Europe Is Trying to Fix Its Mistakes. Will America Make the Same Ones?

For generations, the story of European pharmaceutical competitiveness has been one of stark decline, providing a harsh lesson in what happens when price controls crowd out innovation. Europe's declining drug approval trajectory is a warning for U.S. policymakers tempted by most-favored nation drug pricing.

The decline has not gone unnoticed in Brussels. Motivated by years of self-inflicted setbacks, European leaders have begun to mount a serious campaign to reclaim the continent’s share of global biomedical leadership.

The European Union is modernizing its decades-old pharmaceutical framework, launching a €500 million initiative to attract scientific talent, and pushing aggressively to speed drug approvals and strengthen research incentives. The new “E.U. Pharma Package” rewrites the core rules for how medicines are developed, approved and launched in the single market. The package promises shorter timelines for regulatory reviews and additional incentives to spur the development of orphan drugs and other therapies to treat unmet medical needs. European leaders also set a new target to increase clinical trial activity by 11% or more annually.

However, the E.U. still has a way to go if it’s to truly reclaim its former standing. The European Federation of Pharmaceutical Industries and Associations (EFPIA) described the agreement as “not strong enough to move the needle on European competitiveness.”

And according to new research published by the EFPIA last week, while meeting the bloc’s 11% target would improve access to cutting-edge treatments for thousands of patients, create new jobs, and inject billions into the regional economy, it’s not enough to make up for lost ground. European trial activity would need to increase by 25% annually to return to where the European life science sector was in 2013 – and increase by 50% annually to catch up to and keep pace with China and the U.S.

Nonetheless, European leaders’ frank acknowledgement of how far the continent has fallen should register as a clear warning for U.S. policymakers – especially in light of China’s aggressive, state-backed strategy to dominate the next era of biomedical research. China is pouring resources into clinical infrastructure, manufacturing capacity, and scientific talent and has the results to show for it.

The U.S. became the world leader in pharmaceutical development because policymakers made smart choices that rewarded innovation, protected intellectual property, and kept markets open. A commitment to allowing market competition – not government price setting – to determine the value of innovative therapies made the U.S. the world’s preferred destination for biopharmaceutical development.

That advantage must not be taken for granted.

It would be a mistake to adopt the very pricing policies that put Europe in this hole to begin with.

The lesson of Europe's decline – and its fight to reverse it – is that the mantle of global leadership in the life sciences is not easily recovered once lost. European leaders’ attempts to fix their mistakes are an admission that innovation-friendly policies are the only reliable path to leadership.

Washington should take note before it rewrites its own rules in the wrong direction.