Regulatory Innovation: Where You Stand Depends on Where You Sit

By Peter J. Pitts & Sarah JL Edwards

Introduction: Trans-Atlantic Bridge or Oceanic Divide?

The U.S. Food and Drug Administration (FDA) and the European Medicines Agency (EMA) are very much creatures of their cultural and political structures. The main difference between FDA and EMA is that the American agency is striving to be not only an innovation accelerator but also a competitiveness enabler, while EMA is hewing to a more traditional approach of an independent, science-based review body.

Both institutions are dedicated to advancing the public health of those they serve and are staffed with dedicated public servants. However, FDA serves one nation exclusively while EMA covers 27.[1] Another important variable is that, for EMA, each member state also has its own domestic regulatory authority, while FDA is the exclusive arbiter of healthcare technology licensing in the United States. Dr. Robert Califf, the FDA Commissioner,[2] is a political appointee whose term ends with the President he serves, while Ms. Emer Cooke, EMA’s Executive Director, is a civil servant.[3]

Both agencies (at least in their public pronouncements) are publicly dedicated to using 21st Century regulatory science in their medical technology reviews, while internally, both are restrained and inhibited by the status quo that is reinforced by long-serving, highly dedicated, but change-averse senior public health officials.[4]

Is Innovation “In the Eyes of the Beholder?”

As with generic drugs, the two agencies aren’t identical, but they are equivalent. They are (as they say in the world of biologics) “similar, but not the same.”

Is one of the organizations more “friendly” to healthcare technology innovation than the other? Since each agency is a representative of its location, perhaps the first question to ask is if the United States is more “innovation-friendly” than Europe. According to the World Intellectual Property Organization’s (WIPO’s)[5] 15th Global Innovation Index (which tracks the current state of innovation globally and ranks the innovative performance of 132 countries), the United States is more innovative-friendly than any member of the European Union.[6] Americans are usually the first to gain access to major new medical advances, and those advances are often discovered at American universities and developed by American companies. According to the Centre for Innovation in Regulatory Science (CIRS),[7] FDA took an average of 244 days to approve new medicines in 2020, while EMA took nearly twice that time (426 days).[8] But there are many ways to measure environments that encourage innovation and entrepreneurship.

Follow the Money

Perhaps the best indicator is venture capital investment. Between 2015 and 2020, the annual venture capital investment in the United States almost doubled, to $13.6 billion USD while Europe mustered a 26% growth.[9] (These data concern pure-play drug developers only; medtech, diagnostic, or digital health firms, for example, are excluded.)

By most measures, the United States has stronger entrepreneurial impulse than the European Union. Do the behaviors of FDA and EMA reinforce or disprove this hypothesis?

Walking the Walk. Talking the Talk.

Arguably, FDA has taken the lead in understanding the need to adopt more 21st Century regulatory science and methodologies, from incorporating the use of real-world evidence, smaller licensing studies for approvals or clearances combined with more robust post-marketing data collection, a more regular and formalized inclusion of the patient voice in its regulatory decision-making process, a more robust use of expedited review pathways (including the use of surrogate endpoints and biomarkers[10] for conditions such as Alzheimer’s Disease and Amyotrophic lateral sclerosis), natural history studies[11] for Friedreich’s ataxia, and the use of greater regulatory discretion in disease states such as Duchenne’s Muscular Dystrophy. Of course, the adoption of these methodologies is not a coincidence, but was hard won by patients and activist groups over decades of negotiations. These groups’ advocacy encouraged FDA to develop the parallel track for expanded access in the 1990s. EMA has been slower to incorporate both the use of expedited review pathways[12] and the patient voice in pursuit of similar entrepreneurial regulation.

One of the reasons for FDA’s embrace of entrepreneurial regulation is the 21st Century Cures Act[13] has empowered FDA to use new science to speed product development and review. It also directs the agency to advance and evolve how the products under its jurisdiction are measured for both safety and effectiveness once approved and on the market. There is no similar EU directive for the adoption of similar, more aggressive status-quo-altering regulatory nimbleness for EMA.

