OPINION OF THE ECONOMIC AND SOCIAL COMMITTEE on the ' Free movement of medicines in the European Union - Abolition of existing barriers'
Date: 1996-01-31
Institutions: European Economic and Social Committee
Subjects: free movement of goods, marketing, medicinal product, pharmaceutical industry, single market













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51996IE0089

OPINION OF THE ECONOMIC AND SOCIAL COMMITTEE on the ' Free movement of medicines in the European Union - Abolition of existing barriers'  


Official Journal C 097 , 01/04/1996 P. 0001 





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 on9  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. FOREWORDThis 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. Introduction1.1. The importance of the pharmaceutical sector for the European Union1.1.1.  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 policy1.2.1. 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 objective1.3.1. 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 authorities1.4.1. 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 sector1.5.1. 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 Agency1.6.1. 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 sector1.7.1. 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 action2.1. The value of a European approach2.1.1. 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 intervention2.2.1. 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 policy2.3.1. 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. Conclusions3.1. 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 Presidentof the Economic and Social CommitteeCarlos FERRER() COM(94)319  final of 14. 9. 1994.  () COM(93)718 final of 2. 3. 1994.