Europe has long served as the world’s pharmaceutical laboratory. Since the early 2000s, however, its ability to attract investment has come under increasing pressure from global competition. If the EU fails to respond adequately, the current geopolitical environment could deal a serious blow to the sector.

Swallowing the pill

EU pharmaceutical exports have more than tripled over the past decade, generating a substantial trade surplus of €193.6 billion in 2024. Without this sector, the EU’s overall trade balance would fall into deficit.

Yet this strong performance masks a gradual loss of ground, particularly in research and development. Between 2010 and 2022, R&D investment in the EU grew by an average of 4.4% per year, compared to 5.5% in the US and 20.7% in China.

Over the past two decades, Europe has lost 25% of its global share of R&D investment to other regions, especially in emerging fields such as cell and gene therapies.

Current geopolitical tensions with the US could further weigh on R&D investment in Europe.

Forced alignment

On May 12, 2025, the Donald Trump signed an executive order aimed at aligning US drug prices with those in a basket of comparator markets — primarily European — where prices are typically lower.

Unlike other regions, access to medicines in Europe is based on a state-regulated solidarity model. Each Member State negotiates drug prices according to its national budget constraints and the therapeutic value of the product.

While this system promotes a degree of equity, it also creates persistent commercial tension for innovators between so-called “low-price” markets such as the EU and “high-price” markets like the US.

In 2022, average drug prices in the US were nearly three times higher than those observed across 33 OECD comparator countries.

The executive order therefore seeks to reduce prices for medicines covered by public healthcare programs (Medicaid and Medicare) by aligning them with regulated prices abroad, particularly in Europe.

To do so, it applies a “most favored nation” principle: for a set of targeted medicines, the maximum reimbursement price under US public programs cannot exceed the lowest price available for the same product in a group of OECD countries with comparable income levels, adjusted for volume and per capita income.

So what?

A company launching an innovative medicine in France or Germany at a regulated price now risks seeing that price used as a benchmark to set its reimbursement ceiling in the US — a market with disproportionate commercial weight.

In a globalized market, firms are forced into complex trade-offs. Preserving margins and investment capacity may lead them to stagger the launch of new treatments across countries.

Some companies now explicitly cite the US pricing alignment mechanism as an additional factor in these sequencing decisions.

Insmed, for example, has delayed the launch of its anti-inflammatory drug Brinsupri in Germany, while Amgen has withdrawn its cholesterol treatment Repatha from the Danish market.

Both companies point to a direct link between these decisions and the executive order.

While it is still too early to draw firm conclusions about the long-term effects of the policy, early evidence is concerning. One study finds that the number of drug launches in Europe fell by 35% in the ten months following the order, rising to a 43% decline in countries specifically targeted by the new US pricing benchmarks.

This contraction in launches may also signal a gradual shift of some R&D investment toward the US.

What can the EU do?

Public health policy and the budgetary management of access to care remain subject to the principle of subsidiarity.

That said, the EU does have upstream levers — before national pricing and reimbursement decisions — that can strengthen the bloc’s attractiveness and improve the sector’s resilience to geopolitical pressures.

In December 2025, the European Parliament and the Council reached agreement on the pharmaceutical package, the most ambitious reform of the sector in twenty years. It introduces mechanisms to encourage rapid and simultaneous launches across multiple Member States and streamlines procedures for innovative therapies, but it does not provide a lasting solution to the sector’s declining competitiveness.

The forthcoming Biotech Act appears more promising. It aims to accelerate multinational clinical trials, simplify regulatory pathways for cell and gene therapies, and provide greater clarity for investors.

Meanwhile, the Critical Medicines Act — now nearing the end of interinstitutional negotiations — seeks not only to restore the EU’s attractiveness for the development of critical medicines, but also to strengthen its health sovereignty.