Source: EURLEX
Language: en
Format: md

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| European flag | Official Journal  of the European Union | EN  C series |

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|  | C/2024/2098 | 26.3.2024 |

Opinion of the European Economic and Social Committee on Introducing a European Innovation Stress Test

(Exploratory opinion)

(C/2024/2098)

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| Rapporteur: | Olivier JORIS |

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| Referral | Presidency of the European Council, 10.7.2023 |
| Legal basis | Article 304 of the Treaty on the Functioning of the European Union |
| Section responsible | Single Market, Production and Consumption |
| Adopted in section | 20.12.2023 |
| Adopted at plenary | 17.1.2024 |
| Plenary session No | 584 |
| Outcome of vote  (for/against/abstentions) | 223/0/2 |

1.   Conclusions and recommendations

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|  | 1.1. | Innovation will be critical for achieving Europe’s green and digital transitions towards sustainability, for strengthening Europe’s Open Strategic Autonomy and for delivering on the UN’s Sustainable Development Goals. As such, it should be a key strategic priority for the 2024-2029 European Commission. |

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|  | 1.2. | Framework conditions have a big impact on innovation. Principal framework conditions which support innovation include:  |  |  | | --- | --- | | — | knowledge creation and dissemination; |  |  |  | | --- | --- | | — | skills and competencies; |  |  |  | | --- | --- | | — | macro-political and economic factors; |  |  |  | | --- | --- | | — | social attitudes; |  |  |  | | --- | --- | | — | markets and demand; |  |  |  | | --- | --- | | — | public finance — fiscal support; |  |  |  | | --- | --- | | — | scale and nature of capital markets. | |

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|  | 1.3. | The European Union presents both strengths and weaknesses for innovation. Europe needs policies and legislation which overcome these weaknesses. It needs to build on its innovation strengths by developing policies which support and do not unintentionally stifle innovation. |

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|  | 1.4. | Innovation can be fostered from early childhood through lifelong learning as a cornerstone of our future prosperity and progress, it will be important to actively foster a mindset of curiosity, problem-solving and resilience, including through STEM education. Collaboration between educational institutions, businesses and SMEs should be encouraged to demonstrate that innovation is attainable. |

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|  | 1.5. | The EESC welcomes the initiative by the Belgian Presidency to evaluate introduction of a European Innovation Stress Test which would stimulate and help to retain innovation in the EU and is strongly convinced of its importance. |

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|  | 1.6. | Building on existing effective EU/national research and innovation policies, the introduction and systematic use of a European Innovation Stress Test should provide valuable & comprehensive guidance for new EU policy initiatives. This should help ensure that framework conditions make the EU the most attractive region for innovation. |

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|  | 1.7. | Systematic use of a European Innovation Stress test should ensure that new policies and legislation contribute to routine implementation and use of existing policy initiatives, including innovation deals and the Better Regulation Toolbox #20-23, in accordance with the Innovation Principle. |

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|  | 1.8. | The EESC proposes that the Innovation Stress Test should include the following ten key requirements, against which each new legislation and policy initiative should be evaluated.  Does it:   |  |  | | --- | --- | | a) | protect consumers and the environment, as well as recognise the need for innovation to enable the EU’s green and digital transitions towards sustainability, help to create more and better jobs for the benefit of society and stimulate the economy? (Yes) |  |  |  | | --- | --- | | b) | ensure joined-up policymaking so that existing and future policies are employed in ways which create investor confidence and stimulate innovation, but do not create barriers for continued and new innovation investment in the EU? (Yes) |  |  |  | | --- | --- | | c) | ensure clear understanding by innovators and investors? (Yes) |  |  |  | | --- | --- | | d) | comply with use of the European Commission’s Better Regulation toolbox? (Yes) |  |  |  | | --- | --- | | e) | actively include consultation and involvement of innovators and investors across the full spectrum, from start-ups to international organisations, to ensure policies do not or will not unintentionally undermine investor confidence to invest or keep investing in EU innovation? (Yes) |  |  |  | | --- | --- | | f) | recognise legitimate concerns regarding potential conflicts of interest and provide transparency on these issues for all involved in the process, including policymakers, public and private sectors and civil society? (Yes) |  |  |  | | --- | --- | | g) | take account of the best available and most up-to-date weight of scientific evidence? (Yes) |  |  |  | | --- | --- | | h) | negatively impact availability of skills, human capital and education needed for innovation, research and development? (No) |  |  |  | | --- | --- | | i) | result in actions which could generate a gender imbalance? (No) |  |  |  | | --- | --- | | j) | conflict with existing or future tax incentives for innovation or research and development in Europe? (No) |   If answers to these questions are not fully consistent with those given above, explanation or mitigation should be required. |

