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Pestel Analysis Of Various Factors Eu Matters Economics Essay

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The financial markets are the pivotal function of a modern economy. By aiming towards an increased level of integration, there will be a more efficient allocation of economic resources and long term economic performance (European Commission, 2005). It has therefore been the EU's policy to complete a single market in financial services (being a crucial part of the Lisbon Economic Process [1] ) for addressing EU's global competitiveness.

Since the economic crash and subsequent global crisis there have been calls for closer monitoring of the financial system and better EU coordination. With the failure of the Lisbon Strategy outlined in 2000 (Wyplosz, 2010), many parties has urged a relook at the model particularly with the global economic crisis afflicting the EU. With the collapse of US investment bank Lehman Brothers in September 2008, there has been no shortage of politicians rushing to describe what is to be done differently in the financial sector in future (Dullien & Herr, 2010).

The financial crisis has made it clear that the financial markets are in clear need of reforms and a far more effective regulation to govern the future growth of the financial markets in the EU. While the topic has now focused on the Eurozone crisis, the financial market regulation at both national and EU level, has been experiencing a great deal of changes for which some of the important areas of the EU market regulation, ongoing process and most significant plans evaluated. The strength and confidence in financial markets will need to be re-established as pointed out by the Director General (2010).

The European Commission has presented several draft directives that is undergoing evaluation by the decision making bodies around Europe. Unlike the US, the EU has had several attempts in harmonising the financial markets (through the Lisbon Process) albeit not entirely successful. While all the financial institutions in Europe are very closely linked to each other, there has been a lack of a uniform basic regulation for financial supervision as national governments tend to pursue those which is in the best interest of their country rather than the region. This therefore allowed institutions from neighbouring countries to enter into risky transactions in those markets with tight supervision but greater access of capital. The European Commission's directives are now letting several of the directives be considered for legislative purposes.

Higher capital requirements for banks.

Establishment of an European ratings agency that independently evaluate securities of issuers.

New rules for Derivatives Trading and Securitisation

Creation of a European System for Financial Supervision with a Risk Board being set up alongside those issues mandatory instructions to national supervisory authorities.

This however will be a challenge to the EU as such measures would potentially affect the sovereignty of individual national governments to pursue internal policies, something which several European nations are not willing to give in as seen in the Greek crisis. Such directives are not expected to be introduced by end 2010 with expectations gathering that these directives themselves will be 'watered down' from its original form making it toothless for enforcement purposes (Dullien & Herr, 2010).

Business Cycles

Despite coming out of the recession in the 3rd Quarter of 2009 (European Commission, 2010), confidence in the industry is relatively low despite the positive growth generated compared to 2008. Current momentum suggest that recovery of economic activity will continue in coming months although the European Commission has cautioned on the fragility state (European Commission, 2010)

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Consumer sector wise, confidence improved from its decline in May 2010 with unemployment fears receding and a generally positive optimism on the general economic situation. This however remains below the long term average which reflect the cautious sentiment adopted by consumers.

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Beyond the rebound, recovery is proving to be slower than in past cases. The EU, like other developed economies will struggle with its aftermath for some time in the future (European Commission, 2010)

Savings Rate

Savings rate are generally higher amongst several EU nations as compared to US household in general (Harvey, 2004). There has been a decline in recent years as per researcher Tina Aridas (2010) from the Global Finance Magazine, the magazine hasd stated that between '2007 and 2008, the European Union's household saving rate was lower than in the euro area, due mainly to the low saving rates in the UK and the Baltic countries. The US saving rate was low compared with both the EU and the euro area'. With the passing of the worst effects of the global crisis from 2008, EU households are again faced with the Euro confidence crisis that constraints the region's ability to recover faster than other regions (as it struggles to with unemployment, high deficits and generally bearish economic prospects outlook) (IMF, 2010). The general household will now need to brace themselves for further cuts in income as major EU member nations embarks on tough public spending cuts (Traynor, 2010). Recovery European economies are expected to be gradual and uneven as most of the savings gain from budgets cuts is utilised for loan repayment for the past debts incurred.

