The Biotech act, the European Health Data Space, the EU Life Science Strategy, the General Pharmaceutical Legislation. The list of regulations, policies, directives, and plans emanating from the EU institutions in Brussels, Strasbourg, and Luxembourg can be intimidating. Keeping track of it all is even more of a challenge.

The life science industry is among the most, if not the most, heavily regulated industries. After all, technologies relating to human health must be as well-regulated as the lab-developed treatments and substances intended for humans.  

Regulatory over-abundance

However, the fast flow of new regulations is overwhelming. Especially given that the spectrum of legislation impacting the industry extends beyond sector-specific regulations. Life science companies must also contend with broader EU laws, such as the EU’s AI Act, legislation on sustainability, finance, and the steady stream of other new or updated regulations coming their way. For example, the EU’s sustainability reporting and due diligence framework includes the Corporate Sustainability Reporting Directive (CSRD), the Taxonomy Regulation, the Sustainable Finance Disclosure Regulation (SFRD), the Corporate Sustainability Due Diligence Directive (CSDDD), the Eco-design for Sustainable Products Regulation (ESPR), the Industrial Emissions Directive (IED), the Emissions Trading System (ETS), and REACH (Regulation on chemicals).

Estimates by the Danish government show that average one-off costs for CSRD compliance will be EUR 365,000 with recurring costs of EUR 310,000 a year for companies in Denmark.

It has been estimated that the compliance cost of CSRD reporting will range from EUR 150,000 for non-listed businesses to EUR 1 million for listed companies. Estimates by the Danish government show that average one-off costs for CSRD compliance will be EUR 365,000 with recurring costs of EUR 310,000 a year for companies in Denmark. While ambitious environmental regulations could put EU industries in the driver’s seat in shaping the industry of the future, this can only materialize if it is combined with an equally ambitious program to support the growth of this new industry.

Widening innovation gap

Meanwhile, European SMEs and innovators that want to focus on bringing lifesaving treatments and health-improving solutions to the market increasingly find themselves drowning in bureaucratic reporting. On top of the regulatory burden, the EU is made up of a fragmented market, where risk capital is not as easily available, and with lower compensation levels for pharma companies.

It is no wonder that life science talent is drawn to the US and that the innovation gap in the industry continues to grow.

In contrast, the US has a much slower flow of regulations, seemingly unlimited risk capital, a unified market, and higher drug prices. It is no wonder that life science talent is drawn to the US and that the innovation gap in the industry continues to grow.

Who has a complete overview? 

Policy-making is inherently difficult because creating static rules in a dynamic and ever-changing world is bound to be a challenge. History is full of examples of well-intentioned laws that resulted in unforeseen consequences. The likelihood of unintended outcomes has only increased in today’s fast-paced world. Take, for example, the EU’s General Data Protection Regulation (GDPR), which was implemented in 2018. While its intention to safeguard personal data was noble, it reduced the profitability of small tech companies by more than 15%, as highlighted in the Draghi report.

No one questions the good intentions behind these regulations, but the combined effect of all the new rules across various sectors is difficult – if not impossible – to fully grasp.

No one questions the good intentions behind these regulations, but the combined effect of all the new rules across various sectors is difficult – if not impossible – to fully grasp. Who has the complete overview and who can predict the cumulative effect of all the new EU regulations, policies, directives, strategies, and plans on, say, a small Swedish life science company in Gothenburg or a medtech startup in Helsinki? The answer, unfortunately, is no one. The closest we have come to such an analysis is perhaps the Draghi report, whose findings should serve as a wake-up call.

Are we regulating ourselves into oblivion?

The EU faced criticism when it adopted the AI act earlier this year, rushing to regulate a nascent technology mainly driven by parties on the other side of the Atlantic. It brought to mind the saying: the US innovates, China imitates, and the EU regulates. 

During his presentation of the report on EU competitiveness, Mario Draghi stated succinctly: “With these regulations which we have given ourselves, we are actually self-defeating – we are killing our companies.”

The regulatory framework needs reforms to be simpler and more comprehensive for faster approvals and market access.

On a more positive note, the report also points out that solutions are within reach. Investments in research and development need to increase and be less fragmented. The regulatory framework needs reforms to be simpler and more comprehensive for faster approvals and market access. While it’s yet another piece of the regulatory puzzle, the forthcoming EHDS can actually give Europe a unique opportunity within data-driven innovation. I see this as an opportunity for the Nordics to take a leading role in the development of new treatments and technologies. 

Let’s hope Brussels can rethink the regulatory approach, heed the suggestions by Draghi, and make innovation for life a European success story. 

About the Author

Jessica Martinsson is the CEO and Director General of SwedenBIO, the national trade organization for life sciences in Sweden. SwedenBIO is a recurring columnist in NLS magazine. This column was originally published in NLS No 04 2024.