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|  | 1.9. | The EESC recommends that the current and next European Commission should introduce a new Innovation Stress Test. It should be systematically used for evaluating each new legislation and policy initiative. The European Commission should monitor both its implementation and impact and reflect on its use for evaluating existing legislation. There may also be value in EU Member States doing likewise. |

2.   General comments

2.1.   
Innovation and why it is so important

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|  | 2.1.1. | This exploratory opinion was requested by the upcoming Belgian Presidency of the Council. It is complemented by supplementary opinion CCMI/219 on the European Innovation Stress Test: the example of the pharmaceutical sector. Due to the strategic importance of innovation for society (including quality of life and the ageing population), long-term competitiveness, jobs, growth and both the green and digital transitions, its conclusions and recommendations should be taken into account in the preparation of the Strategic Agenda for the European Commission 2024-2029. |

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|  | 2.1.2. | This opinion sets out how the introduction of a European Innovation Stress Test could be used to stimulate and retain innovation in the EU. To make this new test both practical and relevant, it addresses the most important considerations for policy initiatives which could influence innovation investment decisions in the EU. |

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|  | 2.1.3. | In this context, innovation primarily encompasses new and improved products, services, production processes and ways of organising and doing business, including both radical and incremental changes, using all forms of tangible, technological and intellectual advances. |

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|  | 2.1.4. | Framework conditions for innovation are important for private and public sector organisations of all sizes, from individual innovators, universities, spin-offs, start-ups, small and medium-sized enterprises (SMEs), and larger national and international organisations, across the full spectrum, from traditional low-tech sectors to fast-growth high-tech sectors. |

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|  | 2.1.5. | Innovation requires moving discoveries forward to the market and incorporating them into new products and services, with the expectation of a return on investment. |

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|  | 2.1.6. | Innovation is one of the principal factors in improving productivity, which is a key driver for growth, the creation of more and better jobs, high living standards and prosperity. In this context, it will be important to promote innovation at regional and local level, taking into account potential geographical imbalances. |

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|  | 2.1.7. | Innovation will be critical for achieving Europe’s green and digital transitions towards sustainability, for strengthening Europe’s Open Strategic Autonomy and EU core values and for delivering on the UN's Sustainable Development Goals. |

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|  | 2.1.8. | In the commercial context, innovation is primarily undertaken and financed by the private sector. It flourishes when public policies and hence societies create conditions in which managers and entrepreneurs are encouraged to take business risks, create new sources of wealth and employment and find new ways of meeting previously unfulfilled needs. |

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|  | 2.1.9. | The EESC stresses the high value of timely engagement by social partners when developing policies and legislation which could impact innovation. |

2.2.   
A brief overview of existing EU innovation policies and tools

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|  | 2.2.1. | Public authorities play an important role in creating a business environment which is supportive of innovation. Specifically, they establish ‘framework conditions’ which shape the scale and nature of innovation within societies. They form part of the overall business environment and create incentives (or obstacles) for innovators and organisations to invest in innovation. |

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|  | 2.2.2. | Principal innovation framework conditions include:  |  |  | | --- | --- | | — | knowledge creation and dissemination — investment in knowledge and innovation; the scale, nature and effectiveness of the ‘research base’; dissemination through value chains; access to technologies and infrastructure; |  |  |  | | --- | --- | | — | skills and competencies — availability of a skilled and educated workforce, including the ability to retain and attract new and critical expertise and skills form third countries; |  |  |  | | --- | --- | | — | macro-political and economic factors — predictability, the rule of law, property rights, fiscal and monetary policies; |  |  |  | | --- | --- | | — | social attitudes — towards potential and perceived risks, risk-taking, risk management, enterprise and profits, new technologies (fear or acceptance), the role and nature of regulation; |  |  |  | | --- | --- | | — | markets and demand — size, nature, confidence and trust, new opportunities, demanding customers, competitive intensity, barriers to entry, and use of best technologies; |  |  |  | | --- | --- | | — | public finance — fiscal support; the availability of public innovation funding, tax incentives for innovation and levels of retained earnings; |  |  |  | | --- | --- | | — | scale and nature of capital markets. | |

