EU rules drive pharma backers to the US, says IDA Ireland chief

Europe’s regulations have become ‘too burdensome’ and could hinder innovation, argues Michael Lohan

The EU’s growing regulatory burden is putting off investors in life sciences and threatening innovation in Europe, Ireland’s investment chief has warned.

Michael Lohan, chief executive of IDA Ireland, the foreign direct investment promotion agency, told the Financial Times that new rules proposed by Brussels last year for the pharmaceuticals sector risk further widening the gap between the US and the EU when it comes to cutting-edge technologies.

While the US regulatory system “has become more agile, more responsive”, he said, “the European system, one could argue, has moved in the opposite direction”.

“Europe is probably becoming too burdensome from a regulatory and approval perspective ... and that could impact innovation,” Mr Lohan added.


Just a decade ago, Europe was “very strong” in attracting manufacturers of medical devices, he said, but now, “Europe has lost its position as being the location of choice for new medical devices”.

Ireland has been highly successful in recent decades in attracting foreign direct investment with low tax rates, a skilled workforce and expertise, as well as EU membership. Life sciences is a major sector within that. Most big pharmaceutical and medtech companies have operations in the State, which, among other things, produces some 40 per cent of the world’s contact lenses, as well as all the world’s Botox and a key ingredient used in Viagra.

Neale Richmond, junior minister at the Department of Enterprise, Trade and Employment, said life sciences are “a really important industry for Ireland” and its own authorities must “regulate faster to see the amazing drugs that are being made in Ireland being sold and used in Ireland as well”.

“We can’t simply be an export destination to the US,” he said.

But recent regulatory efforts from Brussels, including last year’s new proposals and 2017 legislation in medtech, have been a “source of frustration” for investors, said David Walsh, director of healthcare and life sciences strategy at consultancy KPMG Ireland.

“Globally in the life sciences sector, there is incredible competition and regulation is a key aspect of how competitive you are,” Mr Walsh said. “If there is a sense the European market is more complex, of course investors will seek to locate in the US or Asia Pacific region.

“I know some of our clients are seeing Europe – including Ireland – as less attractive,” he said, adding that more support was needed from regulators and other bodies to help firms navigate the regulatory complexity.

According to the European Federation of Pharmaceutical Industries and Associations, a Brussels-based lobby group, the US attracted a third more R&D investment than Europe in 2010. A decade later, that difference had reached more than two-thirds, the group said.

“Europe is losing R&D. Innovation is moving to the US,” Lars Fruergaard Jørgensen, president of Efpia and chief executive of Novo Nordisk, the EU’s most valuable drugmaker, told the FT. Companies will be even less likely to fund the search for new drugs in Europe if the payback is reduced, he said.

Under the commission’s proposed new pharma sector plans, which are still under discussion and have not yet become law, manufacturers would be required to market new drugs in all 27 EU countries within two years or have just eight, not 10 years, of valuable exclusivity before facing competition from generic manufacturers.

Brussels has argued that the new rules would drive down the price of medicines and make them more available. “What we’ve done is exactly to help investment in the industry, to help them keep their competitive edge,” said an EU commission spokesperson.

The IDA’s Mr Lohan warned of erecting new “barriers within the research and development cycle of new treatments” and possibly delaying market access.

“From a European perspective, we have to get the balance right,” he said – Copyright The Financial Times Limited 2024