The European Union’s pharmaceutical sector is at an inflection point. New initiatives are driving the sector toward a future where EU patients have more equal access to innovative and affordable medicines, and where the EU’s R&D, production and supply chain operations are better prepared for challenges like the COVID-19 pandemic.
A key driver of this change is the new Pharmaceutical Strategy for Europe. The strategy aims to make sure the pharmaceutical needs of EU member nations are met by addressing challenges like inequities in access to medicines, demands for new therapies and what may be an over reliance on countries outside the EU for medicines.
The strategy and other developments could have big implications for North American companies and their ability to serve Europe, the world’s second-largest pharmaceutical market. Because of this, it’s critical that companies understand not only what’s changing but also what moves they may need to make to remain competitive in the EU.
The Pharmaceutical Strategy for Europe was adopted last year1 and encompasses all aspects of the EU pharma sector, from drug discovery to production to supply chain. As of today, the strategy doesn’t have industry mandates. But it does intend to use legislative and non-legislative actions to achieve its four main objectives. Those objectives include:
The strategy will impact how pharmaceuticals are developed and delivered to patients in the EU, but it’s not the only force that’s reshaping the EU’s pharma sector. The European Commission recently updated its Industrial Strategy2 to strengthen the EU’s strategic autonomy in six key areas, one of which is pharmaceuticals.
The need for greater autonomy became apparent during the pandemic when EU member nations experienced supply chain disruptions and shortages. The updated strategy aims to prevent such problems from happening again by identifying and addressing strategic dependencies for essential products like medical supplies that are critical to the EU’s societies and economies. The strategy also seeks to help industry adopt digital and ”green” business models that are becoming increasingly necessary to compete.
Among the steps the commission is taking to realize these goals is allowing EU member states to use strategic instruments known as Important Projects of Common European Interest (IPCEIs). These instruments ease the typically strict state aid guidelines for supporting industry. And in some cases, they can be the deal-closing incentive that a company needs to make investments that align their operations with new standards or legislation.
Meanwhile, the UK may have exited the EU last year but the move has created lingering uncertainty for the pharmaceutical sector. Large pharma companies likely already had a presence in both the UK and another EU country pre-Brexit. But companies with a single base of operations in Europe will need to adopt a dual approach, with one foot in the UK and another in the EU, to ensure they can continue serving both markets.
Ireland will play a central role in helping to put the EU’s new pharmaceutical and industrial strategies into motion. The country is a European pharmaceutical manufacturing hub and the third largest exporter of pharmaceuticals in the world. Ireland has more than 85 pharmaceutical companies operating within its borders and some 40,000 people employed in the industry.
At the heart of the EU’s new strategies is the need to ensure that pharmaceutical production remains robust in Europe and to use Industry 4.0 digitalization strategies to reduce costs and enable the production of new, more targeted therapies. Ireland shares and supports these goals: it created an Industry 4.0 Strategy to put the country at the forefront of the intelligent manufacturing revolution. The strategy aims to, among other things, stimulate the adoption of Industry 4.0 technologies, help companies harness the opportunities enabled by those technologies and help the Irish workforce develop the skills needed to deliver Industry 4.0 transformation. Other efforts include the development of a new Advanced Manufacturing Center (AMC) to help companies operating in Ireland understand where they can implement emerging technologies. This can help ease the transition that companies need to make from their current manufacturing operations to next-generation digitalized operations.
Ireland already plays a critical role in strengthening the resilience of the EU’s pharmaceutical production base and supply chain. Many companies based in North America and elsewhere — including nine of the world’s 10 largest pharmaceutical companies — have invested and established manufacturing and R&D operations in Ireland to serve the EU and global markets. For companies that have sought to expand their operations outside the UK post-Brexit, Ireland has proven to be the easiest option as the only English-speaking country remaining in the EU. The country is home to 50 FDA-approved pharma and biopharma plants. Ireland’s role as a gateway to Europe may now be more important than ever for North American companies considering possible expansion or restructuring moves as the EU seeks to improve the strategic autonomy of its pharma sector.
Ireland is committed to participating in the EU health IPCEIs and is looking to partner with biopharmaceutical companies that are upgrading their existing facilities or establishing new operations in Ireland by supporting compatible investments. Similar incentives were recently offered when the EU waived regional aid guidelines to support the development of COVID-19 vaccines and therapeutic products. This paved the way for capital investments, such as the $9 million site expansion in northwest Ireland announced by Charles River Laboratories. The company plans to expand its pan-European vaccine testing capabilities at the site to create additional lab space and up to 90 new skilled roles over the next three years.
Companies evaluating where to expand or develop their operations in the EU should consider what led global pharma and biopharma companies to choose Ireland as a location for their operations. Ireland’s Health Products Regulatory Authority (HPRA), for example, has a track record of working with regulatory agencies, including the EMA and FDA, to achieve trouble-free compliance. The country offers a pro-enterprise policy environment, as well as economic and political stability. It also has the youngest population in the EU, combined with high-ranking education system, which gives the pharma sector a deep pool of talent to draw from.
It remains to be seen how the EU’s pharmaceutical and industrial strategies will take shape in the coming years and what requirements they will place on industry. But one thing is clear: The EU‘s pharma sector must evolve and advance. North American and global pharma companies shouldn’t see this as a threat to their access to the EU market, but rather as an opportunity and invitation to bring improvements and greater innovation to a top market.
Rory Mullen is head of biopharma and food at IDA Ireland.