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|  | 2.2.3. | Increasingly, policymakers are also focusing on the availability of certain advanced forms of infrastructure that support enabling technologies, such as digital information technologies. |

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|  | 2.2.4. | Regulation and policies in general — especially how societies react to and manage potential risks from novel technologies — play a critical role in shaping framework conditions for innovation [(1)](#ntr1-C_202402098EN.000101-E0001). The risks associated with not innovating can sometimes be forgotten, but they also play a critical role in shaping framework conditions. As a result, regulation and policies can either stimulate or impede innovation. |

2.3.   
Strengths and weaknesses of existing EU policies and tools

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|  | 2.3.1. | The EU’s framework conditions for innovation have major strengths, most notably the scale of the single market, the strength of Europe’s public and private scientific research base, its advanced infrastructure, and the human and financial capital of its small and large-scale businesses. |

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|  | 2.3.2. | The EU institutions have adopted a series of policies implementing Article 173 of the Treaty on the Functioning of the European Union (TFUE), which addresses the competitiveness of EU industry, as part of the flagship Innovation Union initiative. |

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|  | 2.3.3. | Dedicated institutions and programmes have been created to foster R&D. Horizon Europe is the largest research funding programme in the world, supported by other initiatives (such as the European Institute of Innovation and Technology (EIT), the European Innovation Council (EIC) and by bodies dedicated to advising on innovation-related decision-making (such as the Research, Innovation and Science Expert Group (RISE) and the Expert Group on the Economic and Societal Impact of Research and Innovation (ESIR)). |

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|  | 2.3.4. | Innovation-friendly policy instruments include Innovation Deals [(2)](#ntr2-C_202402098EN.000101-E0002), Better Regulation toolbox tools #20-23 [(3)](#ntr3-C_202402098EN.000101-E0003) and the Innovation Principle [(4)](#ntr4-C_202402098EN.000101-E0004). The systematic use and monitoring of the Innovation Stress Test should support and contribute to implementation of these existing policy instruments. |

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|  | 2.3.5. | The New European Innovation Agenda [(5)](#ntr5-C_202402098EN.000101-E0005), [(6)](#ntr6-C_202402098EN.000101-E0006) aims to position the EU at the forefront of innovation against the backdrop of the post-COVID-19 recovery, the European Green Deal and the conflict in Ukraine. The European Commission seeks to leverage regulatory experimentation (‘sandboxes’), regional ecosystems, human talent and access to finance. These goals were relaunched in 2023 under the Green Deal Industrial Plan [(7)](#ntr7-C_202402098EN.000101-E0007). Since 2021, the EU has also pursued the Digital Decade policy [(8)](#ntr8-C_202402098EN.000101-E0008). |

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|  | 2.3.6. | Despite these important commitments and policy initiatives which set out to support European innovation, the EU’s innovation performance has improved at a lower rate than key global competitors such as the US and China and there is a worrying trend of losing ground against them. |

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|  | 2.3.7. | The EU’s overall approach also exhibits a number of significant and worrying weaknesses. It lacks coherence and consistency over the long term. It does not fully reflect the strengths and structural weaknesses of the EU’s economy. It fails to fully recognise the impact of the regulatory framework, including implementation mechanisms, on shaping incentives to invest in innovation. It pays insufficient attention to the importance of large and globally active companies as key investors in innovation which need to decide where in the world to invest in innovation, and it places insufficient emphasis on supporting investment in incremental innovation. |

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|  | 2.3.8. | Despite strengths in European education and research, Europe has a track record of failing to capitalise on these skills and knowledge in an increasingly competitive global economy. Innovation can be fostered from early childhood through lifelong learning. STEM education and actively encouraging hands-on problem-solving and creativity within curricula could further support innovation. Encouraging collaboration between educational institutions, businesses and SMEs would help to demonstrate that innovation is attainable. |

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|  | 2.3.9. | There are increasing concerns, especially following publication of the August 2022 US Inflation Reduction Act [(9)](#ntr9-C_202402098EN.000101-E0009), that even leading European companies may be electing to invest in innovation and lay down foundations for future jobs and expertise in other parts of the world. Europe's response is critical in this respect. |

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|  | 2.3.10. | Overall, if the EU’s innovation performance does not improve sufficiently and it does not become a more attractive location for investment, its long-term prosperity and prospects for achieving the green and digital transitions are under serious threat. |

