Terms Beginning With 'e'

European Medicines Agency (EMA)

What is the European Medicines Agency or EMA?

The EMA, or European Medicines Agency, is a decentralised organisation of EU (European Union). The agency is responsible for the scientific assessment, supervision, along with the safety monitoring of medicines in the EU. an independent Management Board regulates the EMA. The day-to-day operations of the agency are carried out by the EMA staff and supervised by its Executive Director.

EMA is a networking organisation of thousands of specialists from across Europe who carry out the work of scientific committees of the agency.

The European Medicines Agency has seven scientific committees to evaluate medicines along their lifecycle from initial stages of development, through marketing authorisation to safety monitoring once they are on the market. The seven committees include:

When any healthcare company wants to sell a drug in the EU, it must first seek clearance from the EMA. The EMA also assesses the drug’s safety after its approval, via pharmacovigilance.

The History of EMA

The European Medicines Agency (EMA) was established in 1995 and has worked throughout the European Union and across the world to safeguard human and animal health. The EMA evaluates drugs/medicines via stringent scientific standards and offers partners and shareholders science-based information on drugs/medicines.

EMA has a track record of over a quarter of a century of safeguarding the efficacy and safety of medicines for humans and animals across Europe. The agency also promotes research and innovation for the development of drugs.

With the foundation of the Committee for Orphan Medicinal Products (COMP) in 2000, EMA enhanced its services to patients and healthcare professionals (HCPs). The COMP is responsible for advising orphan drug designation to medicines which are for orphan or rare diseases.

What are the major roles of the EMA?

The EMA is accountable for the scientific assessment, mainly of innovative & high-technology drugs, that are manufactured by pharmaceutical companies for usage in the EU. The agency ensures the best use of scientific resources across Europe for the evaluation, supervision, and pharmacovigilance of medicines.

The EMA works to promote scientific superiority in the assessment and regulation of medicines, for human as well as animal health in the European Union (EU).

Facilitate medicine development and access

The agency is committed to enabling appropriate patient access to new drugs and has a vital role in providing support during medicine development for patients’ benefit. Medicine developers, who want to perform clinical trials in the EU, are required to submit applications to the national expert authorities of the countries where they wish to conduct clinical trials.

The EMA does not play a role in the clinical trials authorisation in the EU. The national competent authorities have the responsibility for the approval of the trials.

The European Medicines Agency also plays a critical role in supporting research and innovation in the pharmaceutical industry. The agency also promotes innovation & development of new medicines by European micro, small as well as medium-sized enterprises.

Evaluation of marketing authorisation applications and Medicine safety monitoring

The scientific committees of EMA give independent suggestions on medicines for human and veterinary use, based on thorough scientific evaluation of provided data.

The assessments of marketing-authorisation applications submitted via the centralised process offer the basis for the authorisation of medicines across Europe.

Provide information to healthcare professionals (HCPs) & patients

EMA publishes impartial and transparent information related to medicines and their approved applications. This comprises public versions of scientific evaluation reports and summaries written in layman language.

What is the European Medicines Regulatory Network?

The medicines regulating system in Europe is distinctive all over the world. The regulatory system is based on a synchronised regulatory network of the competent authorities in the European Economic Area’s Member States working jointly with the EMA and the European Commission.

The European medicines regulatory network is the keystone of the work and success of EMA.

By closely working together, this network makes sure that safe, effective, and superior-quality medicines are authorised throughout the EU.

The regulatory network also makes sure that the patients, HCPs, and citizens are provided with adequate and consistent medicines information.

Advantages of the European medicines regulatory network for EU citizens

  • The network enables Member States to combine resources & manage work for regulating medicines efficiently & effectively.
  • European medicines regulatory network establishes assurance for patients, HCPs, industry, along with governments by confirming consistent standards and best available expertise use.
  • The network also reduces the administrative burden via the centralised authorisation procedure, which helps medicines to reach patients sooner.
  • It accelerates the information exchange on essential issues related to the medicines’ safety.

How does the EMA authorise the medicines?

All medicines should be authorised before their marketing and before reaching to the patients. In the European Union, there are two main routes for approving medicines-

  • Centralised route
  • National route

Under the centralised authorisation procedure, the pharmaceutical companies submit a single marketing authorisation application (MAA) to the European Medicines Agency.

In the centralised authorisation process, healthcare companies required to submit a single marketing-authorisation application to the EMA. This permits the marketing authorisation holder to market the medicine. After approval of the application, the drug shall be available to the patients and HCPs via the EU based on a single marketing authorisation.

CHMP or CVMP committee of the EMA carry out a scientific evaluation of the application and provide advice on whether the drug should be marketed or not.

The below-represented image shows how the European Medicines Agency assesses medicines-

After receiving a grant by the European Commission, the centralised marketing authorisation of a drug becomes valid in the EU Member States and the European Economic Area nations including Liechtenstein, Norway, and Iceland.

Advantages of centralised authorisation process EU Citizens:

Early Exercise is a term in the option contract. The process allows the investors to buy or sell the underlying asset before the expiration date. It could be exercised in both types of option, i.e., American-Style and European- Style.

