The European Pharmaceutical Sector in the Trump Era

Hello! Today is 5 May, and here is your EU news summary for the week. Feel free to share this newsletter with friends and colleagues, and follow us on LinkedIn.

This week’s expert is Ludovic Lacaine, Head of Brussels Office, EU Government Affairs at a pharmaceutical company. For more than 20 years, Ludovic has worked on European public health and pharmaceutical innovation policy. This briefing was written in his personal capacity — it does not reflect Roche’s official position.

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.

EU-US TRADE • On May 1, President Trump announced that he would raise tariffs on European cars and trucks from 15% to 25%, accusing the EU of failing to comply with the Turnberry agreement concluded last summer in Scotland.

That deal set a baseline tariff of 15% in exchange for EU commitments to purchase 750 billion dollars’ worth of US energy and to invest 600 billion dollars in the US. The EU also agreed to negotiate lower tariffs on certain US industrial and agricultural products and to grant broader preferential access, but those measures are to be implemented through separate legal acts.

The European Commission rejected the allegation of non-compliance, stating that it is implementing the agreement via standard legislative procedures, and warned that it would keep all options on the table to protect the EU’s interests.

The move comes against the backdrop of wider transatlantic tensions, including threats to withdraw US troops from Germany, Italy and Spain. Trade Commissioner Maroš Šefčovič is due to meet senior US officials in the coming days.

The Turnberry agreement was approved by the European Parliament in March. Interinstitutional negotiations (between Parliament, Council and Commission) on the agreement begin today.

EU-MERCOSUR • Large parts of the EU–Mercosur trade agreement entered into application effect on a provisional basis on 1 May.

The provisions that have entered into force are those falling under the EU’s exclusive competences. In practice, this covers the strictly trade-related aspects of the agreement.

For provisions that touch on shared competences (such as environment, transport and certain aspects of foreign investment) to take effect, they will have to be approved by the European Parliament and then ratified individually by each Member State according to its national procedure — which, in most cases, means a vote in the national parliament.

Only then will the agreement be fully adopted, replacing the interim version that entered into application on 1 May.

In January, the European Parliament asked the Court of Justice of the EU for an opinion on the agreement’s compatibility with the EU Treaties, a step that could significantly delay final adoption by one to two years.

ENERGY • On 29 April, the European Commission adopted the Middle East Crisis Temporary State Aid Framework (METSAF), a temporary state aid regime designed to shield the European sectors most exposed to the economic fallout of the war in the Middle East.

The framework allows Member States to cover up to 70% of additional fuel and fertiliser costs for companies in the agriculture, fisheries and transport sectors. It also raises the aid intensity for energy-intensive industries under the Clean Industrial Deal State Aid Framework (CISAF) (the state aid pillar of the Clean Industrial Deal), from 50% to 70%.

In force until 31 December 2026, the scheme aims to stabilise the competitiveness of the most vulnerable value chains without tightening decarbonization requirements.

The Commission has indicated that it will reassess the scope and content of METSAF during its period of application, leaving open the possibility of an extension.

• In a note for ECIPE, Oscar Guinea argues that the Commission’s proposed Industrial Accelerator Act remains too focused on traditional manufacturing industries, at the expense of a forward-looking competitiveness strategy, particularly in the digital sector.