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|  | 2.3.11. | There are also significant structural and procedural weaknesses:  |  |  | | --- | --- | | — | the speed of technological innovation now often exceeds the speed of regulation in the EU. For that reason, EU policies which set out to prescribe how innovation should be delivered and which technologies may or may not be employed, can be outdated by the time they are implemented. This cycle of regulation chasing innovation creates uncertainty, especially for SMEs, and undermines investor confidence; |  |  |  | | --- | --- | | — | progressive implementation of novel regulatory approaches to managing potential and perceived technological risks creates systemic uncertainty and erodes investor confidence; |  |  |  | | --- | --- | | — | knowledge creation and dissemination — despite encouragement from the European Commission, the EU as a whole has failed to achieve the target of spending 3 % of GDP on R&D by 2020 [(10)](#ntr10-C_202402098EN.000101-E0010); |  |  |  | | --- | --- | | — | financial weaknesses — EU capital markets are fragmented and lack relative scale and sophistication when compared with the US. | |

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|  | 2.3.12. | These structural and procedural weaknesses are exacerbated by additional policy, legislative and regulatory failings:  |  |  | | --- | --- | | — | there is sometimes a lack of policy coherence and integration at EU level and across all levels of government (EU, national, regional); |  |  |  | | --- | --- | | — | new and controversial approaches to regulating technological risks can undermine the availability of upstream technologies and of materials as well as the confidence of potential investors in innovation. Regulations which are too prescriptive can exacerbate this problem; |  |  |  | | --- | --- | | — | the European Commission has developed better regulation policies and tools, but these are at times overlooked. There is no existing governance in place ensuring systematic monitoring and implementation of these tools; |  |  |  | | --- | --- | | — | there is a lack of clarity regarding the role of scientific advice for policymaking. |   It is important to note that in March 2023 the European Commission introduced a competitiveness check [(11)](#ntr11-C_202402098EN.000101-E0011) to address many of these concerns. |

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|  | 2.3.13. | The upcoming Belgian Presidency of the EU Council offers an important opportunity to steer the next European Commission to build on these strengths, to carefully analyse all identified weaknesses and to set out a roadmap to improve the EU’s innovation policy landscape. |

2.4.   
Introduction of a stress test

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|  | 2.4.1. | The EESC welcomes the initiative by the Belgian Presidency to evaluate introduction of a European Innovation Stress Test, and it is strongly convinced of its importance. |

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|  | 2.4.2. | If framework conditions are not sufficiently attractive for key players in the innovation value chain, innovation will either not happen, will fail or will relocate to other regions of the world. When considering new EU policy initiatives, it will therefore be important to understand and consider how decisions are made whether or not to invest in innovation, and which are the most important factors in encouraging investors to invest here in the EU. Framework conditions also impact Europe’s ability to train, retain and attract critical expertise and skills. |

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|  | 2.4.3. | Building on existing effective EU/national research and innovation policies, the introduction and systematic use of a European Innovation Stress Test should provide valuable comprehensive guidance for new EU policy initiatives, to help ensure framework conditions make the EU the most attractive region for innovation. The Innovation Stress Test should include ten key requirements, against which each new legislation and policy initiative should be evaluated. Does it:  |  |  | | --- | --- | | a) | protect consumers and the environment, as well as recognise the need for innovation to enable the EU’s green and digital transitions towards sustainability, help to create more and better jobs for the benefit of society and stimulate the economy? (Yes) |  |  |  | | --- | --- | | b) | ensure joined-up policymaking so that existing and future policies are employed in ways which create investor confidence and stimulate innovation, but do not create barriers for continued and new innovation investment in the EU? (Yes) |  |  |  | | --- | --- | | c) | ensure clear understanding by innovators and investors? (Yes) |  |  |  | | --- | --- | | d) | comply with use of the European Commission’s Better Regulation toolbox [(12)](#ntr12-C_202402098EN.000101-E0012)? (Yes) |  |  |  | | --- | --- | | e) | actively include consultation and involvement of innovators and investors, across the full spectrum, from start-ups to international organisations, to ensure policies do not or will not unintentionally undermine investor confidence to invest or keep investing in EU innovation? (Yes) |  |  |  | | --- | --- | | f) | recognise legitimate concerns regarding potential conflicts of interest and provide transparency on these issues for all involved in the process, including policymakers, public and private sectors, and civil society? (Yes) |  |  |  | | --- | --- | | g) | take account of the best available and most up-to-date weight of scientific evidence? (Yes) |  |  |  | | --- | --- | | h) | negatively impact availability of skills, human capital and education needed for innovation, research and development? (No) |  |  |  | | --- | --- | | i) | result in actions which could generate a gender imbalance? (No) |  |  |  | | --- | --- | | j) | conflict with existing or future tax incentives for innovation or research and development in Europe? (No) |   If answers to these questions are not fully consistent with those given above, explanation or mitigation should be required. |

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|  | 2.4.4. | The EESC recommends that the current and next European Commission should introduce a new Innovation Stress Test. It should be systematically used for evaluating each new legislation and policy initiative. The European Commission should monitor both its implementation and impact and reflect on its use for evaluating existing legislation. There may also be value in EU Member States doing likewise. |

Brussels, 17 January 2024.

