What is the cure for an ailing European healthcare model?

Healthcare has also been thrown into a geopolitical conundrum through the recent policy initiatives from the US administration. Two measures in particular - section 232 tariffs and Most-Favoured-Nation (MFN) - have altered the pharmaceutical landscape:

• Section 232 tariffs – introduced under an April 2026 executive order, these tariffs apply to a range of pharmaceutical imports, including active pharmaceutical ingredients (APIs). Beyond protecting domestic supply, they are intended to encourage the reshoring of pharmaceutical manufacturing to the United States.
• Most Favoured Nation (MFN) pricing seeks to align US drug prices with the lowest prices paid in comparable developed markets. However, it overlooks fundamental differences between US and European healthcare systems, including funding models, insurance structures, and levels of universal coverage.
• Higher US drug prices have not consistently translated into greater innovation - Between 2016 and 2020, the industry spent $577 billion on share buybacks and dividends, compared to $521 billion on R&D[3]. The US and New Zealand also remain the only countries that permit direct-to-consumer pharmaceutical advertising, adding costs that may ultimately be reflected in prices.

These policies raise broader questions about healthcare sovereignty in Europe. Efforts by foreign governments to influence European pricing, manufacturing, and innovation models through trade and economic policy challenge some of the core principles on which European healthcare systems are built.

Supply security and geopolitical pressures emphasise the urgent need for Europe to decide whether it has the will and framework to safeguard its healthcare model.

Attacks from within

EU members are providing some form of healthcare services to more than 90% of its population[4] . However, beyond pointing fingers outside the bloc, the potential most insidious threats to European healthcare sovereignty might come from internal structural weaknesses:

• Budget deficits and rise of populism across Europe has recently put pressure on healthcare to cut, defer or ration care.
• Well intentioned policies such as the EU Medical Device Regulation (MDR) and In Vitro Diagnostic Regulation (IVDR), which came into force from 2021 and 2022 respectively, led to difficult industry adaptation, delays in certifications and reduced product launches.[5]
• Persistent fragmentation across member states continues to undermine competitiveness. For some drugs, manufacturers must negotiate separate pricing, reimbursement and assessment processes with up to 27 individual member states to achieve broad market access.[6]

An ambitious European approach

The period from late 2025 to mid-2026 has been the most active in European health policy in a generation. Over approximately six months, the EU has moved simultaneously on pharmaceutical reform, supply-chain security, medical device regulation, biotechnology, and health data[7], a legislative density that reflects both the urgency of the sovereignty challenge and a political consensus that has crystallised since the pandemic.

The most recent and significant milestone was the provisional political agreements in May 2026[8], between the European Parliament and the Council of the EU on the Critical Medicines Act. That agreement is a significant milestone in the EU's efforts to prevent shortages of essential medicines, reduce the dependence of supply chains on third countries and strengthen the competitiveness of the European pharmaceutical sector. The sector remains one of Europe's strategic industrial strengths, employing over 900,000 people directly[9] and generating over €400 billion[10] in annual production value, but its share of global pharmaceutical manufacturing and R&D investment has gradually declined relative to the US and parts of Asia.

How we capture it at Candriam

The EU’s clear objective of strengthening its healthcare sovereignty offers numerous investment opportunities in companies that will contribute to this ambition and benefit from various forms of financial support.

The pharmaceutical and biotechnology segment is one of the most obvious area, given its central role in fostering R&D and innovation into novel therapies. They are also playing a key role through building and maintaining manufacturing capacity on the continent. A series of legislative pieces has set the groundwork for incentivising companies such as the EU Biotech Act or recently amended pharma legislations.

Generics and biosimilars are the floors of European health sovereignty. They play a central role in reducing reliance on US innovators drugs and keeping our systems affordable and well supplied. The segment may also benefit from the EU’s Critical Medicines Act framework.

CDMOs & Bioprocessing are building the infrastructure of European pharma. They allow governments to reshore Active Pharmaceuticals Ingredients (API) and diversify supply away from Asian countries.

Diagnostics, medical imaging and high-end medtech equipment are strategic hardware for European health security. Those companies allow the continent to keep a leading edge and serve as a bargaining chip for geopolitical negotiations

[1] Potential measures to facilitate the production of active pharmaceutical ingredients (APIs)
[2] ibid
[3] COR Staff Report - Pharmaceutical Industry Buybacks Dividends Compared to Research.pdf
[4] Population coverage for healthcare: Health at a Glance: Europe 2024 | OECD
[5] Source: MedTech Europe – A regulatory system at a crossroads
[6] Source: The root cause of unavailability and delay to innovative medicines: Reducing the time before patients have access to innovative medicines, April 2024
[7] Source: European Commission, December 2025
[8] Critical medicines act: Council and Parliament reach provisional deal - Consilium
[9] Source: The Pharmaceutical Industry in Figures 2025
[10] ibid