Draghi Publishes Report on Future of European Competitiveness: EU Pharmaceutical Sector Needs to Bolster Innovation and Improve Intra-EU Coordination

• 10/09/2024
• News

On 9 September 2024, former Italian Prime Minister and President of the European Central Bank Mario Draghi published a comprehensive report on the future of European competitiveness (the Report – see attachment). The Report was commissioned by European Commission President Ursula von der Leyen and follows by only a few months another expert report – authored by another former Italian Prime Minister, Enrico Letta – on enhancing the EU single market. In the Report, Mr Draghi analyses the competitive landscape that the EU is facing and sets out an array of proposals to improve Europe’s competitiveness.

With reference to the pharmaceutical sector, the Report underscores its strategic importance for the EU. It highlights the EU's strong manufacturing base and scientific know-how in the on-patent space. However, it also points out that the EU is lagging behind the US in the most dynamic market segments (including biological medicines, orphan medicines and advanced therapy medicinal products). The Report identifies the key areas in which the EU should step up its game, such as increasing public R&D spending, boosting private R&D investment, streamlining the regulatory framework, and maximising the impact of the European Health Data Space.

For this purpose, the Report puts forward several proposals. Notably, to bolster R&D and innovation in the EU, the Report outlines a range of recommendations (including measures to promote a better financing environment for innovation and to introduce a regulatory framework to incentivise investments in innovation). With specific reference to the pharmaceutical sector, the Report suggests a targeted approach. In this regard, it explicitly cites the successful example of the California Institute for Regenerative Medicine (CIRM, with an annual budget of more than USD 400 million), which funds clinical trials, provides training and hosts panels to advise researchers on how to accelerate the development of therapies.

Similarly, according to the Report, the EU should fund the development of a limited number of world-class innovation hubs (especially for advanced therapy medicinal products), and thus consolidate the public support. As regards private investments, the Report proposes increasing the budget of the European Investment Fund to enhance EU venture capital.

At the healthcare providers’ level, the Report recommends expanding the disease registry established under the European Reference Networks in order to facilitate discussions on complex or rare diseases.

According to the Report, these strategies, if implemented, could significantly enhance innovation in the EU, ensuring the EU's competitiveness in the pharmaceutical sector.

From a practical standpoint, it remains to be seen whether (and how) the Commission will take on board any of the proposals set out in the Report. While the Report is ambitious and seeks to boost the EU’s competitiveness with a wide array of reforms, the task at hand is complex, and it seems doubtful that EU policy makers will endorse all the proposals across all industries, especially since – according to the Report itself – a minimum annual additional spending of around EUR 800 billion would be needed to ensure EU competitiveness. This staggering amount (i.e., double the Marshall Plan’s expenditure as a percentage of GDP following World War Two) will likely cause the EU to prioritise specific reforms over others. Inevitably, this may lead to an increase in the competitiveness gap between the EU and other players (notably the US) as certain needs will remain unaddressed.

Similar difficulties may arise in relation to the Report’s proposals specific to the pharmaceutical industry. In fact, Mr Draghi suggests that more integration or coordination is required among national agencies for several issues, ranging from templates for clinical trials over the use of real-world evidence across the agencies, to pricing and reimbursement (P&R), with the ultimate goal of integrating the entire value chain. With respect to P&R, the Report suggests that Member States should pursue cross-country P&R initiatives. This will almost certainly face significant resistance on the part of the Member States, which retain sovereignty on this matter pursuant to the EU Treaties. Member States are keen to maintain the ultimate say on P&R while making a trade-off between making medicines both affordable and accessible and supporting innovation. A more practical solution would probably be to establish a forum for more efficient joint negotiations while leaving Member States with the ultimate decision on P&R levels.

Lastly, while the Report does not expressly say it, it should be regarded as a call on the EU legislators to take a fresh look at the incentive system for pharmaceutical innovation provided for by the current draft pharmaceutical package and reinforce these incentives.