Opinion on the 'Free movement of medicines in the European Union - Abolition of existing barriers'

(96/C 97/01)

On 30 March 1995, the Economic and Social Committee, acting under the third paragraph of Rule 23 of the Rules of Procedure, decided to draw up an Opinion on the 'Free movement of medicines in the European Union - Abolition of existing barriers'.

The Section for Protection of the Environment, Public Health and Consumer Affairs, which was responsible for preparing the Committee's work on the subject, adopted its Opinion on

9 January 1996. The Rapporteur was Mr Colombo.

At its 332nd Plenary Session (meeting of 31 January 1996), the Economic and Social Committee adopted the following Opinion unanimously.

FOREWORD

This Own-initiative Opinion focuses on the issue of the free movement of medicines. The complex question of public health policy and health assistance system have been discussed in other Committee Opinions, and will be addressed again in the future.

1. Introduction

1.1. The importance of the pharmaceutical sector for the European Union

1.1.1. Progress in medicine, together with other factors for social progress, has made a significant contribution to reducing mortality, longer average life expectancy, the retreat of a number of major diseases, and an enhanced quality of life, particularly for older people and those suffering from chronic ailments.

1.1.2. Against this backdrop, the availability and correct use of safe, effective medicines should be recognized as playing an important role in public health protection.

1.1.3. The availability of innovative and effective medicines therefore represents an important factor for enhancing quality of life and merits particular attention on the part of the European Union in order to build up and strengthen a competitive and innovative European pharmaceutical industry.

1.1.4. Moreover, the significant contribution which the pharmaceutical industry can make to growth and employment in the European Union, as well as to its positive net trade flow, should not be underestimated. Up to 1992, employment grew in the sector by 2,4 % per annum, but since then the trend has been reversed, with a progressive decline setting in on the heels of diminishing competitiveness. The sector underwent significant job losses during the 1993-1995 period, with heavy disinvestment in research and manufacturing sites. This is partly the result of the frequent mergers between pharmaceutical companies.

1.1.5. It is important to provide a clear, stable and lasting reference framework, creating a dynamic context favourable to industrial development, given the emergence of signs of weakness in a sector which has to operate in a climate of increasingly fierce world competition and whose R& D mainstay demands ever greater resources and, consequently, sufficient and growing self-financing capacity.

1.2. Industrial policy

1.2.1. Innovation and industrial investment are essential factors for progress both within the pharmaceutical sector and in society as a whole.

1.2.2. The Commission has issued important documents on industrial policy, including the communications on an industrial competitiveness policy for the European Union () and on the outlines of an industrial policy for the pharmaceutical sector in the European Community (): these should encourage the Member States to devise a long-term, Europe-wide industrial policy.

1.2.3. The industrial policy document for the pharmaceutical sector maps out the path to be followed:

- striking a proper balance between the need to maintain a strong, innovative, research-based pharmaceutical industry and the need to meet public expectations regarding the operation of national health systems and the availability of medicinal products best suited to public health care;

- creating the conditions for greater competitiveness in the sector, moving away from a direct price-control approach, which has proved unable to restrict public pharmaceutical expenditure or to encourage an innovative industry;

- improving protection for therapeutic innovation and fostering biotechnological research, from which most new products flow;

- uncoupling the price-setting aspect from reimbursement methods and, more generally, from forms of cost-containment;

- initiating competition mechanisms, including the use of generic medicines.

1.3. Free movement of medicines in Europe: a complex and difficult objective

1.3.1. The foundations for the harmonization of rules for marketing authorizations, production, distribution and the proper use of medicines in Europe have been established in a series of Directives adopted prior to 1993, culminating in the creation of the European Medicine Evaluation Agency (EMEA, 'the Agency') - which does not, however, ensure equivalent market conditions, particularly for prices and reimbursement systems, insofar as these are a matter for the Member States.

1.3.2. The experience of the 'free market' of the last two years has however shown that particular obstacles hampering the free movement of medicines persist, despite the results of technical harmonization.

1.3.3. Major differences remain in price-setting mechanisms and reimbursement methods. Member State approaches not only show few signs of converging, but frequently fail even to comply with the information requirements of Directive 89/105/EEC (transparency).

1.3.4. The need to contain health spending has led to differing ways of controlling pharmaceutical expenditure, mostly involving direct or indirect price control. In many cases the failure to achieve the initial objective of reducing expenditure has led to subsequent interventions in a process leading away from a free market model and multiplying differences between Member States, given the varying short-term priorities imposed by the need to cut spending.

