by Anna Casse, Managing Partner and Saadia Basharat, Consultant, at Alacrita
Out-licensing seems to be the default position for US biotech and pharma companies wanting to launch a drug in Europe. While out-licensing cuts down on the risk, it typically reduces profits, and control over the asset. Although contractual terms such as “Best Commercial Efforts” may help there is no guarantee that the licensee will treat the product as a priority.
Going-it-alone can be equally daunting. Although Europe is often seen as a single market, the individual countries are, in practice, highly diverse. This means that going-it-alone generally carries more risk and expense than partnering. It requires building out new capabilities including local distribution and supply chain management, commercial and medical affairs, quality and pharmacovigilance – each in line with each member state’s regulations. Depending on the degree of manufacturing already completed (e.g., unformulated drug substance, partly finished, finished etc), importation duties and taxes can vary significantly therefore adding to the overall supply chain complexity and cost. Furthermore, the wholesaler landscape and regulations around distribution vary in each country. In some countries multiple wholesalers sell to independent pharmacies, whilst in other countries one or two state-governed wholesalers mandatorily cover the entire distribution process and hold a required level of security stock to ensure supply.
The European Medicines Agency – whilst providing marketing authorisation jurisdiction within its member states – has a different process and often a different opinion from the FDA, therefore it cannot be assumed that complying with FDA requirements will lead to European product approval. Clinical trials and local operational practices are still regulated by European National Health agencies – adding further complexity in pre-launch development phase and post-launch monitoring or life-cycle management.
US companies must also consider different product manufacturing quality requirements for European countries. All products manufactured outside of Europe must undergo EU Import Testing and all drug products must be QP-released onto the market to confirm that the product is fit for purpose and has been processed to cGMP standards. There are numerous official working languages in Europe, resulting in a large number of country-specific pack formats. Within the 28-member states of the EU, there are more than 150 regional and minority languages, and around 15% of them are recognized working languages. For each member state, labelling and packaging needs to be in the member state language, requiring design, generation and management of all packaging components, including labels, Patient Information Leaflets and so on. Companies need a packaging strategy to build regional clusters of specific-language packs that must be ready for launch – often printed at risk before the final EMA label is granted for the product.
Following approval, it often takes some time before a drug is widely available in Europe and one of the reasons for this is the country-specific market access processes. Obtaining a price is complex and depends on the launch sequence and reference pricing as well as the relative value or benefit of the new treatment compared to standard-of-care the level of innovation and the potential cost savings. Each country places a different emphasis on these considerations. Following negotiations, list prices granted are specific to each country, although cross-border trade is permitted and facilitated by international pharmacies.
So why do companies bother about going alone? Given Europe’s position close behind the US in terms of branded pharmaceutical spend, launching in Europe is the logical next step after US launch in becoming a global pharma company for those that want to build a commercial footprint. Instead of out-licensing, directly launching a drug may be the best option for European market entry and may add significant value to proprietary drug developers. Historical stock price performance of launch companies outperforms comparable stock in companies that out-license their assets, and suggests launching a drug alone could lead to significant financial reward and success. There is also evidence that capital markets reward successful launch companies with high valuations reflective of new-found global capabilities. In turn, this allows companies to in-license and launch other value-creating assets. For US biotech and pharma companies that want to go-it-alone but with some help, there are innovative and cost-effective ways to access the required infrastructure to support European launch, including virtual strategies designed to solve operational issues while minimizing costs, commitment obligations and risk. If the market is there, European launch is a strategic discussion seriously worth having for any US biotech and pharma company.