Behavioural Economics According to the school of classical economics, people are intrinsically rational, looking to maximise their utility, and make decisions that are best for oneself. A behaviourist is likely to challenge this school of thought, opining that people often times work irrationally, whether on purpose or not. How should the best parts of psychology and economics interrelate in an enlightened economist's mind? One of the greatest minds of the 20th century, Mr Charlie Munger stated that- “I don't think it's going to be that hard to bend economics a little to accommodate what's right in psychology.” Humans are emotional and easily distracted beings. Consequently, decision making may or may not be made in their self-interest always. Every day, humans make decisions as basic as what amount should one pay for lunch, whether one should pursue a course, invest in gym equipment or how much should be kept aside as monthly savings to making personal finance decisions. There is a dedicated branch of economics that seeks to explain why people decide, what they decide. This branch is called behavioral economics. Your brain effects your thinking- Making Wrong Investment Decision? Blame Your Amygdala! Let us deep dive- What Is Behavioural Economics? Behavioral economics combines understandings from psychology, judgment, decision making and economics with an intent to produce an accurate understanding of human behaviour. It relates to the economic decision-making processes of individuals and institutions. The concept explores reasons as to why people sometimes tend to make irrational decisions, why and how their behaviour does not follow predictions of economic models. It should be noted that behavioural economics focuses on the observable behaviour of humans and does not have strong theoretical or normative assumptions about how an economic system/ business sector or stock market works or should work. Read: Understanding Behavioural Finance & Investment Decisions Let us further break this down with an example: Unlike the field of classical economics, in which decision-making is entirely based on logic, behavioural economics gives room to irrational behaviour and further attempts to understand reasons behind the same. Brexit, for instance is a classic example of how behavioural economics can be useful because behavioural economics can help illuminate how the narrow vote to leave the European Union (EU referendum) was influenced majorly by gut choices, as some experts suggest, as opposed to rational decision-making. The Origin Of Behavioural Economics A keen observer of human behaviour, American economist Richard H. Thaler is broadly believed to be the founder of behavioural economics. He was awarded the 2017 Nobel Memorial Prize in Economic Sciences for his significant contributions to behavioural economics. Thaler’s opinions on the branch is believed to have been inspired by notable works of Israeli psychologist and economist Daniel Kahneman and cognitive and mathematical psychologist Amos Nathan Tversky. Daniel Kahneman also won a Nobel Memorial Prize in Economic Sciences in 2002 for his brilliant work on prospect theory, which he developed along with Tversky. Thaler is best known for incorporating psychological assumptions into analyses of economic decision-making. One of Thaler’s popular ideas – Nudge: Why Move the Earth When A Nudge Can Do! Simple Solutions to Complicated Problems What Are Various Themes Of Behavioural Economics? Three prevalent themes in behavioural economics comprise heuristics, framing and market efficiencies. Why Is Behavioural Economics Important? Behavioural economics provides new ways to think about barriers and drivers to a range of behaviours. This makes it significant, as traditional economic theory does not use insights from psychology, sociology and neuroscience to explain people’s decisions. So much so, behavioural economics seems to have the power to change the way economists and policymakers think about real world problems. Must read: How To Use Psychology To Aptly React To The Coronavirus Pandemic The field also builds a bridge between economic theory and reality- a bridge based on scientific evidence coming from disciplines in behavioural science. Some experts even regard behavioural economics as a counter-revolution, which takes economics closer to its roots, based on psychological intuition and introspection wherein psychology enacts a scientific discipline that can offer much more than merely intuitions and introspection. Besides, understanding basic concepts from behavioural economics can be very useful. It can help people be better negotiators.  How Does Behavioural Economics Influence Market Participants? Clearly, people don’t behave as rational, as traditional economists have assumed. They are affected by cognitive biases, are extremely influenced by other people and often practice herd mentality, have different perceptions about attitudes and behaviours. In context to the stock market, erroneous, irrational financial decisions are the result of different unpredictable reactions by market participants subject to losses and high market risks. Therefore, for decision-making, it is essential to consider all the factors in the market-which creates a place for behavioural economics besides accounting fundamentals, macro and micro-economic factors, economic projections, etc. Consider this- a sudden drop in the value of a few stocks followed by an equally rapid recovery, demonstrates that market participants did not cause such movements by rational choices but rather emotional reactions. Read: What does Fear Do to your Portfolio? Stocks that Scared Investors in 2019 No wonder Benjamin Graham, the father of value investing, and mentor of Warren Buffett the world’s best investor coined the term ‘Mr. Market.” Clearly, he understood there is more to market than numbers. Read: Are you a Growth Investor? Then You Must Wear the Hat of a Psychologist! Why Has Behavioural Economics Concept Risen Over The Years? Let us take cues from dramatic global events over the years- for instance the Great Financial Crisis of 2008 or the novel coronavirus crisis of 2020 (Global Virus Crisis, as some call it). Read: Things to Learn from Past Crises: Role of Financial Planners During Times of Crisis These could not be explained by traditional neoclassic economic models though the impact of these events has been beyond massive. Therefore, other schools of economic thought gained traction and behavioural economics was one such concept. Businesspersons seemed to make decisions based on their emotional state of mind while investors demonstrated nervousness that caused a massive sell off to an extent that circuit breakers had to be launched while. Acts of spontaneity, irrationality, impatience, and herd mentality amid incidents of recent years have paved the way for economists to believe that the human mind is a crucial key to understand economic patterns, financial decisions and eventually- market and economic stances. Do You Know Few Top Behavioural Economists? Besides the foundation setters Kahneman, Tversky and Thaler, a number of economists, and psychologists have emerged as prominent figures within the field of behavioural economics over the years- Behavioural economics enhances the explanatory power of economics as it provides it with a firm and more rational psychological basis. It surely is a way to make economics more accurate by incorporating more realistic assumptions about how humans behave. Besides, good understanding of human decision-making, its rational and irrational aspects, offers opportunities of influencing choices that take better account of how people actually respond to the context within which their decisions are made. There are various to help one not fall prey to behavioural traps, mind you, knowledge alone does not help, but an ability to look at bigger picture and through the eyes of various mental models would help one reduce the errors. Eliminating behavioural errors would not be possible or rather would one be flawless and loose the human touch? Read: All I want to know is where I am going to die so that I’ll never go there- Inversion a Power Tool

