Experts Advocate for Reforms in EU Pharmaceutical Regulations to Enhance Innovation

Recent findings from research conducted by Bayes Business School, in partnership with Merck KGaA, indicate that the European Union (EU) must enhance collaboration among its member states and offer improved incentives for the development of new medications. This is crucial for attracting increased investments from pharmaceutical firms.

The pharmaceutical sector is currently engaged in a fierce competition for innovation, regulatory approval, and market rollout. National and regional regulatory frameworks play a critical role in fostering effective innovation and in creating environments that entice major pharmaceutical companies to develop biological and orphan drugs within the EU.

Various regulatory ecosystems, including those in the US (FDA), EU (EMA), UK (MHRA), China (NMPA), and Japan (PMDA), are vying to approve innovative medicines while also needing to collaborate to achieve global objectives, especially during health crises like the COVID-19 pandemic.

Current trends suggest that pharmaceutical companies are increasingly favoring the US and other regulatory environments over the EU for initial drug submissions, largely due to faster approval times, better regulatory support, and more robust incentives.

The qualitative research, led by a professor of Strategic Management and Innovation at Bayes and a graduate working in regulatory and scientific policy at Merck KGaA, sought to uncover why leading pharmaceutical firms prefer other markets and what measures the EU could implement to regain its competitive edge. The study involved interviews with 47 senior industry practitioners from 19 different nationalities.

The experts identified several reasons for the preference for the US market, including:

• Lower drug prices in the EU, affecting revenue and profit margins for pharmaceutical companies.
• The smaller market size of the EU in comparison to the US.
• Complications related to post-approval access to medicines due to varying reimbursement systems across EU member states.
• Increasing costs in the EU, including taxes and R&D expenses, which discourage production.
• Lack of access to capital, resources, and specialized expertise.
• Fewer clinical trials conducted in European nations due to regulatory limitations.

The study also proposed several measures that could help the European regulatory ecosystem gain a competitive advantage by leveraging its strengths. Recommendations include the introduction of regulatory sandboxes, joint scientific advice for drug-device combinations, adopting electronic product information, and simplifying the existing regulatory framework, along with providing unlimited marketing authorization to eliminate the need for pharmaceutical companies to renew licenses every five years.

Concerns have been raised about the EU's regulatory landscape, especially as it pertains to drug distribution, which some industry experts believe has fallen behind that of the US and other regions. The UK's rapid development and deployment of the Oxford-AstraZeneca vaccine during the COVID pandemic have sparked discussions regarding the advantages of its regulatory framework following Brexit.

Pharmaceuticals have taken center stage in recent debates, especially with recent tariff announcements affecting major companies like Johnson & Johnson and raising concerns about potential relocations due to export costs to the US market.

The research aligns with findings from the 2024 Draghi Report, which highlighted stagnation in the EU's pharmaceutical sector and called for reforms in regulatory processes, capital accessibility, and technological advancements.

While many respondents in the study cited a lack of synergy among EU member states as a barrier to drug development within Europe, they also noted the rich pool of diverse expertise available, suggesting that with strategic changes, the EU could become a more appealing destination for pharmaceutical innovation and investment.