SOCIAL

Demographics

Based on the latest 2008 projections done by the Commission of the European Communities ('EUR-LEX'), the EU is facing unprecedented changes in the populations. This development would represent a challenge for the governments to review and adapt existing policies as it continues to shape the social structure of the EU population. Demographic ageing, i.e. the increase in the proportion of older people, is above all the result of significant economic, social and medical progress giving EU citizens the opportunity to live a long life in comfort and security which is not without precedent in the region's history (EUR-LEX, 2006). This has become one of the main challenges for the EU as the following demographic trends observed throughout the member countries with various magnitudes.

Fertility rate: Fertility rate at the last estimates for 2008 by EUR-LEX stands at just over 1.5 children with a growth forecast 1.57 by 2030 (2009, p.21). In all EU countries, the fertility rate would likely remain below the natural replacement rate of 2.1 births per woman that is needed in order for each generation to replace itself. A period of slow growth and in most cases- actual decline in the population of working age in the region will constraint countries ability to grow from within (due to human capital constraint).

Mortality rate: The Life expectancy has been rising steadily since the 20th Century, with an increase of two and a half years per decade in the countries around the world holding the record of highest life expectancy (EUR-LEX, 2008). The EU projects that life expectancy for male would increase by 8.5 years over the projection period, from 76 Years originally in 2008 to 84.5 by 2060 (EUR-LEX, 2009). For the female, life expectancy at birth would increase by 6.9 years, from 82.1 in 2008 to 89 in 2060, marking a narrowing life expectancy gap between both genders. Most of these increases in life expectancy itself (from birth) will come from recent EU member states (Estonia, Poland, Hungary, Slovakia etc). Children in the EU today will face a high chance of living to their 80s or 90s in the long term especially if they are from Western Europe with mid-high socio-economic status.

Net Migration: Migration already plays a predominant role in population growth today: in many Member States, the size of net migration determines whether the population still grows or has entered a stage of decline (EUR-LEX, 2009). Annual net inflows to the EU are assumed to total 59 million people, of which the bulk (46.2 million) would be concentrated in the euro area. The trend according to the EUR-LEX study, assumes that this will decelerate over the projection period, falling from about 1,680,000 people in 2008 (equivalent to 0.33% of the EU population) to 980,000 by 2020 and thereafter to some 800,000 people by 2060 (0.16% of the EU population). Interviews conducted with respondent concur with the migration trend noting that the continued need for foreign talent to drive further economic growth in the EU. It is therefore only a matter of time for EU to work towards a harmonised migration policy for its member states to consider for ensuring a sustainable growth between its own EU citizens with those from outside non-EU countries.

Net migration flows are assumed to be concentrated in a few destination countries: Italy, Spain, Germany, and the UK. Making full use of the global labour supply through net migration will be increasingly important and requires ensuring that immigrants are effectively integrated into the EU's economy and society for today and the future.

Education

Education and training have an important place in the Lisbon strategy for jobs and growth (European Commission, 2009). EUR-LEX studies expect that the ratio of children and young people to the working-age population will shrink over the coming decade. Nonetheless, the education and training systems in the EU are generally improving. The EU benchmark [2] on mathematics, science and technology graduates was already reached before 2005. New growth has been registered in maths, science and technology graduates which were more than the original target set. Although good, benchmarks on early school leaving, completion of upper secondary education and lifelong learning were the opposite with literacy rate amongst young children on the decline. The respective countries will now need more effective national effective to address this fall.

Entrepreneurial Spirit

The Commission defines "Entrepreneurship" as 'the mind set and process [needed] to create and develop economic activity by blending risk-taking, creativity and/or innovation with sound management, within a new or an existing organisation' (EurActiv.Com, 2004). SMEs are considered the backbone of the European economy, providing jobs for millions of European citizens and are the basis for economic innovation. Back in 2004, conditions for SMEs and start-up companies are not as favorable in the EU as they are in the US making entrepreneurial initiative and risk-taking less developed. EU citizens are almost evenly divided in their preference for being self-employed or having employee status with many still preferring the comfort of being a salaried employee (European Commission, 2009). In general results showed that from 2007 to 2009, EU citizens view on entrepreneurs are mixed with almost all countries more likely to agree that entrepreneurs are only concerned with profit or that they exploited other people's work to their own benefit. The population in general prefer to either save the money or use it to buy a house or to repay their mortgage rather embark on risk taking ventures that threaten their way of life.

The high level of migrants from countries to particularly wealthy EU Member States will however serve to showcase the entrepreneurial spirit in the economy. As many arrive with the intention of making a better life for themselves and their families, the majority of the SMEs arising comes mainly from this group of people, there will certainly be no lack of such entrepreneurial spirit in the EU in the near future.

