EU pharmaceutical regulation reforms needed to drive innovation and investment, experts suggest

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, 2025-05-02 16:29:00

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New research from Bayes Business School, in collaboration with biopharmaceuticals company Merck KGaA, suggests member states from the European Union (EU) must work more closely together, provide better incentives for the development of new medicines and approve access to medicines quicker than other international regulators, if it is to attract greater investment from pharmaceutical companies.

The is in a highly competitive market race for innovation, approval and rollout. National and regional regulatory frameworks are vital for fostering effective innovation, creating ecosystems to attract large pharmaceutical companies to develop biological and locally.

Regulatory ecosystems, including those from the US (FDA), European Union (EMA), UK (MHRA), China (NMPA) and Japan (PMDA) are all in competition to approve innovative medicines, but must also work together to achieve global aims—particularly in crises as seen during COVID.

Current trends indicate that these pharmaceutical companies favor the US and other ecosystems over Europe for first submissions to develop drugs, due to faster average approval times, regulatory support and stronger incentives.

The qualitative research was led by Stefan Haefliger, Professor of Strategic Management and Innovation at Bayes, and Pedro Franco, Bayes alumnus (Executive MBA, 2023) and Head of Europe Global Regulatory and Scientific Policy at Merck KGaA. It aimed to explore reasons why leading pharmaceutical companies favored other markets, and what the European Union could do to gain competitive advantages over these to reestablish its global reputation. The study involved interviews with 47 senior practitioners in the pharmaceuticals industry, from across 19 nationalities.

“Competition of regulatory ecosystems in approving medicines: Policy implications in the case of Europe” by Pedro Franco and Professor Stefan Haefliger is published in Drug Discovery Today.

The most commonly identified reasons given by experts for companies choosing the US over the EU included:

  • Lower prices in the EU, which restrict revenues and margins for pharmaceutical companies.
  • The EU’s smaller market size compared to the US.
  • Complications in post-approval access to medicines due to differing reimbursement systems across EU countries.
  • Rising costs in the EU, including taxes and research & development, are disincentivizing production.
  • Insufficient access to capital, resources and expertise.
  • Fewer clinical trials in European countries due to regulatory restrictions.

The study also revealed measures that could help the European regulatory ecosystem establish competitive advantages through leveraging strengths. These included introduction of regulatory sandboxes, joint scientific advice for drug-devices, the introduction of electronic product information, and simplification of the existing regulatory system and unlimited marketing authorization—which avoids to renew licenses every five years.

Professor Haefliger said, “It is widely recognized that the European drug dispersion has fallen behind that of the US and others. Indeed, the UK’s development and rapid deployment of the Oxford Astra-Zeneca vaccination during COVID was celebrated by Eurosceptics as a ‘Brexit dividend’—following the UK regulatory framework’s aggressive strategy after departure from the trading bloc.

“Pharmaceuticals are also a hot talking point right now, with President Trump’s recent tariff announcements causing a stir in Ireland and across the EU—amid fears that industry giants such as Johnson & Johnson may look to relocate instead of paying costly sums to export their products to the US market.

“Our study is supported by findings of the 2024 Draghi Report, that laid bare the EU’s stagnation in pharmaceutical growth and urged reform in regulatory processes, capital access, and technological adoption.

“While many individuals in our study cite the lack of synergy between EU members as a reason for their reluctance to develop drugs in Europe, there remains a highly diverse pool of expertise—and certainly the potential to become a more attractive proposition.

“Without significant changes, however, the EU risks falling further behind its competitors in attracting pharmaceutical innovation, investment, and leading research talent.”

More information:
Pedro Franco et al, Competition of regulatory ecosystems in approving medicines: policy implications in the case of Europe, Drug Discovery Today (2025). DOI: 10.1016/j.drudis.2025.104295

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EU pharmaceutical regulation reforms needed to drive innovation and investment, experts suggest (2025, May 2)
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