What is the October Effect: a myth, or a reality? October effect refers to the theory that stock prices crash in the month of October. This happens without any methodical reason or any specific factor affecting the stock prices. However, the theory has come into existence because of repeated crashes observed in October over the years. October effect is more of a psychological concept than a real-stock market concept.  There have also been price crashes observed in September. However, the reasons for these crashes have been varied. How does October Effect impact the markets? The hysteria around the October effect might make investors scared in this month. The expectations of a price decrease might lead to many investors selling their stocks in early October. If too many investors end up selling stocks, that might inadvertently lead to more panic selling among the investors. Why do investors believe in the October Effect? Often investors let emotions get the best of them. People might lose out on their money because they let their emotions guide them, which may include fear, greed, or a herd mentality. Behavioural finance suggests that investors might be motivated by factors other than their rational decision making. Some of the biggest crashes in history have happened because of the poor decision-making of the investors. People might follow a crowd and put their money in stocks which are more popular among investors, without having any other reason for doing it. At times, the media accounts about the market and a general notion, which is framed without any rational explanation, end up misguiding investors into the wrong direction. These factors may lead to investors giving in to the mass hysteria prevailing during October, which may end up fuelling the October Effect. Therefore, investors must consider all the factors before putting their money in a particular stock. Why was the concept of October Effect formed? The following historic incidents led to the phenomenon of stock prices crashing during October: Panic of 1907: This occurred in the beginning of October. It started with the bankruptcy of two small brokerage firms. Two investors failed to buy shares of a copper mining firm, which led to a run on banks associated with them. This resulted in a domino effect. The crash started with New York city, but it eventually spread to other parts of America. As money was withdrawn from the economy, financial institutions faced the brunt. It also led to the shutdown of Knickerbocker Trust, which had been refused a loan by JP Morgan. The crash was ultimately resolved when the US government gave a fiscal credit of over $30 million, which led to the consumer confidence coming back. Stock Market crash of 1929: This is also referred to as Black Tuesday and it occurred on October 29, 1929. During the 1920s, the US economy was going through various expansions and peaked during a period of high speculation. This was referred to as the Roaring Twenties. As a result of this rise in speculation, there was overvaluation of the stocks, when their prices went way beyond their actual value. However, the bubble burst with reasons attributed to low wages, a downfall of the agricultural sector, and a multiplication of debt. Black Monday: This event occurred on 19th of October, 1987. There were many factors at play, which led to the stock market crash. These included a widening of the trade deficit, incoming of computerised trading and various other geopolitical reasons. The computerised models used for trading were programmed to give a positive feedback. This led to the model generating increased buy orders when prices were increasing, and more sell orders when the prices began to fall. International tensions between countries also led to the crash and loss of confidence in the market. Other events in September: There were historical events which led to a crash in September, like the Black Friday, Black Wednesday, the WTC attacks in 2001, and the housing market crash of 2008. Black Wednesday occurred on September 16, 1992. A collapse in the Pound Sterling led to the UK to opt out of the European Exchange Rate Mechanism. All these factors occurred because of different reasons, which were specific to that particular time period and set-up. Thus, it can be argued that the fact that these events occurred in October is a coincidence. Is the October Effect real or just a coincidence? It is safe to say that October Effect is nothing more than a mere coincidence. The events discussed above happened without any methodical linkage connecting them to the month of October. There has been further evidence proving that the October Effect failed to occur in the years when the market remained strong in this month. The historical crashes mentioned above occurred because of issues which had been specific to those times. Stock exchanges and trading platforms have incorporated the necessary changes to ensure that these events do not get repeated. Regardless of these regulations, it is safe to say that some of these crashes were Black Swan events and could not have been predicted under any circumstances. Therefore, it is difficult to say whether the current market is immune to phenomena like the October Effect or any other crash.

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