The Covid – 19 crisis has revealed the production and technological dependencies of the European Union on third countries in several sectors of the economy, and has thus fuelled the debate on the potential lack of European technological sovereignty in strategic fields. Amongst them, and based on the renewed awareness of the central role of health as a strategic asset for the competitiveness of the entire system, the recent health emergency has highlighted and exacerbated longstanding structural problems in the EU related to the supply of medicines, particularly generic medicines, and dependence on third-country imports for certain pharmaceuticals and essential active ingredients.
However, technological sovereignty in the pharmaceutical sector is not only a matter of competitiveness. It also contributes to guaranteeing appropriate health assistance to European citizens, even during times of emergency, and to addressing the evolving health demand and unmet medical needs. Therefore, the pandemic has paved the way towards building a strong European and national health system and pharmaceutical industry. The past years have revealed the risks of having an intricate system of global interdependence, as well as highlighting the pharmaceutical sector’s strengths and weaknesses. In 2021, the total European pharmaceutical market value at ex-factory prices increased to €255 billion from €89.4 billion in the early 2000s. Moreover, we witness a significant growth in the value of production for the research-based European pharmaceutical industry in the long run – from €127.5 billion in 2000 to €300 billion in 2021. The growth of European pharmaceutical exports was even greater, from €90.9 billion to €565 billion over the same period, with 2021 ending in a positive trade balance of €175 billion. This international advantage is explained by the typically European R&D intensity of the pharmaceutical sector.
Despite this marked growth, many challenges are still to be faced to allow the European pharmaceutical industry to maintain and even strengthen its role as a primary hub of innovation.At the same time, Europe’spositioning in the global pharmaceutical landscape cannot be taken for granted. Although Europe is an established manufacturing power, its supply chain still heavily relies on non-EU raw material subcontractors, which benefit from lower labour costs and less stricter environmental standards. As a result, between 60% and 80% of active chemical ingredients are produced outside the Union, mainly in China and India. Moreover, from 2010 to 2015 Europe was the leading world region for clinical trials initiated per year. From 2016 onward, however, the Western Pacific region has taken the lead.
As a response to the increased competition on the global markets, on 25 November 2020, the European Commission adopted the Pharmaceutical Strategy for Europe. In order to achieve the goals of autonomy and sovereignty, Europe must tackle three critical deficits – a lack of resources and raw materials, of digital skills and of an adequate regulatory framework to encourage the commercialisation of resources. Therefore, four actions need to be taken:
- develop R&D competencies and knowledge through private-public partnerships;
- provide the capacity to turn R&D into market products;
- protect and foster the delivery of innovation through patenting and co-inventions;
- retain competencies and knowledge.
The ongoing review of the pharmaceutical legislation as envisaged by the pharmaceutical strategy, and expected for the beginning for the beginning of the 2023, comes with a peculiar complexity also because of the objective to re – establish technological sovereignty in the field. The role of Intellectual Property Rights is a hotspot here since weakening IPRs is often recognised as a disincentive for product development. As well, IPRs are a complex issue as they attempt to balance long-term incentives for innovation and short-term access to innovation. However, it is generally recognised that the existence of IPRs makes a market more attractive for innovators.
In general, the challenges to be faced by the health sector in the near future and, in particular, in the pharmaceutical sector, are manyfold. As well, it is important to keep in mind that autonomy should not be confused with isolation, as strategic autonomy has more to do with the diversification of suppliers rather than autarchy.