Lifestyle changes

Recent evidence shows that in industrialised countries people do not only enjoy longer life expectancy, but they are also experiencing better health conditions in old age due to both healthier lifestyles and more effective pharmaceuticals allowing people with chronic diseases to control the adverse effects of illness (European Commission, 2009). The continuing improvements of the population's healthy ageing in the EU reflect the desire for a sustainable lifestyles, healthy environment amongst the people moving forward. With the Maastrich Treaty, the explicit mentioning of public health as an area of competence of the EU reinforces the expectation that having a sustainable, healthy lifestyle will be the way forward for the EU. Clearly, pharmaceutical drugs (patent or otherwise) will continue to provide a vital service to the EU population.

Changing household and family trends need to be taken into account as the number of low income, single parent families' increases. As a result of the higher involvement of woman in the work force (either due to higher education or contribute to existing family income), the economic crisis along with the spending cuts instituted at present is expected to create a more prudent, budget oriented household as the situation forces families to rein in their spending for essentials. Healthy lifestyles will become a more viable daily practice as a preventive measure against sickness as compared to incurring medical bills in the household due to illness.

Social Mobility

A simple meaning on the term 'social mobility' refers to the degree to which an individual or group's status is able to change in terms of position in the social hierarchy. Population with the greatest access to education and adopting a more tolerant, if not more open attitude towards the society will tend to experience a higher level of social improvement (Blanden et al, 2005). Historically, the EU social mobility are mixed based on Blanden's research study (2005) and Breen (2004) as countries like the UK and Ireland seen as generally more rigid with any mobility associated with parental income and educational attainment. Over the years since the formation of the EU, the mass migration of citizens with different social background has presented a difficulty task in further upgrading their mobility within the society. With the economic crisis, the younger generations in EU member states will now struggle to scale upward especially with the loss of family income and limited government support marking a risk that any cycle of poverty that an individual household will face is repeated. This is more so as essential cost such as health care becomes more costly towards a household attempts toward improving living standards while aiming to scale towards a better way of life for themselves.

Altitude towards generics vs patented drugs

Our interview with Dr. [David Lu] and subsequent research revealed that the acceptance of generic drug by patients throughout EU are different. Since the mid-1990s, dispensing of generic drugs has been largely different amongst member states of the EU with countries like UK, Germany, Sweden and Netherlands having a wide acceptance of generic medicines dispensed in its healthcare system (WHO, 1997) as compare to France, Italy and Belgium. Based on our discussion, these were due to the perception build in patients mind on the generics effectiveness and reimbursement incentives given to doctors and pharmacists for sale of these products. This has remained a barrier by many in the generic business towards successfully penetrating the market. Researchers have pointed out on the need for a harmonised pricing mechanism to help generics manufacturers obtain higher market share (Burgermeister,2006). All interviewees are however, sceptical of such standardisation and are in agreement that such step by the EU will be unlikely owing to the different political, social and cultural environment that EU members are. Generic drug manufacturers will need to continue tailoring different marketing strategies to increase patients trust in their products accordingly and not adopt a standard approach for the member states if it intends to compete effectively for the market share.

TECHNOLOGY

Recent Technology Developments:

In this modern age, the pace of technological changes is accelerating at a rapid pace. The generic drug industry is of no exception with the following technological factors that currently in the limelight.

Internet

The further rapid expansion of the internet to new retail lines such as online pharmacies or also known as mail-order pharmacy has enabled patients to consider a cheaper alternative to purchase medicines. Such services would tend to promote generic alternatives through offering of price and product range comparativeness when patients access their websites. Whilst the cost and convenience aspects have long been an attractive feature for the online aspect of this business, several worrying factors have emerged as a result.

Counterfeit medicine

This problem was first addressed in 1985 (Pharmaceutical Technology Europe, 2010) in the World Health Organisation (WHO) meeting with experts. With the explosion of e-commerce from the year 2000, the problem has increased substantially with the magnitude difficult to access due to the variety of the information sources available (WHO, 2010). While the European Commission proposed several features to be present on the medicines (i.e. mass serialisation, seals etc) (British Generics Association, 2010), counterfeit medicine remains a growing threat. Currently, counterfeiters tend to focus on expensive patented drugs rather than generics but as global acceptance on online purchasing increases, counterfeit drugs are increasingly being detected in the supply chain marking a issue of concern for generic manufacturers as any products discovered as counterfeit can easily harm patient confidence in the generic brand besides endangering lifes. As over 50% of the medicines purchased online are found to be counterfeit (WHO, 2010), monitoring of counterfeit drugs particularly those purchase from cyberspace has become a necessity for the pharmaceutical industry.

