"Europe may lead the world in pharmaceutical manufacturing, but trails behind when it comes to innovation in life sciences," according to a new report from Cap Gemini Ernst & Young.
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, it notes.
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. And 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 of life sciences, at Cap Gemini Ernst & Young.
He noted that 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, he said, because of complex patent regulations after EU enlargement and the more open environment for generic pharmaceuticals in the acceding countries.
Like many other industry experts, Nannetti expects 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," he said.
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 the top European recipients, notes the report,with Ireland, Germany, Belgium and Spain following close behind.
It shows that the Nordic countries are now well placed to become the 'hotbed' for biotechnology research within the EU, thanks to facilities for R&D, a supportive infrastructure, incentives available for start-ups and close links between universities and commercial companies.
Meanwhile, 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.
And the large number of ethics committees across Western Europe also has an impact on the EU as a place for fast drug development, said Nannetti. 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," concluded Roy Lenders, the report's author.