The President of the European Economic and Social Committee

Olivier RÖPKE

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ANNEX

The annex to this document (the Supplementary Opinion of the Consultative Commission on Industrial Change — CCMI/219 — European Innovation Stress Test: the example of the pharmaceutical sector — EESC-2023-03784-00-01-AS-TRA) can be found on the following pages:

Opinion of the Consultative Commission on Industrial Change on a European Innovation Stress Test for an innovative and forward-looking industrial policy: the example of the pharmaceutical sector

(supplementary opinion to INT/1045)

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| Rapporteur: | Florian MARIN |
| Co-rapporteur: | Antonello PEZZINI |

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| Bureau decision | 19.9.2023 |
| Legal basis | Rule 56(1) of the Rules of Procedure |
|  | Supplementary opinion |
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| Section responsible | Consultative Commission on Industrial Change (CCMI) |
| Adopted in CCMI | 6.12.2023 |
| Outcome of vote  (for/against/abstentions) | 25/0/0 |

1.   Conclusions and recommendations

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|  | 1.1. | The Belgian Presidency of the Council of the EU has asked the EESC to draft an exploratory opinion [(1)](#ntr1-C_202402098EN.000702-E0001) on the practicality and significance of introducing a European Innovation Stress Test. As a complement to the exploratory opinion, this supplementary opinion should consider whether the introduction and systematic use of a European Innovation Stress Test is relevant for the future of the pharmaceutical industry. In this regard, the following aspects should be taken into account:  |  |  | | --- | --- | | — | striking a balance between predictability of the regulatory environment and adaptability to scientific and technological progress; |  |  |  | | --- | --- | | — | a balanced intellectual property system that stimulates innovation and guarantees competition in a timely manner; |  |  |  | | --- | --- | | — | synergies between the pharmaceutical industry and related industries, such as the IT or chemical industries; |  |  |  | | --- | --- | | — | interoperable and open data access infrastructure for relevant stakeholders; |  |  |  | | --- | --- | | — | transparency concerning product price structures and research and development (R&D) costs; |  |  |  | | --- | --- | | — | improving ethics and trust; |  |  |  | | --- | --- | | — | covering all the relevant niche areas for the market and society, with a close focus on future health risks and challenges; |  |  |  | | --- | --- | | — | synergy between pharmaceutical innovation and social innovation; |  |  |  | | --- | --- | | — | common definitions, indicators, rules and a mutual recognition system of public authorities at EU level; |  |  |  | | --- | --- | | — | a balanced supply chain that is efficient, competitive and tech-forward; |  |  |  | | --- | --- | | — | strengthening public and private partnerships, product development partnerships, cross-border partnerships and health diplomacy; |  |  |  | | --- | --- | | — | better coordination and coherence between various programmes and financing sources and diversifying the funding sources while also building a single access point for accessing investment opportunities; |  |  |  | | --- | --- | | — | revision of the competition principle to make the innovation framework fairer and more inclusive. | |

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|  | 1.2. | Medicine is not a consumer good that can be measured in purely economic terms in the pharmaceutical industry. Innovation is more than a simple improvement of a product or process: innovation is life. Medicine is an essential public good and a core element of health policy. Health is a fundamental right and a critical investment in the well-being, economic development and cohesiveness of society. |

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|  | 1.3. | The EESC proposes that social dialogue, collective bargaining, working conditions, decent wages, career predictability and access to opportunities be part of the innovation framework in order for the pharmaceutical industry to be competitive. More women and young people, as well as a focus on gender balance, are needed in the sector. |

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|  | 1.4. | The EESC highlights the need increasing the targeted and flexible involvement of the public sector in building support infrastructure for innovation and facilitating access to data and research results. Creating a Trans-European Pharma Network could help build a system to transfer innovation between the Member States and companies of all sizes. |

