Europe, pharmaceuticals and lessons from the EV sector: Asleep at the wheel?

The Covid-19 pandemic demonstrated to the world just how much pharmaceutical prowess and access to medicine production have become major levers of power and prestige. As China deployed its facemask diplomacy across the globe, Europe rolled out the first authorized mRNA vaccine, an illustration of transatlantic interdependence: co-developed by Germany’s BioNTech with the US’s Pfizer and leaning on the latter’s capacity and scale to facilitate manufacturing. However, against the background of what many perceived as American ‘vaccine nationalism’, this also triggered an intense debate over the EU’s slower start, with accusations that it had prioritized solidarity at the expense of speed.¹ With supply chains under pressure and export controls spreading, the case for home-grown pharmaceutical development and manufacturing became clear to the European public. 

However, as the immediate danger receded, the lessons of wider strategic consequences were not drawn. This is worrying, as warning lights have begun flashing more urgently for Europe’s place in the global pharmaceutical competition between the US and China.  

There has been a succession of announcements by the US impacting the pharma sector, from the launch of a Section 232 investigation earlier this year to determine the effects on national security of imports of pharmaceuticals and pharmaceutical ingredients, to a more recent announcement of a 100% tariff that would apply to any branded or patented drug unless a company is building their pharmaceutical manufacturing plant in America. Furthermore, binding commitments to giving the US most-favoured nation (MFN) status are being sought from manufacturers, with the objective of reducing pharmaceutical prices in the US while increasing them in Europe. These developments signal that pharmaceuticals have squarely entered the realm of geopolitics, recalibrating the balance between national security concerns, drug pricing policies and global supply chains. Hope that pharmaceuticals would be exempt from such bargaining, given their importance for people’s health and their consequent long-standing exemption from tariffs, has given way to a new reality.   

In China, headlines tell of the country’s staggering rise in biopharmaceuticals. It has shifted from being a fast follower to a growing innovation driver in areas such as oncology. In 2024, 23% of global drug candidates were developed in China.² In addition, Chinese companies are participants in 18% of licensing deals for potential new drug candidates in the stages of discovery and development involving multinational companies, and represent a little over 30% of deal value.³ These are ‘out-licensing deals’, in which companies grant to other firms the right to further develop, commercialize or distribute their newly developed drugs. China’s clinical trial ecosystem offers speed and scale advantages that Europe struggles to match. According to some estimates, China could account for 35% of drug approvals by the US Food and Drug Administration (FDA) by 2040, up from the current 5%.⁴

These developments are set to have profound effects on the dynamics of capital flows, the location of clinical trial and manufacturing investment decisions, and supply chain derisking. Europe must adapt quickly to these shifting dynamics to avoid seeing its pharmaceutical research, export and manufacturing strengths erode further. 

Lessons for driving Europe’s biopharma future 

Biotech, a foundational technology, has applications in a broad range of human activities and a clear dual civilian–military use dimension. The 2025 Strategic Foresight Report by the European Commission lists it as one of the technologies that will make its mark in the next decade.⁵ It represents a significant economic activity for Europe; by some estimates, the direct, indirect and induced effects of biotech for the European Union reached up to €75.16 billion in 2022.⁶ Biotech-based pharmaceuticals account for around 44% of the pipeline.⁷ In the growing biotech rivalry, Europe retains unique strengths in the sector; increasing dependence would come at great human, scientific and economic cost. 

The development of the EV sector shows what happens when Europe ignores the warning signs, offering lessons for Europe’s next steps. In the case of EVs, the EU underestimated China’s long-term strategy and overestimated its own industries’ resilience. China invested in the sector early, batteries quickly became a chokepoint and Europe lost control of the value chains, becoming reliant on China for the supply of components and ultimately losing market share. European car manufacturers are now undergoing profound restructuring, with significant consequences for jobs across the sector.  

