How Europe Lost Global Biopharmaceutical R&D Leadership to the United States: Lessons for Today

By Anne Prichett

Today, the United States leads the world in biopharmaceutical industry research and development (R&D), supporting nearly five million jobs and generating more than $1.65 trillion in economic output. This position of global leadership, however, is relatively recent.

Until the late 1980s, Europe–particularly Germany, France, Switzerland, and the United Kingdom–was the global leader in biopharmaceutical R&D. However, in that decade, a growing number of European governments adopted cost-containment policies designed to manage pharmaceutical spending. These included product-by-product price controls, caps on manufacturer profits, increased patient cost-sharing, restrictions on access to certain medicines and across-the-board cuts in payments to manufacturers. In France, these measures coincided with reductions in public R&D investment and the absence of clear frameworks for public-private collaboration, contributing to the erosion of the country’s once-leading position in the sector.

During this period, the United States adopted a range of pro-innovation policies that resulted in a significant shift in R&D investment from Europe to the United States, positioning it as the world leader in biopharmaceutical research. A more market-driven approach, combined with university-industry partnerships encouraged by the Bayh-Dole Act of 1980, facilitated federally funded research into commercial products by allowing universities to retain rights to their discoveries. Thus, this stimulated innovation in a once-trailing sector by also focusing on helping innovators with a policy framework that balanced intellectual property (IP) and regulatory incentives to provide certainty to innovators and spur R&D investments with the creation of abbreviated approval pathways for the approval of generic and biosimilar medicines.

The Effects of Europe’s History of Price Controls
In the 1970s, the largest European countries accounted for 55 percent of new medicines, while the U.S. held a 31 percent share. However, from 2001 to 2010, the U.S. share jumped to 57 percent, while France, Germany, Switzerland, and the United Kingdom saw their share of new drug approvals drop to 33 percent. Today, the United States invests roughly 40 percent more in biopharmaceutical R&D than all of Europe combined, where most countries have adopted some form of price controls or access restrictions on prescription medicines. Since 2012, 85 percent of new medicines have been launched in the United States, compared to less than 40 percent, on average, across more than 20 European countries.

Beginning in the 1980s, a growing number of European governments adopted price controls such as International Reference Pricing (IRP) policies, which linked drug prices to those in other markets. While these policies constrained prescription drug spending, they were often accompanied by other measures that undervalued medical advances or introduced delays in patient access. Studies have found that IPR contributed to drug shortages, slower access to new treatments, and changes in manufacturer launch strategies that further limited patient availability.

Consequently, a widening disparity has emerged between the United States and Europe in terms of new product launches and the availability of medicines. Research indicates that economies with price controls and other market access requirements tend to experience lower levels of product penetration and longer timelines for patient access, in part due to extended formulary, reimbursement, and approval processes:

• In France and Spain, for example, patients wait on average 500 to 600 days before gaining access to new medicines.
• A 2018 study examining 46 new cancer medicines in four EU member states (Belgium, Estonia, Scotland, and Sweden) found significant variation across countries in terms of the number and timing of access to new medicines. In no economy were all 46 new products launched. In Estonia, for instance, almost half of the sample (19 medicines out of 46) were never launched, and the time to access new medicines ranged from 14.3 months in Sweden to over 63.9 months in Estonia.

Select U.S. Pro-Innovation Policies Led to Global Leadership in Biopharmaceutical R&D
In the 1980s, the United States reinforced its market-based pricing system and implemented a range of public policies to encourage innovation. These measures were driven by an interest in leveraging emerging scientific and technological advances, supporting the growth of new biotech and pharmaceutical firms, and accelerating medical innovation in response to pressing health challenges such as HIV/AIDS. By the late 1990s, total biopharmaceutical R&D investment in the United States had surpassed that of Europe. Key policies included:

Technology Transfer Policies:

• The Stevenson-Wydler Technology Innovation Act of 1980 (Public Law 96-480) created a national policy to promote cooperation among academia, Federal laboratories, labor, and the private sector to facilitate the transfer of innovative federal technologies with the goal of fostering innovation and economic growth.
• The Bayh-Dole Act of 1980 (Public Law 96-517), subsequently amended in 1986, encourages private-sector investments needed to transform basic government-funded research into tested and approved products through licensing of basic inventions by universities, small businesses, and non-profit institutions that are made during the conduct of federally-funded research.
• The Small Business Innovation Development Act of 1982, the SBIR program today is managed through America’s Seed Fund under the National Science Foundation (NSF). It had four original objectives, namely, to stimulate technological innovation; to use small businesses to meet federal research and development needs; to foster and encourage participation by minority and disadvantaged people in technological innovation; and to increase private sector commercialization innovations derived from Federal research and development.

