European life sciences industry under pressure but EU enlargement offers hope
24 March 2004
Lower cost manufacturing will not happen overnight says new report from Cap Gemini Ernst & Young
Europe may lead the world in pharmaceutical manufacturing, but trails behind when it comes to innovation in life sciences. European success is hindered by a fragmented market, intense pressure to lower manufacturing and R&D costs and a climate that fails to encourage or reward innovation, according to the latest report from Cap Gemini Ernst & Young.
However, the addition of 10 new countries as part of the EU’s enlargement this year has the potential to strengthen Europe’s position in the life sciences sector in the long term. It will provide access to a wider pool of skills, a larger reservoir of patients for clinical trials and more cost-effective facilities. The new EU countries are well positioned to support clinical development activities - potentially accelerating the time to market for new drugs.
“Investment costs, cultural issues and regulatory requirements in Western Europe have traditionally prohibited the EU from becoming the “location of choice” for conducting clinical trials,” said Paul Nannetti Global Leader Life Sciences, at Cap Gemini Ernst & Young.
“Central and Eastern European countries, which offer lower clinical development costs, higher site productivity and less local regulations, could relieve some of the current pressures on pharmaceutical firms in Europe. But it is not something that will happen in the short-term. Because of complex patent regulations after EU enlargement and the more open environment for generic pharmaceuticals in the acceding countries, we expect that parallel trade will increase within the EU. Looking at the market we see that Central and Eastern Europe’s highly skilled workforce, multi-lingual skills and low-cost back-office activities such as finance, administration and human resources could also be prime candidates for transitioning to Eastern Europe and provide a valuable complement to traditional offshore locations.”
Historically, European countries developed and produced the majority of new pharmaceuticals but their share of new launches on the world market has been steadily declining in recent years. Between 1990 and 2002 R&D investment in the US rose more than fivefold, while in Europe it only grew 2.5 times. This slow paced investment in Europe means that the European life sciences sector has lost much of its talented workforce to the US where better career opportunities exist.
Between 1997 and 2002 there were 787 foreign investment projects in the European life sciences industry, with the UK and France having been the top European recipients. Ireland, Germany, Belgium and Spain follow close behind. The report shows that the Nordic countries are now well placed to become the ‘hotbed’ for biotechnology research within the EU, thanks to facilities for research and development (R&D), a supportive infrastructure, incentives available for start-ups and close links between universities and commercial companies.
The complexity of regulatory requirements makes Europe less attractive than the US for life sciences investment. Unlike the US, which has only one regulatory agency for all states, Europe has 15 single regulatory authorities in the current EU and as many as 40 across the whole of Europe. This will not change with EU enlargement.
The large number of ethics committees across Western Europe also has an impact on the EU as a place for fast drug development. In comparison a multi-centre study in the US requires just one central ethics committee and, where applicable, local ethics committees for individual centres.
“EU enlargement brings the opportunity to reduce the ‘innovation gap’ between the US and Europe. A more attractive and innovative environment that allows European talent to flourish should help to reverse the trend of our workforce seeking careers elsewhere. Lower cost clinical development, an increase in site productivity and a highly educated labour force are all key factors, to which the 10 new countries all have the capacity to contribute,” said Roy Lenders, the Report’s Author, at Cap Gemini Ernst & Young.
Note to Editors
EU Enlargement - Driving Change in the European Life Sciences Industry provides
not only an analysis of the existing 15 EU countries and their potential to generate
more opportunity, but also highlights the significant implications of enlargement
and the need for acceding countries to harmonise their laws in line with EU regulations.
For a copy of the report please go to www.capgemini.com.
About Cap Gemini Ernst & Young
Cap Gemini Ernst & Young is one of the world’s largest providers of Consulting, Technology and Outsourcing services. The company helps businesses implement growth strategies and leverage technology. The organisation employs approximately 48,000 people worldwide and reported 2003 global revenues of 5.754 billion euros.
More information about individual service lines, offices and research is available at www.capgemini.com