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|  | 1.5. | The EESC believes that innovation in the pharmaceutical industry should integrate social conditionalities and the principles of corporate social responsibility (CSR) when launching new products, and that it should not be exclusively market-oriented. Access to safe, affordable and quality pharmaceutical products is a cross-cutting need, both for the pharmaceutical industry and for society. |

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|  | 1.6. | Building an innovation system which promotes all kinds of dialogue and the involvement of civil society is important for attracting talent and investment, and could even be achieved through an EU participative health and pharma foresight exercise, consolidating the synergy between health needs and the fruits of innovation in pharmaceuticals in a forward-looking industrial policy. |

2.   General comments

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|  | 2.1. | In 2022, the pharmaceutical industry benefitted from investments of EUR 44 500 million in R&D. The number of employees in the industry was 865 000, with 130 000 directly involved in research activities. The EU Industrial R&D Investment Scoreboard showed that health industries invested EUR 235,3 billion in research in 2021, accounting for 21,5 % of total business R&D expenditure worldwide. In 2022, the trade balance had a positive value of EUR 175,143 million [(2)](#ntr2-C_202402098EN.000702-E0002). In the breakdown of sales distribution in 2017-2022, the EU covered only 16,4 %, compared to the USA, which covered 64,4 %. In 2022, the EU covered 22,4 % of the global pharmaceutical market. |

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|  | 2.2. | The stress test process on the innovation of an EU industrial sector should be a dynamic exercise aimed at using an analysis of the strengths and weaknesses at European level to ensure a common prospective vision, in order to increase the efficiency of the drug industry with transnational value. Stress testing is the process of assessing the ability of a critical infrastructure to maintain a certain level of functionality under unfavourable conditions. |

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|  | 2.3. | A dynamic stress test of innovation in the European pharmaceutical industry cannot ignore resilient entrepreneurial capabilities that can deal with increases in demand volatility; increasingly stringent needs for service, quality, safety and sustainability; bottlenecks in production and logistics activities; and increases in the frequency of risk factors, such as supplier crises, trade wars or cybersecurity attacks. |

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|  | 2.4. | The pharmaceutical industry is a highly complex system. In a transnational supply chain process, it is essential to support the flexibility and potential propensity for innovation of SMEs, capable of bringing out spaces for specialisation in a chain of values, linked to the opportunities for large companies to overcome the current, often defensive and national, corporate aggregation. |

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|  | 2.5. | The EU pharmaceutical industry faces manifold challenges in the fiercely competitive global landscape, which should be considered in any innovation stress test, emphasising the importance of international standards. These challenges include, among others, intellectual property protection, regulatory hurdles, global supply chain vulnerabilities and global competition from generic drugs and biosimilars. |

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|  | 2.6. | The pharmaceutical sector structure is oligopolistic with a fringe of companies acting in different submarkets or therapeutic areas. It effectively works as a set of legal or de facto monopolies on most medicines, with unavoidable implications in terms of market power: prices, particularly for new medicines, are associated with wide margins over opaque costs; frequent mergers and acquisitions lead to further market concentration; production choice and the value chain are optimised to extract profits for the top multinational corporations. This market structure contributes to high drug prices which, in turn, creates affordability problems for patients and the sustainability of healthcare systems. The EESC believes that the relationship between quality and price should be focused on helping consumers and not simply increasing profits for companies. |

3.   Challenges

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|  | 3.1. | Legal uncertainty is one of the barriers to innovation in some Member States. It is crucial to have a clear regulatory framework that ensures a sustainable balance between predictability of the regulatory environment and adaptability to scientific and technological progress, while also encouraging innovation. |

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|  | 3.2. | Intellectual property protection cannot be differentiated based on the size of a company, however, regulations should be introduced to prevent the transfer or purchase of innovative pharmaceutical SMEs outside the EU if they have benefited from public support. This condition could be included in contracts regarding public support. |

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|  | 3.3. | Specific attention needs to be given to accurately monitoring the innovation process, not only at industry level but also in related industries. Interoperable and open data access infrastructure and the efficient implementation of the European health data space are crucial for boosting innovation. |

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|  | 3.4. | Ethical guidelines need to be developed at EU level and included in the various standards used in the industry, especially when there are talks on involving the patients. Repurposing well-established medicines as both a non-profit and a commercial activity should be largely supported, as it provides an affordable option for innovation in areas where innovative companies have no interest to invest. Over-treatment, under-treatment, reducing waste and unethical commercial practices should be dealt with in the innovation system. In general, companies and investors must operate and act according to the principles of CSR. |

