Recent collaborative research conducted by Bayes Business School and the biopharmaceutical giant Merck KGaA has cast new light on the intricate challenges faced by the European Union (EU) in amplifying its role as a premier destination for pharmaceutical innovation and investment. This study argues that without substantial reforms in regulatory harmonization, incentive structures, and approval speed, the EU risks falling further behind global counterparts such as the United States. The nuanced dynamics of pharmaceutical regulation reveal a complex interplay between market size, price controls, and administrative fragmentation that collectively suppress the continent’s competitive edge.
The pharmaceutical industry, characterized by fierce competition and rapid innovation cycles, hinges crucially on an effective regulatory ecosystem to enable swift approval and dissemination of novel medical treatments. Globally, regulatory bodies such as the US Food and Drug Administration (FDA), the EU’s European Medicines Agency (EMA), the UK’s Medicines and Healthcare products Regulatory Agency (MHRA), China’s National Medical Products Administration (NMPA), and Japan’s Pharmaceuticals and Medical Devices Agency (PMDA) form a competitive yet interconnected network. These entities race to approve cutting-edge therapies but also must cooperate on global health challenges, as dramatically illustrated during the COVID-19 pandemic. However, the EU’s current trajectory paints a narrative of regulatory stagnation and fragmentation.
A striking insight from the research highlights pharmaceutical firms’ preference for submitting their initial regulatory filings in the United States rather than Europe. This trend largely reflects the US system’s faster average approval times, robust regulatory support mechanisms, and more compelling incentives for pharmaceutical investments. These factors create a conducive environment for pharmaceutical companies to optimize their innovation pipelines and capitalize on early market entry, often sidelining the EU despite its substantial scientific expertise and potential consumer base.
The research, orchestrated by Professor Stefan Haefliger and Pedro Franco, a Bayes alumnus and regulatory expert at Merck KGaA, employed qualitative interviews with 47 senior pharmaceutical practitioners representing 19 different nationalities. Their testimonies underscored multifaceted reasons for the EU’s diminishing attractiveness. Key factors include comparatively lower pharmaceutical prices within Europe, which directly limit revenue potential and thus reduce incentives for local drug development. Additionally, the EU’s market is roughly half the size of the US in terms of purchasing power, diminishing its influence as a launchpad for new medicines.
Regulatory complexity further compounds these challenges. The EU’s healthcare landscape is fragmented across its member states, each operating distinct reimbursement models and market access protocols. This disjointed post-approval environment significantly hampers predictable and timely patient access to drugs once authorized. Consequently, companies face protracted timelines and administrative burdens to navigate this patchwork, discouraging their initial or sustained investment within Europe.
Financial considerations also weigh heavily. Rising operational expenses, including taxes and research and development (R&D) costs across the EU, escalate the barriers to pharmaceutical production. Coupled with constrained access to capital and a shortage of specialized expertise, these economic factors attenuate the region’s ability to maintain a dynamic biopharmaceutical sector. Further exacerbating this trend is the relative scarcity of clinical trials conducted on European soil, attributed in part to stringent regulatory constraints that deter experimental research activities.
In response to these systemic issues, the study proposes innovative regulatory reforms aimed at reinforcing the EU’s strengths while mitigating its weaknesses. One such recommendation is the implementation of regulatory sandboxes—controlled environments that facilitate faster and iterative regulatory evaluation of novel therapeutics and combination products. These sandboxes could foster agile learning and expedite adaptive approvals, striking a balance between rigorous oversight and innovation facilitation.
Another transformative measure involves the harmonization of joint scientific advice processes, particularly for complex drug-device combinations. By providing consolidated guidance across national regulatory bodies, pharmaceutical developers could streamline compliance efforts and reduce duplicative submissions. Furthermore, adopting electronic product information systems could ensure that up-to-date and comprehensive drug data is accessible efficiently throughout the EU, enhancing transparency and patient safety.
The researchers further advocate for a simplification of the existing regulatory framework, including reconsidering the current requirement for marketing authorizations to be renewed every five years. Transitioning to an unlimited marketing authorization model could substantially reduce administrative overhead and accelerate market continuity, thereby reinforcing industry confidence in the European regulatory environment.
Professor Haefliger contextualizes these findings with broader geopolitical and economic narratives. He notes that the United Kingdom’s rapid deployment of the AstraZeneca COVID-19 vaccine post-Brexit exemplifies the efficacy of a more assertive and agile regulatory strategy. This “Brexit dividend” demonstrated how flexible frameworks can support accelerated development and distribution of critical therapies, contrasting with the comparatively slower EU processes.
The current geopolitical climate further complicates matters, with trade tensions and tariffs, such as those proposed by former President Trump, sparking fears of pharmaceutical companies reconsidering their operational footprints. Ireland and other EU member states appear particularly vulnerable as export costs to the US market could incentivize relocation, undermining local industry vitality.
The research’s conclusions resonate with the 2024 Draghi Report, which identified stagnation within the EU pharmaceutical sector and stressed the urgent need for reforms in regulatory policy, capital access, and the integration of emerging technologies. The absence of unity among EU member states emerges as a critical barrier, eroding opportunities to capitalize on the continent’s depth of scientific expertise and infrastructure.
Ultimately, the study issues a stark warning: without decisive collaboration and systemic reform, Europe will likely cede its status in the global pharmaceuticals arena. This outcome would not only diminish economic investment but also hinder patient access to innovative medicines and stifle the continent’s ability to attract top-tier research talent. The path forward demands an orchestrated effort to harmonize regulatory processes, incentivize innovation, and streamline access, safeguarding Europe’s capacity to lead in the biopharmaceutical revolution.
The full article, titled “Competition of regulatory ecosystems in approving medicines: policy implications in the case of Europe,” authored by Pedro Franco and Professor Stefan Haefliger, appears in the February 2025 issue of Drug Discovery Today. It invites policymakers, industry stakeholders, and regulatory bodies to reflect on the urgent imperative for transformative change in pharmaceutical governance and innovation strategy within Europe.
Subject of Research: People
Article Title: Competition of regulatory ecosystems in approving medicines: policy implications in the case of Europe
News Publication Date: 1-Feb-2025
Web References: https://www.sciencedirect.com/science/article/abs/pii/S135964462500008X?via%3Dihub
References: ‘Competition of regulatory ecosystems in approving medicines: Policy implications in the case of Europe’ by Pedro Franco and Professor Stefan Haefliger, Drug Discovery Today, February 2025.
Keywords: Pharmaceuticals, Public health, Drug delivery, Medications, Scientific organizations, Pharmaceutical industry, Health care industry, Health and medicine, Europe
