of drug discovery is enormous and sophisticated. In this paper the structure of the Research & Development sector of the European pharmaceutical industry will be examined, which is of increasing importance for the success of the individual companies. The specific data on the R & D section will be given a general character.

Furthermore it will give a brief overview of the different regions in Europe and their individual differences.

In the end, the difficulties and challenges of R & D in the pharmaceutical industry will be described and compared to other pharma markets abroad.

¹ Data taken from „Combining discovery with development” by Dr. Peter Eddershaw; World pharmaceutical frontiers 2003/2004

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“Innovation is the lifeblood of the pharmaceutical industry and the key to any improvement in medical care.”

-Jean-François Dehecq, Vice President of the European Federation of Pharmaceutical Industry Associations- “Since aspirinwas invented a century ago, scientific and technological breakthroughs in the pharmaceutical industry have enabled researchers to research complex diseases efficiently, first by exploring the biochemistry of tissues, and then that of individual cells.” 2

This development is shown in the chronology of drug innovation.

² Source: European Federation of pharmaceutical industries and associations

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2. Structure of the Research and Development of the European Pharma-Industry

The pharmaceutical Industry is a key asset of the European Economy. Although there has been a recent slowdown of the major economies the employment in the R&D section of this industry is rising.

Source: European Federation of pharmaceutical industries and associations

This can also be seen in the following table, where the total expenditures on R & D in Europe

are summed up.

A measure of innovation in the pharmaceutical sector is the number of launches of new chemical and biological entities. In the last decades there has been an increasing competition in the section of research in the world. European pharmaceutical companies, once leading in the world have lost some of their competitiveness, as shown in the following table.

Generally pharmaceutical R & D has the following characteristic features: 3

- Lengthy: by the time a medicinal product is placed on the market, an average of 12-13 years will have elapsed since the synthesis of the new active substance Costly: the cost of researching and developing a new chemical or biological entity was estimated at € 895 million in 2001 (Di Masi J., Tufts University, Centre for the Study of Drug Development, November 2001)

- Of a high risk nature: on average, out of every 10,000 substances synthesised in laboratories, only one or two will successfully pass all the stages to become marketable medicines.

R&D costs are rising by 20% per year and clinical trials take up half the profitable life of a patent. Yet if a pharmaceutical company launches a successful drug before its competitors, it is set to make vast amounts of money. The increasing competition is due to a large number of successful small drug discovery and development firms.

³ Source: European Federation of pharmaceutical industries and associations

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