Patient Data Protection

Usage of online purchasing for medicines by patients on illegitimate sites has resulted in the risk of private and personal health information being disclosed publicly to unscrupulous operators (Berstein, 1999). The issue of spamming has become a major concern for most internet users as likewise for the sick and vulnerable patients that choose to source cheaper medication which in this case, is the generic drugs available. Private health and financial information (i.e. credit card numbers) can be compromised to criminals that puts the pharmaceutical companies with bad publicity should anything occurs.

New Products and Research & Development ('R&D') Expenditure

Increasingly, the R&D spending by the pharmaceutical industry has been on a decline forcing leading drug manufacturers to rely on existing lines of drugs for revenue generation (Kollewe, 2010). Based on a report by CMR International disclosed in The Guardian newspaper, the level of R&D spending had slipped by 0.3% in 2009 following a 6.6% drop in 2008, marking an increasingly difficult period as leading pharmaceutical companies shows only 7% of sales originating from new drug launched in the past 5 years. A decline in the success rates for new drugs to be introduced into the market is a major factor as the industry faces a "patent cliff [3] " for which generic manufacturers will increasingly benefit. In recognition of this, pharmaceutical groups have embarked on M&A routes with smaller firms, joint development with academic institutions / commercial competitors for new drugs while reducing costs incurring activity. Introduction of blockbuster drugs such as Pfizer's Lipitor has been stagnant with generic drug makers from India and China crowding the pharmaceutical scene making it tougher to incur healthy margins that finances R&D expenditures for future drugs.

Preventive Healthcare

As stated in an interview with Ms Angela Farrell (2010), preventive healthcare would a normal trend as medical cost continues to increase. As with having more elderly people in the population anywhere now in the EU at present, the prevalence of chronic and serious medical conditions remains on the rise. It is therefore no surprise that this becomes an area for further focus by the state government that seeks to control its existing healthcare budget (Hewitt Associates, 2010). Unlike the US healthcare system, EU states adopts a universal provision of heath care with at least, the basic terms of heath care, provided free to its citizens (Przywara, 2010). Therefore the WHO has pointed out that 'if not successfully prevented and managed, they will become the most expensive problems faced by our health care systems' (WHO, 2010). Because several diseases such as cardiovascular diseases, cancer, diabetes and chronic respiratory diseases - are linked by common preventable risk factors, healthcare authorities around the world (including EU) has found it more cost-effective to put preventive practices into action rather than continue with responsive-oriented healthcare. Other than providing information, education, programmes and support to those in 'risk-groups' and the general population, Ms Angela has provided us several useful insights into the other developments in this segment.

Genomics testing

Since the discovery of DNA and the associated study of it, this has been marked as one of the major breakthroughs in genetic testing (Amgen Scholars, 2009). Utilising technological advances over the years, genomics testing allows for a more-accurate diagnosis of genetic diseases and therefore facilitates early treatment at an earlier stage. It also provides patients with both an understanding of possible risks for certain diseases and possible preventive measures long before the diseases even forms within a human's body. Genomics testing in Europe however, suffers from a lack of widespread acceptance as compared to the US (Ramanathan, 2008) owing to the protection laws governing the genetic data obtained from such test. The processing of genetic data in Europe has been subjected to stronger protection as provided in the in the Directive 95/46/EC and the national laws of the EU member states implementing it (Ramanathan, 2008). However, as EU residents healthcare cost mounts, the development of an integrated knowledge base combining the insights of sciences, humanities and social sciences will be required to inform policy and to plan for the rational implementation of new healthcare services. EU health communities has recognised the benefits of genomics testing for healthcare prevention with the need for a strong integrated, interdisciplinary European links to manage the sheer volume and complexity of this emerging genomic knowledge, and the speed of technological development (EUPHA, 2010). The EU themselves has viewed genomics in a more positive manner as seen in one of its main theme for the Sixth Framework Programme (that funds research work on genomic studies on diseases) to exploit this knowledge to human health besides economy growth benefit (CORDIS, 2009). Genomics testing will continue to grow as more benefits are uncovered from researchers in the EU with long term plans by the EC being provided towards nurturing such growth.

