Growth in European pharma R&D spending outpaced by US and China

US spending on pharmaceutical research and development has left Europe behind in the last decade, and Chinese investment is growing faster than in both regions, new research shows.In the EU, Switzerland, the UK and Norway, private R&D expenditure grew 4.4% each year on average between 2010 and 2022, rising from €27.8 billion to €46.2 billion, according to the report by consultants PwC, carried out for the European Federation of Pharmaceutical Industries and Associations (EFPIA).While Europe accounts for almost a third of all global spending, growth has not kept pace. In the same period, US spending rose 5.5% per year on average, from €30.7 billion to €71.5 billion, outpacing Europe despite the two being level pegging until 2014.Chinese spending increased 20.7% annually to reach €14.8 billion in 2022. While this is still only a quarter of European spending, the report shows that China is making strides in drug discovery.For the first time in 2023, China overtook Europe for the number of new molecular entities, new drugs with an active chemical ingredient that are marketed for the first time.“There is only a finite time to turn things around,” said EFPIA director general Nathalie Moll. “Boosting European competitiveness to kickstart growth requires concerted, collective action; urgent implementation of a coherent life sciences strategy for Europe would be a good start to futureproofing the sector.”In her political guidelines for the next five years, European Commission President Ursula von der Leyen outlined plans for such a strategy, including a biotech act, which will aim to making it easier for early stage research to move into clinical development and on to the market.Pharma is a major contributor to Europe’s economy. PwC’s analysis found productivity in the sector is three times higher than in the EU economy as a whole, at €197,200 gross value added (GVA) per worker.GVA measures the contribution of a company or sector to the economy, and is equivalent to GDP, after excluding taxes on products but adding subsidies on products. GVA per hour in the US pharmaceutical sector is around double that in the EU, according to the report.Competitiveness gapPharma was highlighted by Mario Draghi’s report on EU competitiveness, as a critical sector in which the EU’s global position is declining.“Of the top ten best-selling biological medicines in Europe in 2022, just two were marketed by EU companies while six were marketed by US-based companies,” the report says.Europe is especially falling behind in products with market exclusivity such as orphan drugs and advanced therapy medicinal products that are based on genes, cells or tissues.Underlying this, the Draghi report points to low investment in pharmaceutical R&D in Europe, and a slow-moving and fragmented regulatory framework. Public spending in the EU is less than half of US spending, while private investment is four times larger in the US.Draghi proposes remedies, including channelling EU funding into the development of a limited number of hubs for advanced therapy medicinal products.Other proposals include accelerating the digitisation of health systems and the European Health Data Space, making it easier to set up and run multi-country clinical trials, and providing clear guidance on the use of artificial intelligence in drug development.The industry has also been warning that a major reform of the EU’s pharmaceutical legislation, currently being negotiated, risks pushing investment out of Europe by reducing market exclusivity incentives.Read More