A New EU Strategy

How can this be explained? There are many technical ways to answer this question, but at the foundation of the proposition is the reality that EMA is part of a multinational conglomerate of independent nations governed via consensus. That limits the agency’s ability to color outside the lines versus FDA, which, by both organizational culture and legislative mandate, is willing to (or in the case of the U.S. Congress, required to) embrace more progressive regulatory paradigms and a more collaborative approach with medical technology developers. Last month, the United Kingdom’s Chancellor of the Exchequer presented his 2023 Spring Budget to the House of Commons. It included plans for the UK regulatory body, the Medicines and Healthcare products Regulatory Agency (MHRA), to “explore partnerships” with regulatory agencies in the United States and Japan.[14] Whether or not this is a uniquely Anglo-Saxon post-Brexit “fraternity of the free market,” a desire to make the agency an innovation accelerator, or a strategic initiative to attract more capital investment to the United Kingdom, it is a tacit acknowledgment of the need for the MHRA to be both regulator of and colleague with the industries it regulates.

How can EMA catch up in the race to embrace innovation? The European Commission[15] has recommended an across-the-board reduction in the amount of time that new drugs are protected from competition from unbranded rivals. To compensate, drugs that meet certain pre-defined, socially useful criteria will benefit from added protection.[16] According to the European Commission’s Regulatory Scrutiny Board[17] (an independent EU body that assesses proposed policies, laws, the EU’s proposed actions to address) has significant “reservations.” And, indeed, some of the reservations are frightening when it comes to the future of healthcare technology innovation in Europe.[18]It remains to be seen how existing health inequalities in the UK respond to such change, not to mention how the already strapped NHS might evolve to support it.

Specifically, the assessment points out that, “the report should better assess the impacts of reduced regulatory protection periods on the sectors capacity to finance future innovations and international competitiveness.”[19] That’s precisely correct, considering that the main result of the proposed revised legislative framework would be to gut patent protection, seriously erode the intellectual property rights of healthcare innovators, and deny cutting-edge therapies to the citizens of the European Union. That’s a lot of reservations.

The Commission is proposing revisions that would reduce key incentives crucial to the research and development of medicines in Europe and further accelerate the flight of healthcare venture capital funding out of the European Union to the United States and China.

The Value/Danger of Healthcare Technology Assessment

A different approach to regulatory science is only one side of the innovation/entrepreneurship coin. The other side is how the United States and the various nations of the European Union address healthcare technology assessment (HTA) policies.[20] The United States avoids using HTA, leaning on a hybrid system of both government (Medicare, Medicaid, Veterans Administration, etc.) authority and private insurance companies. The health ministries of each individual nation of the European Union make their own national reimbursement decisions and they are generally less comprehensive (in terms of paying for new medical technologies) than either government or private payers in the United States.

The current debate over the Inflation Reduction Act[21] reflects the fractious but intertwined relationship between the desire for innovation and the desire for greater access to and lower costs for biopharmaceutical products. Will the predictable outcome of U.S. government price negotiations[22] be the significant dis-incentivization of the research-and-development system that makes America the world leader in medical innovation?[23] During his 2022 State of the Union, President Biden claimed that under a price control regime, “Drug companies will still do very well.”[24] In fact, such a policy could reduce the revenue of the innovative biopharmaceutical industry by $1.5 trillion over the next decade.[25] These biopharmaceutical companies, on average, dedicate nearly one-fifth of revenue to research and development (R&D). Economic modeling estimates that price control legislation would snuff out 56 new drugs—including 16 cancer treatments—that would have otherwise reached patients.[26]

Conclusion: Innovation Votes with Its Feet

Plainly speaking, Americans have faster access to more medicines than anywhere else in the world. Investors, scientists, and innovators vote with their feet.[27] The predictable outcome of European-style price controls is the significant dis-incentivization of the research-and-development system that makes America the world leader in medical innovation. Actions have consequences.

Both models are defensible, but only one can be called “entrepreneurial”—and it resides (at least for the time being) in the United States.


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