1.3.5. The centralized registration procedure and placing on the market of a 'European' specialty by the EMEA may fail to develop its full potential if pricing and reimbursement systems at the next stage, fixed by the Member States, act as deterrents.

1.3.6. The contradictory nature of this situation cannot but be of concern in the light of the process which should lead to European Monetary Union, with a single currency and the same economic and monetary policy. The question should therefore be examined in appropriate detail before the 1996 Intergovernmental Conference as this glaring breach in the fabric of European unity cannot be allowed to stand.

1.3.7. One of the fundamental aims of setting up and developing the European Union is to create a free market, as this fosters competitive and innovative capacity in industry and affords protection to individuals in satisfying their requirements.

1.3.8. In the pharmaceutical sector, protection for individuals means the prompt availability of the most appropriate medical treatment, freely available for prescription by doctors or for self-medication, subject to proper patient health and safety controls.

1.3.9. A free market involves real competition, free of market distortions generated by abuse of dominant positions on either the supply or demand side (monopsonistic position of public-sector demand), or by forms of artificial support for industries lacking innovative capacity.

1.3.10. Significant market distortions occur as a result of compulsory price reductions which militate against the import of competing products from countries with higher prices, and artificially favour exports from countries where the lowest prices are imposed.

1.3.11. The competitive advantage of a new drug is a temporary advantage, rewarding innovation. However, it hardly ever leads to a monopoly situation, since alternative treatments are available, and since drugs of the same or similar class are ever quicker to appear on the market.

1.4. Medicines, health spending and the role of the public authorities

1.4.1. The serious problem of ever-growing health spending from the public purse cannot, of course, be overlooked.

1.4.2. Although pharmaceutical expenditure varies between Member States, it represents a minor proportion of public health spending. However, all possible savings should be made without depriving European citizens of the necessary availability of medicines, and without reducing the pharmaceutical industry's capacity for innovation and competitiveness.

1.4.3. The public authorities have the main part to play in reducing expenditure. They must be urged to take more effective and wide-ranging action, given the poor results achieved by action based exclusively on squeezing prices.

1.4.4. It is equally essential that the role of the public authorities be modernized, so that they can make the necessary adjustments to the markets of the future, rather than merely react to them afterwards.

1.4.5. The public authorities are duty-bound, while keeping a close watch on public expenditure, to create a dynamic environment propitious to industrial development in the sector, by coordinating and attempting to harmonize all action likely to enhance health protection.

1.4.6. Social security and health service systems are of key importance here. The circumstances in which a pharmaceutical product is marketed have a considerable effect on market size, the shape of manufacturing companies, investment in research and, consequently, on the rate of innovation.

1.4.7. The objective of a free, genuinely competitive market can only be achieved by participating in what will necessarily be a long-term process, with a comprehensive approach covering all the parties concerned, and successive actions, the effects of which should be assessed as they progress.

1.4.8. Through appropriate bodies, such as the Transparency Committee, the Member States should check in advance that planned measures to contain expenditure comply with European regulations, and should analyse the possible impact on the EU market, the industrial sector and distribution.

1.4.9. The Commission and Council should indicate the general criteria on which the Member States should base their action, ways of achieving convergence and the conditions under which the protection of European citizens' health can be safeguarded and greater innovation and competitiveness encouraged in the European pharmaceutical industry.

1.5. The role and responsibilities of the various parties operating in the sector

1.5.1. The complexity of the health sector cannot, of course, be overlooked: it must safeguard individual health protection, the social security system, the legitimate interests of the economic operators involved (manufacturers, wholesale distributors, dispensing chemists, etc.), the professional standing of doctors, chemists and other health operators, and a patient-centred approach.

1.5.2. The industry needs to restore its image regarding the proper balance between the research effort and innovative results contributing to health care, and temporary monopoly situations.

1.5.3. Pharmaceutical research must be strengthened and encouraged by means of appropriate public policies, and particularly as a result of market conditions favourable to innovative products.

1.5.4. Research in the rare diseases sector, where adequate treatment has not yet been devised, merits special attention. Since the size of the market frequently dissuades private research from tackling the problem of rare diseases, greater efforts are required, particularly at Community level, in favour of research into 'orphan drugs', and EMEA procedures for their registration should be simplified.

1.5.4.1. The Committee accordingly welcomes the Resolution of 30 November 1995 of the Council of Health Ministers calling upon the Commission to formulate proposals in this area, particularly concerning definitions and incentive measures.