Regulatory Policies:

• The Drug Price Competition and Patent Term Restoration Act of 1984 (referred to as the Hatch-Waxman Act) (Public Law 84-417), which amended the Food, Drug, and Cosmetic Act of 1938 (FDCA) streamlined the approval process for generic drugs while preserving incentives for the development of innovative small molecule medicines.
• The Biologics Price Competition and Innovation Act of 2019 passed as part of the Affordable Care Act [Public Law 111-148] established a similar regulatory scheme authorizing the FDA to approve biosimilars and interchangeable biosimilars, while maintaining incentives for innovative biologic medicines.
• The Prescription Drug User Fee Act (PDUFA) of 1992 (Public Law 102-571) allowed the U.S. Food and Drug Administration (FDA) to collect fees from the industry to support and accelerate the drug review process. The measure helped reduce approval backlogs and contributed to reversing earlier delays in U.S. drug approvals. Today, almost two-thirds of new active substances approved globally are launched first in the United States.

These legislative and regulatory measures, along with robust funding of basic research through the National Institutes of Health (NIH), resulted in a significant competitive advantage for U.S. firms. Today, NIH is the largest public funder of biomedical research, with an annual budget of $47 billion, greater than the combined government funding of biomedical research by the United Kingdon, Australia and the European Union.

New Threats to U.S. Biopharmaceutical Innovation
Almost half a century after assuming global leadership in biopharmaceutical R&D, the United States faces growing challenges in its position. External competition is intensifying, particularly from China, which has launched a wide range of policies to strengthen its R&D and manufacturing capacity. However, the more immediate risk stem from domestic policy choices that could alter the incentives underpinning the U.S. innovation system:

• Most Favored Nation policy: A May 2025 Executive Order (EO) established a Most-Favored-Nation (MFN) framework that benchmarks U.S. drug prices to the lowest paid in a group of other advanced economies. While aimed at lowering prescription drug spending, analysts warn that such measures could reduce the attractiveness of U.S. markets for new investment. Historical precedent in Europe suggests that benchmarking and price controls can slow innovation and shift R&D activity elsewhere.
• Potential pharmaceutical tariffs: The prospect of tariffs on pharmaceuticals, discussed by the administration, has also raised concern about supply chain stability. Tariffs could increase uncertainty for manufacturers, elevate costs for patients, and disrupt access to essential medicines, especially generics.
• FDA staffing and resource cuts: Recent reductions of approximately 3,500 staff at the FDA alongside additional voluntary departures, have raised questions about the agency’s capacity to sustain timely drug reviews, inspections, and facility approvals- functions central to both innovation and public health.
• Intellectual Property Protections: Stakeholders note that U.S. IP rights have faced recent pressures. Moreover, there are concerns that geopolitical tensions could lead countries such as China to relax IP protections for foreign firms while maintaining strong protection for domestic companies.
• Bayh-Dole Act Reforms: Proposals to expand the federal government’s “march-in rights” under Bayh-Dole to include pricing considerations could introduce uncertainty across sectors. Such changes would alter long-standing assumptions about the commercialization of federally funded research, creating significant uncertainty for inventors.
• NIH funding cuts: Reductions in grants and contracts, estimated at more than $12 billion to date, and proposals for an additional $18 billion, or 40 percent cut to the NIH budget would significantly constrain public research funding. Given the complementary relationship between NIH and private-sector investment, such cuts could weaken the overall U.S. R&D ecosystem.
• Inflation Reduction Act (IRA) provisions: The 2022 IRA authorized Medicare to set prices for selected prescription drugs, with penalties (up to 1,900 percent) for noncompliance. Early evidence suggests this policy may already be influencing investment decisions, with some studies noting almost 35 percent decline in early-stage research and venture capital funding for small and midsized biotechnology firms.

To sustain and grow U.S. global leadership in biopharmaceutical innovation and patient access to new medicines, policymakers will need to prioritize measures that support innovation while addressing cost and access concerns. Key considerations include maintaining strong intellectual property protections, carefully assessing the implications of adopting foreign-style price controls, ensuring a well-funded and effective regulatory and R&D ecosystem, and pursuing trade policies that promote a more level global playing field for U.S. firms. Drawing on the lessons of Europe’s experience, the United States has an opportunity to preserve its leadership even as competition from rising powers intensifies.

Anne Pritchett is Senior Associate (Non-resident) with Renewing American Innovation at CSIS.

This piece was originally published on September 9th with the Renewing American Innovation Project at the Center for Strategic and International Studies in Washington, D.C.