Rainer Westermann of European life science venture capital lobby group, the Life Sciences Acceleration Alliance, lays out a policy roadmap for how innovative European pharma can continue to grow and thrive against a backdrop of trade uncertainty and precarious US-EU relations.
The US/EU trade deal was presented as necessary to avoid an escalating trade war and end uncertainty. However, many of the details remain vague, leaving substantial uncertainty about how the deal will be implemented. One thing is already clear, though – Europe’s innovative health sector is still in the crosshairs.
European-made pharmaceuticals, for instance, were historically exempt from US import taxes. But now they will be subjected to 15 percent tariffs, except for generics, which are being prioritised over innovative new medicines.
And tariffs aren’t the only threat. The Most Favored Nation Prescription Drug Pricing Executive Order signed by President Trump could further undermine pharmaceutical research, development, and manufacturing throughout the EU, ultimately harming patients on both sides of the Atlantic.
Given these evolving threats, it is high time for EU policymakers to take decisive action to reinvigorate Europe’s life sciences ecosystem and drive innovation.
A Deal Meant for Stability, Delivered with Ambiguity
On 27 July 2025, European Commission President Ursula von der Leyen and US President Donald Trump announced an agreement aimed at restoring “stability and predictability” in EU–US trade relations. According to the Commission, the deal capped tariffs at 15 percent across a broad set of industrial goods. For pharmaceuticals, long considered sacrosanct in trans-Atlantic trade, the deal introduced ambiguity: generics, active ingredients, and chemical precursors would benefit from reduced or zero tariffs, but branded and innovative medicines appeared exposed to the full tariffs.
The subsequent Joint Statement of 21 August reinforced these points but offered few specifics, instead pledging to “work ambitiously towards extending” exemptions. Meanwhile, Washington maintained its Section 232 “national security” investigation into pharmaceutical imports, leaving final implementation uncertain.
For an industry where predictability is the foundation of investment decisions, this lack of clarity is destabilising. Analysts estimate that a 15 percent tariff on innovative medicines could cost the global pharmaceutical industry between USD 13 and 19 billion annually. The EU, with its high dependence on exports, would bear a disproportionate share of that burden. This clearly will have a negative impact on life sciences innovation in Europe.
Why Life Sciences Innovation Is Uniquely Vulnerable
The pharmaceutical and biotechnology ecosystem is deeply global and interdependent. Finished products, active ingredients, intermediates, and advanced therapies flow freely across the Atlantic and beyond. Disrupting this system with tariffs risks not only financial damage, but also threatens patients’ access to lifesaving medicines, undermines clinical research networks, and strains supply chain resilience. Innovative medicines face enormous pricing pressure in the EU and innovation in life sciences historically has been undervalued.
Europe’s life sciences sector already struggles with structural disadvantages compared to the US. Europe enjoys an excellent academic base, but when EU-based venture capital firms step in to help biotech firms translate academic discoveries into tangible products, they often lack the depth of funding to support the many scientific innovations being created. Investments in later-stage clinical development and manufacturing scale-up is even more scarce.
Policy fragmentation, lengthy regulatory timelines, and limited capital markets compound the problem. An example is the Clinical Trials Regulation (CTR), which centralises submission via the EU portal and harmonises review, but rollout (and learning-curve / national ethics alignment) has created operational complexity and transitional delays. The lack of cross-border trials and access to data is another critical issue. This is likely going to increase time to first-in-human and pilot trial costs for startups. Early-stage investors dislike uncertainty around how long local approvals and site start-ups take.
A shock such as trans-Atlantic tariffs could widen the innovation gap at precisely the moment Europe needs to close it. Mario Draghi has already indicated his unease.
Industry associations across the continent have also voiced concern. EUCOPE has highlighted the risk that smaller and mid-sized innovators – already navigating a challenging policy environment – will be least able to absorb additional costs. EuropaBio has warned against the creation of new non-tariff barriers and called for urgent Commission engagement to safeguard supply chains. Analysts from GlobalData and others underline the fiscal risk of dismantling decades of tariff-free trade on medicines.
The Commission’s Efforts – Necessary but Insufficient
To its credit, the European Commission has not been idle. The recently launched EU Life Sciences Strategy lays out a framework for strengthening the innovation ecosystem, streamlining clinical research, and improving the implementation of the EU Health Technology Assessment Regulation.
Unfortunately, while this introduces joint clinical assessments at the EU level, member states still set prices and reimbursement. The joint assessments improve consistency but add another procedural step and more uncertainty about market access and timelines. The EU Commission has also emphasised industrial sovereignty and resilience in pharmaceuticals, recognising their strategic importance for Europe’s health and security.
Yet the trade deal underscores the need for more decisive and immediate measures. The EU needs to ease the regulatory burden, reduce non-tariff barriers, and find a way to incentivise innovation in life sciences to attain the stated objective – building a strong life sciences industry in the EU. Europe must demonstrate its resolve in defending and nurturing its most innovative industries.
A Policy Roadmap for Europe
If the EU is to grow and protect its life sciences sector in the face of new trans-Atlantic uncertainties, policymakers should pursue a set of clear, actionable measures:
- Secure explicit tariff carve-outs for all medicines and inputs. Generics, branded drugs, active ingredients, and advanced therapies must all be exempt from trade barriers to safeguard patient access and industrial competitiveness. At the same time, eliminate non-tariff barriers in the EU.
- Accelerate implementation of the EU Life Sciences Strategy. Streamlining research approvals, enhancing cross-border trial infrastructure, and changing price control measures – in part by ensuring innovative medicines are fairly valued in the HTA implementation – are urgent tasks, not long-term aspirations.
- Support late-stage development and scale-up. Establish EU-backed financing vehicles to bridge the capital gap between early science and commercial deployment, ensuring innovative therapies are developed and manufactured in Europe.
- Strengthen manufacturing resilience. Incentivise advanced therapy and biologics production within the EU to reduce dependence on volatile global supply chains.
- Ensure predictable incentives. Maintain strong frameworks for intellectual property, data exclusivity, and market entry rewards, resisting the erosion of innovation safeguards.
- Foster rare disease and SME innovation. Introduce targeted incentives for orphan drug development and simplify access to EU-level funding for young innovative companies.
A Moment of Decision
The US–EU trade deal has revealed, in stark terms, how vulnerable Europe’s life sciences sector is to external shocks and internal indecision. Ambiguity is itself a policy risk. As the Life Sciences Acceleration Alliance, we cannot stress enough how corrosive uncertainty is to investors, for companies planning clinical development, and for patients awaiting breakthrough therapies.
Europe has the scientific excellence, the industrial base, and the regulatory expertise to remain a global leader in life sciences innovation. But it must match these assets with political resolve and economic clarity. Securing tariff exemptions is the first step. Accelerating domestic reform and investment is the second. Together, they will determine whether Europe protects and grows its life sciences sector – or sees it eroded by external pressures and internal inertia.
For policymakers in Brussels and national capitals, the choice is clear. The time to act is now.
Sources
- European Commission (2025) – EU–US Trade Deal: Joint Statement and Press Release
- Reuters (2025) – EU–US trade deal could add up to $19 billion in pharma industry costs, analysts say
- GlobalData (2025) – US–EU trade deal puts pharmaceutical industry at substantial fiscal risk