1.5.5. Pharmaceutical distribution plays a highly important role. Distribution must adjust to the conditions of a contracting market which cannot support automatic income deriving from market position.

1.5.6. It is important to stress the role of wholesale distributors in ensuring that drugs do not deteriorate during the lengthy manufacturer-patient journey, that they can be located at any point of the distribution chain, and are rapidly available to end users under all circumstances.

1.5.7. The role of dispensing chemists, who provide a basic link between doctors and patients for prescribed medicines, and between patients and medicines for non-prescription medicines, should be put to good use not only in terms of distribution but also in encouraging and advising on the more rational use of medicines so as to achieve the best possible therapeutic results.

1.5.8. Dispensing chemists in particular play an important part in ensuring that self-medication products are properly used. Wider future use of these products may offer an important means of reducing social security spending, and would fit in with the prevention policy it is hoped will come into existence. This policy must offer all the appropriate safeguards and involves increased responsibilities as well as further training for chemists on pharmaceutical interaction and side-effects, to cope with these new responsibilities.

1.5.9. The central link in the chain is represented by the health operators, particularly doctors. It is they who determine the consumption of prescription medicines.

1.5.10. While fully retaining the freedom to prescribe the necessary medicine, more rational use must be aimed for, paying closer attention to the cost/benefit balance for each treatment, together with the more efficient use of existing health structures and technologies.

1.6. The new European arrangements for authorizing medicines and the European Agency

1.6.1. The creation of the European Medicines Evaluation Agency (EMEA) is unquestionably a major step forward in the rapid dissemination of 'hi-tech' and innovative products throughout the EU, for pharmacovigilance and for settling disputes which may arise within the context of the prevalent mechanism for reciprocal recognition.

1.6.2. The institutional responsibilities of the Agency, as defined in Directives 93/39, 40 and 41 and Regulation 2309/93, are strictly limited, and it is clear that, during the initial phase, the Agency should concentrate on ensuring that the centralized procedure is fully operative.

1.6.3. The decentralized procedure, based on mutual recognition, continues to apply to most products, and for registration purposes the national authorities remain responsible for inspections, quality control and pharmacovigilance.

1.6.4. The co-existence of the two systems should nevertheless be viewed in a dynamic light as strengthening the European dimension of the medicines market and reinforcing scientific cooperation and coordination between the appropriate authorities.

1.6.5. The EMEA could, without exceeding its institutional powers, contribute to the competitiveness of the European industry by ensuring a rapid authorization procedure for innovative specialties, within the time limits set out in the abovementioned legislation and by providing the scientific and technical reference-point for defining the framework it is hoped the Monetary Union will have for medical specialties (see also paragraph 2.3).

1.7. The preconditions for Community action in the pharmaceuticals sector

1.7.1. In devising a strategy for the free movement of medical specialties within the Community it should be borne in mind that the conditions under which the market operates stem from a series of actions taken at different times, under varying circumstances, with sometimes differing aims and not always consistently in line with each other.

1.7.2. These actions have thus far been decided upon from an exclusively national point of view and almost always in response to immediate political interests and economic demands, without real assessment of the long-term consequences for public health protection and the proper functioning of the sector.

1.7.3. The strategic guidelines should therefore be mapped out at Community level and should, in the ESC's view, be grounded on two irrevocable principles:

a) to guarantee the availability of medicines able to provide the highest possible level of health protection for European citizens and to create real equality of availability for future innovative medicines;

b) to secure a market climate guaranteeing the European pharmaceutical industry's international competitiveness, with a vigorous resurgence of research, fostering free enterprise while ensuring compatibility with health protection and with public-sector health spending limits.

1.7.4. A rounded approach of this kind would appear to be the only way of restoring a more positive image, and therefore greater public credibility, to the pharmaceutical system as a whole. This image has in the past been tarnished by profit-driven choices which have overlooked the complexity of the health issue and the needs of individual patients.

1.7.5. If the European industry prepares its strategic options better and harnesses its scientific and innovatory potential, it could contribute to increasing employment, particularly in the highly skilled categories, and could have a positive role to play in connection with the developing countries.

1.7.6. Trade with the developing countries must not, however, be seen by the European industry simply as an opportunity to maximize its profits, but should serve to create the conditions for availability of medicines to provide effective health protection, and should respond primarily to a sense of solidarity with the populations of the countries in question.

1.7.7. Up-to-date patent laws, protection of trademark ownership, active measures against counterfeiting and implementation of the GATT-Trips agreements are preconditions for a stronger local industry and proper relations with the European Union.