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|  | 3.5. | The innovation system in the pharmaceutical sector needs to focus on rebuilding trust, not only between financial contributors and pharmaceutical companies, but also other stakeholders, such as civil society and consumers. Better collaborative, two-way relationships with patients, customers, suppliers and business partners are important. Reducing market fragmentation in the EU is important for building resilience and competitivity for the industry. |

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|  | 3.6. | The innovation system should be competitive, fair, more open and inclusive, and create the conditions for companies of all sizes to build a resilient industry. The system should be linked with related industries, such as the chemical industry. An efficient innovation system calls for a multilevel and multistakeholder approach, a balance between creative innovation and market innovation, and strong cooperation between the public and private sectors. Access to critical materials for innovation and production should be a constant concern. |

4.   Competitivity

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|  | 4.1. | Artificial intelligence, high-performance computing, Big Data, personalised medicine, precision medicine, blockchain, digital therapeutics and extended reality have contributed to the rapid change of the pharmaceutical industry and have allowed new competitors to enter the market. The acceleration of digitalisation in the sector should not affect the role and the influence of humans in the research process — final decisions should remain human-centred. |

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|  | 4.2. | The EESC believes that concrete results should be achieved to increase transparency in R&D costs and pricing. The issue of transparency should also be taken into account for public purchasing agreements. |

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|  | 4.3. | A more ambitious approach to building public research infrastructures managed among Member States that focuses on research in medicine to tackle the research niches which are not covered and facilitate access to innovation is needed alongside developing a non-profit pharmaceutical company for public research. Both basic and clinical research need to be taken into consideration for a fully innovative system in the pharmaceutical industry and for building a trans-European innovation system. More innovative companies managed by women are needed in order to cover all niche markets. More young and female researchers are also clearly needed. |

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|  | 4.4. | Boosting innovation and having the same rules for all the actors of the industry calls for the same definitions based on the same criteria EU-wide; a common recognition of new products as well as a mutual recognition system of the public authorities at the EU level are important for reducing the costs associated with different clinical trials and obtaining agreements between different agencies. A common set of economic, social and environmental indicators should be established and used for ranking the importance and effectiveness of innovation in the industry alongside a common approach concerning state aid. Reducing the time for drug authorisation is clearly needed. |

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|  | 4.5. | The EESC believes that an innovation transfer system between Member States is needed. Leaving no one behind means that a cross-cutting, formal and recognised dialogue with all relevant stakeholders is important for assuring a clear synergy between innovation results and health needs. The territoriality of the innovation system is important and should be taken into account when the investments in the industry are being delivered. |

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|  | 4.6. | Innovation in the industry also requires new business models, sustainable production processes, circular economy, competitive and balanced supply chains and protection of human rights taking into account different health systems of the Member States. Creating a balanced supply chain that is efficient, competitive and tech-forward will be more suitable for attracting capital from investors. The EESC recommends supporting European pharmaceutical manufacturing capabilities for the entire supply chain. |

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|  | 4.7. | Having different levels of development between countries or different levels of income between people calls for administered or differential pricing for the same quality of the product as a cross-cutting concern in the innovation system of the pharmaceutical industry, especially to ensure that life and human rights are protected. |

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|  | 4.8. | A common approach on contracting and procurement among Member States is needed to increase bargaining power but also to guarantee a market for new products, which has a direct impact on motivating the innovation process and reducing transaction costs and creates more stability and predictability concerning EU internal market demand. |

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|  | 4.9. | More targeted and adapted fiscal and financial incentives are needed alongside a common approach at the EU level in this field that goes far beyond EU funds. Boosting public and private partnerships or product development partnerships with the involvement of the research institutes, universities, public institutions, spin-offs and start-ups calls for a revision of the legislation at the EU level. IMI2 (Innovative Medicines Initiative) and IHI (Innovative Health Initiative) are examples in this regard. Creating an EU-wide health research and innovation ecosystem that facilitates the translation of scientific knowledge into tangible innovations should be a cross-cutting concern. |

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|  | 4.10. | A revision of the competition principle with the protection of the competitivity of the industry is urgently needed, alongside maximising the contribution to economic growth, public health, good quality jobs and trade. Innovative small firms and new entrants have significant difficulties meeting strict approval requirements, while big firms are more adapted in this regard. The long-term effect of mergers on innovation should be taken into account. |