There are multiple benefits for both pharmaceutical and generic makers as pointed out by Philips et al (2004). According to the research carried out, genomics is likely to provide a 'multitude of new drug targets, enable the development of drugs that avoid problematic genetic variants in drug-metabolizing enzymes, and increase the development of preventive interventions for patients identified as being at higher risk for future disease' (Philips et al, 2004, p.428). Interviewee, Ms Angela has pointed out the interest of many in the medical field to create a more targeted form of treatment. Genomics allows this as it allow drug therapies with greater efficiency and safety, which of course leads to higher price due to the added value it brings to patients. Genetic profiling in patients enrolled during the early testing phase for drugs will allow for shorter testing time that can increased approval chances with the health authorities. Drugs that previously were unsuccessful can be re-examined by targeting them to patients with specific genetic profiles i.e. 'niche drugs'. Generic drug makers will eventually benefit as such avenues open wider markets for patients upon expiry of patents or if possible, spurn development of 'niche drugs' rather than reliance on original drug makers.

Drug delivery system

An area that has become increasingly popular within the pharmaceutical industry based on interviews with Ms Angela and Mr. Gregor. It is reported that at present, failure of drugs clinical trial are mainly through the failure to deliver the compounds to the area it is needed most without going through some interaction with the human body along the way (Cientifica,2007). It is therefore considered a very valuable and important development for any technology that enables direct delivery of drug compounds without triggering any or no side-effects on the patients. One of the EU market focus is currently on the nanotechnology-enabled drug delivery system for patients. While there are delivery system using laser, injection, spray being practiced, nano particles are receiving particular attention owing to more development going on in this field. Drug development is a very costly affair for patent holders especially with the decline of new drugs being uncovered each year. Many new scale biotech companies have become acquisition targets owing to keen interest towards this subject.

The future of nanotechnology is in a completely uncharted territory. It is almost impossible to predict everything that nanoscience will bring to the world considering that this is such a young science field today (Nanogloss, 2009). The field however is viewed as a revolutionary advancement but potentially controversial with its ability to bring materials to life. Religious and ethical issues aside, scientist are hoping that the further understanding of this technology would contribute towards improving population heathcare globally in future. If successful, pharmaceutical companies would view it as its next line of income as existing drug making expertise dry up.

Biotechnology

With 20% of new drugs launched from market each year derive from biotechnology (EFPIA, 2009), the biotechnology field has long been a promising development for the medical and healthcare purpose. Areas such as pharmacogenomics, nanotechnology, stem cells and gene therapy are becoming part a growing emphasis by medical professions. With a vision of improving design and production of drugs within a human's genetic makeup, this has become a new alternative for medicine as previous reliance on convention drugs (through use of chemical reactions) for treating illness have become scarce and increasingly difficult to produce. Using biomedicine, which create drugs based on the living molecules that are associated with specific genes and diseases, EU scientists under the JRC-EU [4] in 2007 has pointed out encouraging responds towards treatment of genetically inherited diseases such as hepatitis B, cancer and diabetes. JRC further pointed out the human medicine and heathcare are the most prominent field for modern biotechnology with a high share of publications and patents targeted towards this sector (2007).

The direct and indirect elements of R&D works for biotechnology would add towards EU's GVA [5] and improving state of heath for EU citizens as part of the context of the EC's objective of making the EU "the most competitive and dynamic knowledge-based economy in the world, capable of sustainable economic growth with more and better jobs and greater social cohesion" (JRC-EU, 2007, p.5). Numerous researches suggest that biotechnology can offer patients more and better healthcare choices. The biomedical healthcare industry is viewed as the pharmaceutical industry's external R&D centre and source of product innovation (EMCC, 2005).

However, the strength of the biomedical healthcare industry differs widely between European countries. As of 2003, the UK is considered to have the most mature industry as compared to other EU states (EMCC, 2005) but this has narrowed as other EU states nurtures their own industry. This is due to availability of more resources (both human and capital) increases over the years.