2. Lines of action

2.1. The value of a European approach

2.1.1. While recognizing the limits to the Union's powers in this area, the Committee is convinced that many lines of action exist which would strengthen the European dimension, bearing in mind the objectives of raising the quality of life and of economic and social cohesion, as set out in Treaty Article 2.

2.1.2. The path should be cleared for the removal of existing barriers to the free movement of medicines - especially the invisible barriers thrown up in areas still not standardized at European level - by an analysis, coordinated by the Commission, of national experiences and assessing:

- the effectiveness of action in terms of the objectives set;

- compliance with Community objectives on the free market, the full development of industrial potential, and the protection of citizens;

- the compatibility of specific Member State policies and actions with the launch of a convergence process.

2.1.3. The Commission should encourage cooperation between Member States in planning all national measures, so as to assess them in the light of the previous experience of the other countries, and preparing simulations and feasibility studies for situations with the greatest economic impact. Such cooperation should form part of the efforts to promote a free market and competition, while at the same time ensuring the attainment of a high level of health protection [Treaty Article 3(o)].

2.2. Suggested priorities for Community intervention

2.2.1. The Economic and Social Committee believes that the Community bodies today responsible for certain aspects of the pharmaceutical system could, as a matter of priority, direct the bulk of their activities to creating the conditions for a free medical specialties market, or at least the necessary preconditions. It welcomes the conclusions of the Council meeting of 30 November 1995, especially the resolutions highlighting the impact of the free movement of medicines on health, and the need to integrate this aspect into overall public health strategy.

2.2.2. Practical implementation of the industrial policy guidelines set out in the two Commission documents (see point 1.2.2) also requires it to be heavily involved in supporting joint action with the Member States in order to achieve the objectives referred to in the documents and the broader aims stated in the Treaty.

2.2.3. Priority must be given to checking the application of the transparency directive as regards objectivity, transparency and the objective and verifiable reasons for the various price controls and refund schemes and their application to types of treatment and to individual medical specialities.

2.2.4. The procedures for ensuring observance of the transparency directive should be optimized in the review. In this event, observance of the transparency directive should be promoted in parallel, in the context of convergence policy.

2.2.5. The Commission is urged to use its supervisory powers over the application of Community law by Member States to check whether they have complied with the requirement to notify any intervention on their part in full, and in good time, to order immediate application in the event of non-compliance and, where appropriate, restore the violated 'rule of law' and to establish general principles/rules/methods designed to prevent interventions falling outside the above-mentioned law.

2.2.6. In order to strike a proper balance between the freedom of the pharmaceuticals market in the European Union on the one hand, and the Member States' need to control health spending on the other, it is suggested that further research should be carried out into the most appropriate means of separating price-fixing aspects from the question of State or social security reimbursement.

2.2.7. A further suggestion to the Commission is that it should prepare studies and analyses to provide a clearer picture of the fragmented European market and an objective assessment of possible Member State action, with the purpose of proposing means of mitigating existing distortions and paving the way for decisions which also take account of the international consequences. Studies on the situation within individual countries, and in comparison with the US and Japan, should focus particularly on the effects of past actions by the Member States, such as:

- direct price control in relation to consumption levels and the national industry's competitive capacity;

- the relationship between the various criteria and reimbursement levels and their impact on prescription patterns and consumption of medicines;

- the effect of fixed consumer contributions on prescribing attitudes and consumption of medicines;

- assessment of the efficacy and impact of integration on the internal market for the pharmaceutical sector;

- evaluation of the effects of price, reimbursement, classification and packaging interventions on the reorganization of producers' and wholesale distributors' structures, functions and activities.

2.2.8. The Commission is also urged to examine the possibilities and practicalities of a series of interventions to help set up a free market in medical specialties. Priority should be given to the following:

a) a programme for the progressive harmonization of operating conditions, from manufacture to sale of medicines (amount of product per package, single European packaging, explanatory leaflets for doctors and/or chemists distinct from those for patients, bar codes, European quality certificate, etc.);

b) the correct method of comparing international prices;

c) establishing in unequivocal terms conditions for the protection of industrial property, thereby encouraging development and innovation in the high technology sectors, particularly pharmaceuticals, thereby ensuring strict compliance with trademark protection as defined in the European Patent Convention; Regulation EEC/1768/92 and the national Additional Certificates for Protection, insofar as they are compatible with the Regulation;

d) identifying the conditions under which generic medicines can play an effective role in price competition and in creating a more dynamic market, guaranteeing equivalent quality, safety and effectiveness as original medicines backed by the proper documents and free of artificially advantageous conditions, particularly substitution of specialities without consulting prescribing doctors;

e) identifying and proposing the fiscal policy instruments most likely to boost research, some 95 % of the costs of which, in the pharmaceutical sector, are borne by private industry;

f) considering broader use of the centralized procedure, collaborating with the EMEA to define a wider understanding of 'innovation' based on the therapeutic added value in terms of efficacy and safety.