Beyond the obvious differences, Europe risks a similar situation in pharmaceuticals and needs to act to prevent a repeat of the EV experience. It currently occupies a position of relative strength, as a major pharmaceutical exporter, a key hub for biomanufacturing, for example in Belgium and Ireland, and a strong science sector with leading life science hubs in Denmark, Spain and France. Preserving these advantages requires strategic foresight and political action today. 

China’s rise in EVs followed a consistent pattern: long-term planning, strategic subsidies, vertical integration and export scaling. A similar approach is at play in the biopharma sector. Throughout successive plans, notably the 14th Five-Year Plan for Bioeconomy Development and the Made in China 2025 strategy, biotech and biopharma have been identified as strategic sectors, attracting a combination of public funding, preferential policies, regulatory reforms and talent-return programmes to support China’s growth. A vast patient population, dense hospital networks and a maturing base of organizations involved in contract research create the conditions for speed and scale in clinical trials. China’s growing chronic disease burden, linked to its demographic transition, is driving priorities and investment into areas such as oncology and metabolic disease, with drug candidates that will be important for Europe as well. Out-licensing by Chinese biotech firms to multinational pharmaceutical companies is embedding Chinese innovation in Western drug pipelines. 

Although China’s rise in certain areas of the biopharma value chain is staggering, its current global position is still evolving. China’s innovative drug sector is driven by the globalization of assets through ex-China trials and marketing authorizations by the US Food and Drug Administration or the EU European Medicines Agency, among others. Chinese firms still rely on co-development and licensing to access intellectual property (IP), clinical networks, global distribution and manufacturing know-how. Chinese research quality is rising, although partnerships with US, EU and Japanese labs continue to be sought to elevate standards and enrich datasets. Participation in global harmonization forums and interoperable data norms is necessary to make Chinese-generated evidence exportable. China might seek self-sufficiency in biopharma and is emerging as a biopharma innovation leader in its own right, but it cannot decouple from the logic of a highly interdependent sector. 

Lesson 1: See it early 

A first key lesson from the EV experience is for Europe to read this current momentum carefully. A much stronger and more systematic strategic foresight function is needed in partnership with the private sector. Through a better understanding of the rapidly changing business models in biotech, of the frontier technologies that drive these changes (such as AI and quantum science), and of the chokepoint risks heightened by the US’s reshoring drive, in combination with risk assessment for biotech in the framework of the EU’s Economic Security Strategy,⁸ Europe can make a realistic assessment of the situation and calibrate its regulatory instruments and funding efforts accordingly.    

Lesson 2: Address Europe’s blind spots 

A second lesson to draw is that Europe’s blind spots need tackling by addressing fragmentation and the slow national implementation of EU legislation, which is creating self-inflicted opportunity costs. Two areas are particularly important. Firstly, that of the EU Clinical Trials Regulation, which was meant to harmonize clinical trial capabilities across the EU and streamline applications for multi-country trials, but where we are still seeing delays and slow patient recruitment timelines. This contributes to sponsors moving trials elsewhere. And secondly, the European Health Data Space (EHDS). Health and genomic data are an essential ‘currency’ in driving the research, development and commercialization of biopharmaceuticals. Health and genomic data, computing power and analytical capacity is strategic infrastructure. The EHDS can deliver transformative change. However, as already highlighted in the Draghi Report,⁹ it is not yet delivering the data access needed for AI-enabled research and evidence generation. Company concerns over insufficient guarantees and protections with regard to IP and business-sensitive data must be addressed, while broad opt-outs and divergent national add-ons must be avoided. The risks of inefficiencies in clinical trials or of underused health data are known, but decision-makers are acting too slowly, assuming there is still time. 

Europe should nevertheless resist the temptation of addressing the continent’s eroding position in biopharmaceuticals through a regulatory approach alone. The biopharmaceutical sector is complex and science-driven, collaborative in nature, and needs a dynamic translation infrastructure. It also contends with long, high-risk and costly pipelines, and globally distributed supply chains. Add the disruptive force of AI/Machine Learning and the case for a cross-sectoral and comprehensive industrial strategy is strong; Europe would benefit from a close look at how other successful hubs, notably in Asia, are bringing these different aspects into a more coherent framework. 