At this time, there has been a lack of attempts towards producing generic versions of the biotechnology drugs. Many of these drugs are very expensive because they are so difficult to produce owing to complex molecules involved (Montgomery, 2009). Furthermore, regulatory guidelines are still lacking on existing bio-medicines due to the different arrangement governing both the US and EU member states (Manley, 2006). However as expertise and experience continue to grow (especially with the campaign by EGA's biosimilar drugs), it would be a matter of time before biotechnology because part of the patient healthcare in the EU and the world.

Incremental & Disruptive technologies

To practitioners in the drug industry, incremental (or sustainable) technologies will come in form of mostly new drugs for an existing class with similar action mechanism but '...differ in features such as, therapeutic profile, metabolism, adverse

effects, dosing schedules, delivery systems, for example' (GSK, 2008). Incremental technologies are this sense, is seen as innovation capacity, which is according to Wertheimer & Santella, 'the lifeblood of the pharmaceutical industry' (2009). The current issue surrounding this subject matter has largely pertained to criticism that the developments of 'me-too [6] ' drugs were time wasting and a drag of existing resources (R&D, money etc) towards 'fleecing unsuspecting consumers' (Wertheimer & Santella, 2009) particularly as the patented drugs life is ending. Generic manufacturers in the US and Europe has been particularly vocal towards this practice as it alleges pharmaceutical companies uses this to extend patent lifespan through introduction of small changes that deprives generic manufacturers access to such drugs (and therefore an anti-competitive practice). It is therefore a contentious issue as both individual corporations such as GSK and its trade representative in EU, EFPIA continues to debate this publicly and with the European Commission.

Other incremental technologies that serve to complement the medical drug industry arises from rapidly improving testing, diagnostic, and other technologies (Brill & Robbins, 2005) which allows better and more targeted drugs in the heath care sector thus ensuring the continued relevance of conventional medical drugs in the market.

Disruptive Technology here is both a worry for patented and generic manufacturers as witnessed by the continued interest in biotechnology as the new alternative in medical discovery. With the continued dearth in significant creation of 'blockbuster' drugs from conventional pharmaceutical research, EU policy makers has continued to show further interest in biomedicine thru policy development initiatives such as funding (EFB, 2010). Pharmaceutical giants too, has gradually increased R&D capacity in this field with many companies embarking on M&A activities with existing biomedical companies (i.e. Pfizer's acquisition of Wyeth) besides growing internal resources to sustain its business.

LEGAL

The legal framework of the EU is vast and diverse due to the numerous countries within the grouping and hence only an overall review of selected laws and regulations is discussed, it is however noted that European generic medicine companies faces the problem of disharmonised implementation of new pharmaceutical legislation in member states (EGA [7] , 2007) as well as cost constraints as a result of legislative requirements imposed by EU Member states.

Labour Laws

Europe's legal system are largely founded on Roman Law and Germanic customary law and therefore share a common linkage. These have been highly influential in shaping national codes and have given rise to legal frameworks that rely less on case law and 'precedent' cases occurring elsewhere for countries within the European continent (FedEE, 2010). The attraction for EU citizens pertains to the freedom of movement of labour. This is because every EU national is entitled to take up and pursue employment in the territory of another member state under the same conditions as the nationals of the host state (EU Treaty Art 1 and Regulation 1612/68). When first introduced, the movement was aimed at facilitating a competitive environment for member states to pursue economic growth as it provided labour mobility for EU businesses to move labour to any member states for the best optimal outcome, thus generating further growth for all member states.

Since 1969 (Strauder v City of Ulm) a 'de facto' body of general human rights principles has been introduced by the European Court of Justice (ECJ) to avoid clashes with national constitiuonal rights when making their decisions (FedEE, 2010). This therefore mounts the complexity for any businesses as host states may impose conditions relating to linguistic competence where this is directly relevant to their employment (ECJ case reference C-397/87).

Health and safety regulations

HS regulations play an important in the medical drug industry owing to the test type and chemical process used in production facilities. European Agency for Safety and Heath at Work imposes directives on EU member states under Article 137 of the TEC [8] which ranges from workplaces and safety equipment, chemical agents exposure, physical hazards, biological agents to sector specific provisions which is updated regularly to reflect the current trends in the EU workplace. Pharmaceutical and generic manufacturers therefore faces high cost in time and labour as it maintains its compliance to the various heath and safety codes introduced from time to time. This is not all negative however as the existence and monitoring of HS regulations ensures that medical drugs produced are at the highest quality for usage by patients anywhere. Generic manufacturers unlike original medicine developers do not share as much compliance concern owing to the lesser amount of work activity required for rolling out its drugs as most (if not all) the main risk has been carried out by patent holders instead.

