Despite a decade of gradual growth, new data reveals how the United States, despite facing increasing competition from China, is outpacing Europe in research and development (R&D) spending. Europe’s pharma sector is alarmed and calling on the EU to shift gears on competitiveness and investment.
“This is another report that should be a wake-up call for policymakers when it comes to Europe’s competitiveness,” Michał Byliniak, General Director of INFARMA, told Euractiv.
The recent studies published by the European Federation of Pharmaceutical Industries and Associations (EFPIA) provide an in-depth analysis of the pharmaceutical industry’s economic impact on European member states and compare Europe with other regions worldwide.
As Byliniak explained, “The data clearly indicate that despite the importance of the pharmaceutical industry and the increase in R&D spending, Europe is losing this important race for patients and the economy to the US and China.”
Key figures
In 2022, the pharmaceutical industry in Europe contributed approximately €311 billion to Gross Value Added (GVA) in EU-27 countries and €448 billion across Europe, representing 2.0% and 2.6% of total GVA in these regions, respectively.
The industry supported 2.3 million jobs in the EU-27, 633,200 of which were direct employment positions within pharmaceutical companies. Additionally, the sector generated 737,500 indirect jobs and 924,200 induced jobs through employee spending.
The total GVA comprises €163 billion from direct contributions, €68 billion from indirect contributions, and €80 billion from induced contributions. The pharmaceutical industry demonstrates significant productivity, achieving a GVA per employee of €225,000, approximately three times higher than the average for the broader European economy.
Since 2016, the sector’s GVA has grown at an average annual rate of 6.9%, while employment has increased by 2.2% annually. This industry is crucial for innovation and research in Europe, with annual R&D spending rising by an average of 4.4% since 2010.
Pressure on Europe
However, these figures also serve as a warning regarding the disparities in R&D spending between the EU and other parts of the world, as Europe struggles to keep pace with growth observed in Asia and the United States.
During the same period, R&D expenditures in the USA rose by 5.5%, while those in China increased by 20.7%.
In recent years, this widening gap in R&D investment between Europe, the USA, and China has been correlated with a relative decline in new molecular entities (NMEs) discovered in Europe—drugs with active ingredients introduced to the market for the first time—which are essential outcomes of R&D activities.
In 2023, the EU fell behind China regarding NME discoveries. “From an economic perspective, this sector benefits the European Union significantly. It remains crucial for health and economic security in Europe despite a range of increasing constraints,” Nathalie Moll, Director General of EFPIA, summarised the report.
Moll explains that despite slow growth in R&D spending, the scale and pace of declining global shares of Europe in R&D investments indicate that the time to reverse this trend is limited.
“Enhancing Europe’s competitiveness to stimulate growth requires joint and coordinated actions,” she asserts, adding that “the urgent implementation of a coherent life sciences strategy for Europe would be a good start to prepare the sector for the future,” she said.
Polish perspective
The report underscores the pharmaceutical industry’s vital role in enhancing both economic output and employment opportunities within Poland.
In 2022, Poland’s pharmaceutical industry significantly contributed to economic growth by adding approximately €5 billion to its GVA. This sector not only bolstered the economy but also played a crucial role in employment, providing 58,500 jobs across various sectors.
Notably, the direct GVA generated per employee in this industry exceeds the national average, highlighting its productivity and importance as a driver of economic performance.
Byliniak emphasises the significance of Poland’s presidency in shaping future directions and priorities for the EU during this new term of Parliament. “It has a chance to significantly influence directions and priorities for improving Europe’s competitiveness,” Michał Byliniak told Euractiv.
[Edited by Vasiliki Angouridi, Brian Maguire]