Lesson 3: Focus on innovation 

A third lesson, therefore, is to keep a strong focus on the technologies and innovations that will define the sector’s future, home in on where Europe can lead, and substantially improve access to capital and regulatory frameworks. Europe has strategic strengths but does not yet have a mindset of converting them into global indispensability. In the development of EVs, China chose to focus on batteries rather than legacy engines. In biopharma, Europe has important advantages in areas such as vaccines, cell and gene therapies, mRNA and biomanufacturing; it has a wealth of health data, a strong position on quantum science, world-class universities, clusters and major pharma incumbents.  

Recent proposals raise hope that structural change is coming to close Europe’s innovation gap and strengthen the path from science to scalable solutions. The Commission is proposing to double the budget of the research and innovation framework programme to €175 billion, as part of the EU’s next multiannual budget for 2028–34. A reinforced European Innovation Council is foreseen, and within it the planned launch of an ARPA-style approach (modelled on the US Advanced Research Projects Agency) that will pilot high-risk deep tech challenges, including prototyping and real-world application. The EIC will guide priorities for innovation. It is also set to increase its role in advancing dual-use research, an important driver for innovation, including in biotech. A proposed European Competitiveness Fund will focus on the deployment of innovation. It will include biotech as one of four strategic areas.  

China builds state-backed AI–biotech clusters. The recent Franco-German ‘Economic Agenda’ highlights the need for an ‘Executive Dialogue for AI in Industry’ and for joint R&D projects on sovereign AI, including in health. This could help the emergence of European companies and overcome policies that treat AI, quantum, biotech and health data as separate lanes.  

Lesson 4: De-risk globally, not alone 

A fourth lesson is to factor in the international dimension as an integral part of Europe’s industrial strategy. This means engaging especially with countries that have an important biopharmaceutical footprint, such as Australia, Canada, Japan, South Korea, Switzerland and the UK, to strengthen clinical trials, manufacturing resilience and regulatory convergence. Dialogue and cooperation with the US must continue. China locked in critical raw materials needed for EV production and leveraged technical standardization as a tool of industrial strategy and geopolitical influence. In biopharma, given that Europe’s financial resources are under pressure, achieving diversified global supply chains can be efficient and more resilient than costly onshoring. Europe needs a coherent multilateral economic security approach that complements measures implemented within the EU and extends to trusted partners. Part of this effort should be focused on coordinated supply-chain strategies that cover the various inputs needed in R&D and biomanufacturing (such as enzymes, reagents, cultures, and the raw materials essential for advanced therapies). It means pushing for leadership in standard setting, especially in synthetic biology and the AI–biotech nexus, where rules will shape both markets and ethics.  

Lesson 5: Europe should use its strengths before the window closes 

 The final and critical lesson from the EV story is not that biopharma will inevitably encounter the same fate. Europe has significant strengths, but it must act before the window of opportunity closes. The cost of delay here will mean being out of the race for clinical research, manufacturing and translating its scientific knowhow into approved medicines. Europe should factor current developments in the US into its strategy, given America’s reshoring drive and tariff threats that pose additional challenges to Europe’s objectives of building a strong biopharma sector. However, the attractiveness of its science ecosystem and support for research can offer potential opportunities. Europe’s publicly funded healthcare systems are key actors in the uptake of innovation, and industry, governments and healthcare decision-makers must align on a competitive model rooted in Europe’s strengths, balancing incentives for innovation with (geo)political realities and public-health priorities.  As Nobel laureate Philippe Aghion has urged, highlighting the tensions between competition and industrial policy, Europe to learn from the US and China and ‘find ways to reconcile industrial policy in areas like defence, climate, AI, biotech,’ evolving towards a clear and coherent strategy.¹⁰