With the announced European Innovation Act (“EIA”), the European Commission has signalled its intention to introduce a central legislative instrument designed to structurally enhance the European Union’s capacity for innovation and competitiveness. The EIA is conceived as a horizontal, cross-sectoral legal framework and is expected to be proposed in the form of a Regulation in the first quarter of 2026, thereby ensuring direct applicability and deliberately precluding divergences arising from national transposition.
The regulatory approach of the EIA does not seek to promote individual technologies or industrial sectors, but rather to improve the Union-wide framework conditions of the innovation ecosystem as a whole.
Its starting point is the long-identified discrepancy between the EU’s high level of scientific excellence and its comparatively limited ability to translate research results into industrial scaling, market penetration and global competitiveness.
Against this background, the EIA specifically addresses the fragmentation of the Internal Market, regulatory and administrative burdens, as well as deficiencies in access to capital, infrastructures and sales markets. Existing innovation policy initiatives at Union level—such as the Start-up and Scale-up Strategy, the Single Market Strategy, or measures within the framework of the Capital Markets and Investment Union—are not intended to be replaced, but rather coherently bundled, coordinated and legally systematised.
Between Scientific Excellence and Market Reality – Europe’s Incomplete Innovation Process
The regulatory and economic context to which the European Innovation Act shall respond: Europe continues to rank among the global leaders in basic research, while steadily losing ground in international comparison when it comes to the economic exploitation of this research. This discrepancy is particularly pronounced in capital-intensive and highly regulated high-technology sectors, most notably the life sciences, where the gap between discovery and application remains wide, increasingly manifesting itself in the relocation of investment, clinical development, manufacturing capacity and highly skilled talent to non-European markets.
A central structural driver of this problem is the persistent regulatory fragmentation of the Internal Market. Despite extensive formal harmonisation, there remain in practice 27 regulatory and enforcement realities that in some cases diverge significantly from one another, shaped by differing national transpositions, administrative practices, authorisation timelines and funding logics. For innovative companies—regardless of their size—this fragmentation generates substantial transaction costs, legal uncertainty and cumulative delays throughout the innovation value chain. In the life sciences in particular, innovation is regularly the result of a division of work between academic research, SMEs, mid-caps and established industry partners; regulatory fragmentation therefore operates as a systemic barrier to innovation.
In addition, a structural mismatch persists between the pace of innovation cycles and regulatory decision-making processes. Legislative and administrative responses frequently remain ex post, rather than acting in an innovation-anticipatory manner.
The Commission’s consultations further show that innovation-friendly instruments such as regulatory sandboxes, real-world laboratories or accelerated authorisation procedures do exist, but are neither systematically coordinated nor usable on a cross-border basis. In highly regulated fields such as clinical research, biotechnology or medical technology, this frequently results in scaling efforts failing at national borders.
Against this background, the material scope of the initiative is deliberately broad. Rather than establishing another sector-specific regulatory regime, the EIA seeks to introduce a horizontal framework that interlinks existing regulations in an innovation-compatible manner, reduces administrative barriers and establishes functionally equivalent conditions for innovative companies across the Union.
A Horizontal Legal Framework for Innovation – Ambition and Objectives of the EIA
The objectives of the proposed European Innovation Act are ambitious and explicitly horizontal in nature. The initiative seeks to accelerate the uptake and diffusion of innovation within the Internal Market and to create innovation-friendly and level playing-field conditions for innovative companies—including SMEs, start-ups and scale-ups—so as to enable them to grow across the Union. Innovation is thus not conceived as a sector-specific support policy, but as a cross-cutting challenge of economic and regulatory governance. An innovation-friendly Internal Market presupposes that regulatory framework conditions provide long-term certainty for investment decisions and enable the economic valorisation of research within the Union. Unlike traditional innovation policy instruments, which are often confined to project-based funding or sector-specific priority setting, the EIA pursues a structural approach: rather than relying on selective subsidies, innovation is to be enabled systematically through appropriate legal, institutional and financial framework conditions. In this respect, the EIA purports to place innovation at the centre of the Internal Market order as an autonomous regulatory objective.
In order to attain these objectives, the European Commission identifies a number of intervention areas intended to form a horizontal innovation framework:
- Simplification and more innovation-friendly design of the existing legal framework: The EIA envisages a reduction of regulatory fragmentation and administrative burdens for innovative companies. Consideration is given to introducing Union-wide harmonised definitions of “innovative companies”, “start-ups” and “scale-ups” as a horizontal reference framework for funding, State aid, tax and public procurement regimes. From a legal perspective, this approach offers significant simplification potential, while simultaneously entailing the risk of sector-blind standardisation that may fail adequately to reflect divergent innovation dynamics, such as the lengthy development and authorisation cycles characteristic of the life sciences sector. This risk is particularly acute where multiple regulatory regimes apply cumulatively. An innovation-friendly simplification therefore requires less the creation of new meta-levels of regulation than clarity, coherence and predictability at the interfaces of existing regulatory frameworks.
- Facilitation of access to finance: A particular focus is placed on the mobilisation of private capital, notably through the enhanced use of intellectual property rights as collateral. IP-backed financing models are intended to improve innovative companies’ access to financing instruments within the framework of the Savings and Investments Union. Complementary measures include more innovation-friendly State aid rules and improved coordination of public funding instruments with a view to optimising the overall financing mix. It will be decisive, however, that Union-wide instruments are designed to operate with greater speed, risk adequacy and competitive attractiveness than purely commercial financing options, in order effectively to mobilise private capital and to retain scaling phases within Europe.