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|  | 4.11. | A stakeholder platform for innovation in the EU pharmaceutical industry that involves civil society, various scientific disciplines, universities, research institutes, doctors and health system professionals should be built, in order to share innovation and best practices and to build partnerships, including cross-border partnerships. Initiatives like the European Institute of Innovation and Technology should be further consolidated, as should partnerships with civil society. |

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|  | 4.12. | A framework should be created to enable Member States to provide support for EU-based manufacturing facilities and for capacity building. Under the rules set out for State aid and IPCEI (important projects of common European interest) projects, only research, development and innovation projects using novel technologies can be financed, under the condition that they cannot be financed by the private sector alone. To ensure the inclusion of the European generic, biosimilar, and value-added medicines industry, it is necessary to broaden the interpretation of innovation within the IPCEI framework. Innovation should encompass a wider range of projects that contribute to Europe's strategic autonomy in health. |

5.   Funding

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|  | 5.1. | The EU is financing R&D and innovation through many instruments, such as Horizon Europe, the RRF, cohesion policy, the European Defence Fund and InvestEU. A single access point and more coordination between various financing instruments are needed, as is a sector-specific call for proposals dedicated exclusively to the pharmaceutical industry. |

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|  | 5.2. | Crowdfunding, private equity, credits, grants, venture capital and collateral guarantees, blended finance and financial instruments should be used to finance innovation in the pharmaceutical industry. More synergies with the capital market should be created to attract capital and facilitate access to finance. |

6.   Environmental aspects

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|  | 6.1. | The EU innovation system in the pharmaceutical industry should be guided by economic, environmental and social aspects with the same weight and needs, while at the same time ensuring competitivity and resilience through improved products, services and production processes. |

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|  | 6.2. | Innovation in the pharmaceutical industry is important for directly contributing to achieving a climate-neutral industry by taking into consideration the circular economy action plan, the SDGs, the chemicals strategy for sustainability, the Green Deal, the Pharmaceutical Strategy for Europe and the EU health action plan. |

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|  | 6.3. | Health diplomacy should integrate innovation in a cross-cutting manner. Sharing of best practices and dissemination of research results in the interest of the EU and should be integrated in the trade agreement to create opportunities, increase the influence of the EU globally and help to create international standards for the industry. |

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|  | 6.4. | Long-term care, mental health care, cancer treatment and building resilience to new health risks are important societal needs and should be an ongoing concern, taking into account the pressure that biodiversity degradation will put on the pharmaceutical industry. Long-term investments for these issues are far more important for societal progress than short-term profits. |

7.   Social aspects

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|  | 7.1. | The lack of focus on innovation and R&D in certain less profitable areas is a behaviour that needs to be tackled, with the involvement and support of public institutions and civil society. Launching products should take into account social conditionalities when public funds for research programmes or other State aids are used. |

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|  | 7.2. | Human resources are hugely important for boosting innovation in the pharmaceutical industry, with researchers at the forefront of science. Social dialogue and collective bargaining should be used to consolidate partnerships with social partners and to also attract talent from outside the EU. The ongoing improvement of working conditions, decent wages, career predictability and development opportunities should be a constant priority for making the sector more attractive. |

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|  | 7.3. | The EESC proposes creating adequate training, through a European platform, for acquiring and exchanging necessary skills on drugs, underlining the crucial importance of a strong and resilient European R&D infrastructure, high quality jobs, decent wages, good professional training and the attractiveness of the professions in the sector in terms of career development. |

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|  | 7.4. | Aligning the priorities of the pharmaceutical industry innovation systems with societal priorities and integrating them into public policies should be a constant concern. Access to medicine, including basic medicine, is still a problem in many parts of the world, creating a risk at global level. Synergies between pharmaceutical innovation and social innovation should be taken into account. Access to research results is an ongoing problem for stakeholders, and concrete solutions are needed in this regard. Price and overregulation are still two of the most significant barriers in access to medicine, especially for vulnerable groups. In addition, the privatisation of the health sector is negatively affecting access to medicine and medical treatments. |

Brussels, 6 December 2023.

The President of the Consultative Commission on Industrial Change

Pietro Francesco DE LOTTO

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[(1)](#ntc1-C_202402098EN.000702-E0001)  Opinion of the Consultative Commission on Industrial Change on a European Innovation Stress Test.

[(2)](#ntc2-C_202402098EN.000702-E0002)  According to the European Federation of Pharmaceutical Industries and Associations.

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ELI: http://data.europa.eu/eli/C/2024/2098/oj

ISSN 1977-091X (electronic edition)

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