2.3. Suggestions for a future contribution by the EMEA to supporting Community policy

2.3.1. The ESC, while considering it essential for the Agency to begin immediately discharging its duties as described under point 1.7, believes that the Agency can provide forward support for the issues outlined in 2.2 above.

2.3.2. The EMEA could, for example, help to harmonize the classification of existing products on the market through a phased programme, and proceed with the progressive harmonization of labelling and explanatory leaflets for products available in more than one country as they fall due for their five-yearly reviews.

2.3.3. Provided it is supplied with adequate economic and human resources, the Agency could also represent the ideal forum for discussion and contact - on a purely scientific and technical basis - with national agencies and with leading national experts on points with might contribute to a more closely aligned working environment in each of the Member States. Such points might involve:

- study and/or research into a medicinal specialty classification method applicable on a uniform basis at national and European level, with the capacity to define and describe pharmaceutical product features without penalization, thereby moving beyond the limits encountered in implementing the ATC classification;

- scientific and methodological criteria for classifying prescription products in therapeutic classes comparable in terms of seriousness of the pathology treated, to which Member States could refer for reimbursement purposes, so as to prevent treatment varying on purely economic grounds.

2.3.4. The EMEA could also put its technical and scientific skills at the Commission's service in order to devise guidelines on:

- the mutual recognition of products on the market for more than 10 years in several Member States or, alternatively, a simplified European authorization procedure;

- harmonized explanatory leaflets summarizing product characteristics for doctors, chemists and patients, including for products already on the market in more than one Member State;

- the attainment of a uniform, Europe-wide classification for the supply of medicines for human use; bearing in mind the need for a high quality of health protection for the patient, the aim must be to ensure that a particular medicine is either prescription or non-prescription throughout Europe (based on the criteria laid down in Directive 92/26/EEC) in the interests of greater harmonization of the legal framework for medicines in the single market, and the promotion of the free movement of medicines in the European Union.

3. Conclusions

3.1. The ESC's intention in drawing up an Own-initiative Opinion on the removal of barriers hampering the free movement of medicines in the EU is to draw attention to the decisive role which Community action can play in this sector - a sensitive one because citizens' health is at stake - since the proper use of medicines represents a major contribution to an improved quality of life.

3.2. The Opinion outlines the strategic and operating suggestions which all the social forces represented on the ESC commend to the European Commission and the EMEA to further a policy supporting medicines.

3.3. The ESC believes that this type of action should take place within a reference framework which reflects, in terms of:

- general policy:

the objectives and priorities of medical treatment;

a strengthening of the European Commission's initiative in providing guidance on decisions to be made by national bodies, encouraging measures which further convergence and slowing down those which move away from the necessary process of Community-level harmonization;

- social policy:

a future guarantee of equal availability of medicines to all European citizens;

social protection arrangements adapted to the need for a high level of health protection;

- industrial policy:

conditions enabling the European pharmaceutical industry to become highly competitive with their US and Japanese counterparts;

encouragement for expanding employment within the sector.

3.4. The availability of safe, effective medicines, an industry which can ensure world-level competitiveness, the professional skills of those working at every stage of the production cycle and the potential for scientific innovation produced by European research represent the best safeguard for the most vulnerable sector of the society: the sick.

3.5. This contribution to health protection must not remain the exclusive property of industrialized nations, but should serve as a means of expressing solidarity with the developing countries in improving the quality of life.

3.6. The proposal refers to the pharmaceutical sector for human use only: a similarly detailed analysis should, however, be carried out with respect to veterinary medicine.

3.7. Veterinary medicines have a positive impact on the health of both livestock and pets. Proper use of veterinary medicines for livestock can also make food products (meat, milk, eggs, etc.) healthier.

3.8. Given, however, that alongside the benefits described, there are also animal and human health and environmental risks, common rules on the use and movement of veterinary medicines must unarguably be further improved in the future.

Done at Brussels, 31 January 1996.

The President

of the Economic and Social Committee

Carlos FERRER

() COM(94)319 final of 14. 9. 1994.

() COM(93)718 final of 2. 3. 1994.