Nonetheless, HS regulations for patient are given equal weight by both pharma and generic players making such environment tough for EU drug industry as it monitors all adherences to standards imposed by the EU governmental agencies.

Consumer Protection

Consumer protection is provided for under the EC's Consumer Policy for the 493 million EU consumers. The Consumer Policy supports the aims laid out in Articles 153 and 95 of the Treaty establishing the European Community, which promote the interests, health and safety of European consumers. The policy stresses on market transparency, consumer protection and consistency in operational objectives for all EU member states. This therefore puts both pharmaceutical and generic drug manufacturers on notice on being transparent in their dealings, manufacturing methods, and ingredients for the highest level safety standards for EU patients. With the EU internal market having the potential to become the world's largest retail market (CEC [9] , 2009), the market has remained largely fragmented along national lines, forming 27 mini-markets [10] instead marking it a challenge for EU consumers that engage in cross-border disputes as result of consumer purchases outside their home country. The CEC report has quoted that despite the technological advancement (i.e. e-commerce) 'business and consumer behaviour lags far behind, restrained respectively by internal market obstacles and a lack of confidence in cross-border shopping' (2009, p.2).

Despite the still predominantly fragmented nature of the retail markets around EU, the CEC's views that cross border trade liberalisation would be the key to unlocking the potential of the EU retail market (CEC, 2009) and has therefore continued to push for further liberalisation of various business sectors around the EU. It is therefore inevitable that EU markets be gradually consolidated into 1 single market once customer protection regulations are harmonised across the member states. As better informed and educated EU consumer numbers grow, the medical drug industry will be one of the growing focus for protection of patients across individual state borders once quality benchmarks are established in healthcare sector for all EU states to comply.

Benefits System

Welfare benefits across EU Member states are largely generous with many offering free / low cost medical care for its citizen upon reaching the legal retirement age. The continued development in the region resulted in many of the EU member states boosting some of the best health care system in the world (Eurostat, 2010) as a testament to the growing ageing demographics of the EU residents. This however is undergoing challenges on several fronts. The severe recession that is affecting the global economy and the recent EU crisis has left many national treasuries under pressure due to the rising cost as well as the depleting financial resources towards financing heath care once perceived as 'generous' by many. As many citizens of the EU grow older, the declining birth rate of younger generations to replenish them has resulted in many EU populations experiencing the same problem: Foreign migration.

Migration has been nearly responsible for the nearly 3 quarter increase in the EU population over the past few years (Eurostat, 2010) with many foreigners coming from non-EU member states. This therefore strains the existing resources, coupled with the economic crisis, has seen EU member states considering significant reforms in social policy especially in terms of heath care spending. Generic drugs will gradually become the medicine of choice due to the lower price charged. Public spending has the potential to be restricted by many governments as it encourages citizens to consider private heath care financing for the more 'expensive' diseases. The struggle towards providing a sustainable heath care system in the EU will continue towards the near future and beyond.

Anti-Trust Laws

EU's antitrust laws represent an important part of the market integration efforts by the EC as it seeks to regulate a free market trading environment. Given that there are numerous national companies for each member states, antitrust laws for the EU are particularly geared towards addressing this under Article 107 of the Treaty. This is particularly important both competition policy and the creation of the European single market could be rendered ineffective when member states are free to support national companies as they saw fit.

With the pharmaceutical markets being heavily regulated at national level, this leaves less room for competition on prices and therefore market forces cannot realise their full effect here as they do in most other industry sectors within the EU (European Commission, 2010). Currently, the EC is focusing more on attempts by companies to delay or hamper the introduction of generic medicines or of new, innovative drugs that may compete with their products already on the market (European Commission, 2010). This issue has long been a concern raised European Generic Medicines Association in their argument with the original pharmaceutical using intellectual property to maintain their grip on the medicine.

Pharmaceutical companies who try to prolong patent protection for a product may breach EU competition rules which are enforced by the EC. The recent AstraZeneca case which resulted in the pharmaceutical company being fined €60 million is an example of commitment by the EU towards encouraging competition within the industry for both pharmaceutical and generic manufacturers. Both industries must take care in ensuring that whatever business practices deemed anticompetitive (M&A, parallel trade, state aid) has to be approached carefully as the EU market gradually expands and grow over the decades to come.

ENVIRONMENT

Environmental legislation, Social Responsibility, Sustainability & Global Climate Change The EU has some of the highest environment standards in the world, developed over decades to address a wide range of issues (EUROPA, 2010). As awareness on climate change, biodiversity and sustainable development increase amongst the EU population, it is therefore undeniable the effect it has on the pharmaceutical / generic drug industry. Companies with industrial biotechnology involvement (that produces pharmaceutical compounds) will face issues relating to genetic modification and its impact on patients making it a serious issue to address as this field continues to grow for medical R&D.

European Parliament views the use of biotechnology to have vast potential in pharmaceutical innovation, in creating new cures and with less impact on the environment during manufacturing (Europarl [11] , 2004). It does acknowledge the concerns by some that having too much legislation governing biotechnology would only stifle innovation, competition as well reduce incentives towards "orphan drugs" (for rare diseases) and aims to provide policies that serve to encourage this area of development carefully.

There will be continuous ethical questions that needs to be addressed to the public as it involves the life and death of living organisms (Europarl, 2004), the very factors that have shaped the deepest religious, ethical and cultural heritage of humanity as enshrined in the EU Fundamental Rights Charter. Cross border cooperation in research on ethical usage of this technology would be the way forward towards reducing such scepticism.

Waste Product

Growing awareness of environmental impacts and the need to conduct tests to evaluate such effects are creating cost pressures for the pharmaceutical industry (EEA [12] , 2009). Our discussion with Ms Hilary - Pfizer, has stressed that the need for drug manufacturers (generic or otherwise) to be well verse with the latest EU drug legislation and best practices adopted by surrounding countries (i.e. Sweden [13] ) in order to compete in the EU market. Used and unused API [14] has a considerable implication for waste streams especially in wastewater and river source making it a growing concern in the EU. Therefore, there has been an effort to control the level of chemicals used for industrial production (drugs included) as outlined in the EU's REACH [15] Regulation while promoting the concept of 'Green Pharmacy' (EEA, 2009) in addressing this issue. All interviewees agree concurrently that while the environmental factors are not high on their agenda, it is nevertheless a consideration factor when planning business sustainability in the future.

Non-Governmental Organisations (NGOs)

The role of NGOs will become ever more crucial as the industry serves to maintain a social responsibility outlook with the various stakeholders. Patient rights group and other public interest group can prove to be an effective barrier during the decision making process Their involvement with the company through partnership and continuous engagement can contribute towards the sustainability and effectiveness of projects while introducing innovative approaches and community participation (World Bank, 1995). This working partnership is gradually gaining acceptance in various sectors and governmental organisation and would be an important feature for businesses that is concerned about their continued business sustainability and the impact on the landscape. This is especially so when working in a complex and diverse business environment such as the EU. Pharmaceutical and generic companies can use this chance to create innovative solution toward new / existing drugs that serves to the best benefit of the patients for the EU and the world.

Packaging

To many drug manufacturers, drug packaging cannot be separated from its contents. On Sanofi-Aventis website, the company views packaging requirement as it 'must protect the product's physical and chemical integrity in order to ensure pharmaceutical-grade quality for the product's entire life cycle' (Sanofi-Aventis, 2010). Precious packaging methods by the producers (i.e. plastic bottles, glass, paper etc) which were used to protect medicines are judged to be environmentally unfriendly owing to the use of plastic components that is difficult to dispose off in the long term. Hence, there were constraints in the past owing to the limited capability for suppliers to produce suitable, environmental friendly packaging in the market.

Advances in the production of medicine have resulted in a need not only for enhanced protection against various environmental factors (moisture, heat, light, oxygen, mechanical forces) but also for packaging to play a more integral role in drug delivery, e.g. stability and shelf life. As a result of strict EU legislation, drug packaging itself has undergone changes in respond to the development. Plastic components are gradually reduced with biodegradable plastics used in place while refillable packets are introduced by pharmacist for recurring patients.

Manufacturers are examining the use of prefillable inhalers and syringes for meeting the requirements while further discoveries are made in new bioengineered medicine (Plastemart, 2008). Given that there is no other cost efficient solution with drug packaging at the moment for new storage methods, manufacturers will continue to rely on bottles and bags for patients to keep until a more cost effective delivery mechanism is found especially in the field of biotechnology.


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