- Support for access to Union and national funding: The EIA aims to render existing funding landscapes more transparent and accessible. This is expected to benefit in particular smaller and early-stage companies, which have hitherto frequently been deterred by complex funding architectures and administrative barriers.
- Improved access to research and technology infrastructures: Innovative companies are to be enabled more easily to develop and test their products and technologies in state-of-the-art research and technology infrastructures, including through regulatory sandboxes and testing environments under market-like conditions. This is of particular relevance for highly regulated sectors such as the life sciences, where pre-clinical and clinical development phases are heavily dependent on access to appropriate infrastructures.
- Facilitation of market entry and diffusion of innovation: A more innovation-friendly design of public and private procurement is intended to serve as a market-entry lever and to stimulate demand for innovative products. These measures complement the planned revision of the EU public procurement directives and underline the role of the public sector as a lead market for innovation. Beyond initial market entry, specific instruments are required to actively support the scaling and broad deployment of innovative solutions in regulated practice—such as medical care, clinical application and industrial production. Innovation policy must not be limited to the generation of innovation, but must consistently take into account its deployment and systemic diffusion within the Internal Market.
- Improved framework conditions for attracting and retaining talent: Innovative companies are to be placed in a better position to attract and retain highly skilled personnel, inter alia through more attractive employee share ownership schemes. These measures are embedded in the context of the proposed “28th regime” for companies and the Union of Skills.
- Strengthening the commercialisation of publicly funded research: More uniform intellectual property rules, increased use of standardisation and certification, and enhanced technology transfer structures are intended to prevent situations in which scientific excellence is generated in Europe while the resulting economic value is realised elsewhere. In this respect, the EIA complements the measures of the European Research Area Act and the Internal Market Strategy.
- Improved coordination of innovation policy: Finally, a framework is to be established to facilitate coordination between the Member States, as well as between national and Union levels. The objective is to avoid duplication and to ensure a more coherent alignment of innovation policy measures.
The European Innovation Act no longer treats innovation as an annex to existing policy fields, but as an autonomous, cross-cutting regulatory task. Whether this ambition can be fulfilled will depend to a decisive extent on whether the envisaged simplifications and coordination mechanisms can be designed in a legally binding manner while remaining sufficiently flexible to accommodate the differing innovation logics of individual sectors—particularly in highly regulated fields such as the life sciences.
Innovation as Location Policy: The EIA within the “Compass for a Competitive EU”
The European Innovation Act is not an isolated legislative project, but an integral component of the Compass for a Competitive EU. This strategic guiding document marks a recalibration of European economic policy: competitiveness is no longer understood primarily as a question of costs or deregulation, but as the outcome of strategic investment in innovation, skills and resilience.
Innovation constitutes one of the three central pillars therein, alongside decarbonisation and security.
Notably, innovation is no longer reduced to research policy, but is conceived as a cross-cutting task across all policy areas. In this respect, the EIA functions as a legal connecting element between Internal Market, industrial, research and financial policy.
Of particular relevance is the claim to establish horizontal coherence. The EIA is not intended to supersede existing initiatives such as the Start-up and Scale-up Strategy, the Capital Markets Union or the European Research Area, but to legally orchestrate them. If successful, the EIA could, for the first time, provide a systematic response to the hitherto fragmented innovation-related legal landscape of the EU.
At the same time, the political ambition to understand innovation as an element of strategic autonomy becomes apparent. In key areas—among which the life sciences undoubtedly count—Europe is expected not only to conduct research, but also to produce, scale and compete globally.
Horizontal Reform, Sectoral Impact – The EIA and the Life Sciences
For the life sciences sector, the European Innovation Act is of particular relevance, and at the same time associated with high expectations as well as justified scepticism. Hardly any other sector is so dependent on innovation, so capital-intensive and so deeply regulated, with key value-creation stages—from pre-clinical research through clinical development to market access and reimbursement—each subject to distinct, in part sectorally fragmented regulatory regimes.
At the outset, it is positively noteworthy that the EIA at least implicitly addresses the structural specificities of the sector: long development cycles, high regulatory barriers to entry, and an emphasised dependence on IP rights and public infrastructure. The consultation results clearly show that associations/stakeholders from pharma, biotechnology, medical technology and diagnostics identify regulatory fragmentation, complex authorisation procedures and a lack of scaling finance as key barriers to innovation.
The discussion on regulatory sandboxes and real-world laboratories is of particular relevance. In the life sciences, Union-wide coordinated and cross-border-recognised testing environments could generate substantial acceleration effects—for example for novel therapies, digital health applications or innovative manufacturing processes—provided that their outcomes are designed to be regulatorily interoperable with existing authorisation and conformity assessment procedures under the MDR, IVDR and pharmaceutical law.
Another key question is the issue of IP and incentive systems. Industry stakeholders rightly emphasises that innovation-friendliness does not arise solely from procedural acceleration, but from reliable investment conditions. The EIA will therefore have to be assessed against its ability to complement existing protection and incentive mechanisms in a coherent manner —such as data and market exclusivity—rather than inadvertently eroding them through overly abstract horizontal simplification. For research-intensive sectors in particular, robust and predictable IP and market incentive systems—including data and market exclusivity—constitute a central prerequisite for investment decisions. Innovation-friendliness is not achieved through acceleration alone, but through the reliability of regulatory protection and return-on-investment mechanisms. This applies in particular against the background of the planned Pharma Package, which provides for a recalibration of regulatory incentive systems and must therefore be directly aligned with the innovation policy objectives of the EIA.
Critical attention must also be paid to the tendency to focus innovation policy measures primarily on start-ups and SMEs. In the life sciences sector, innovation is frequently the result of a division of labour across academic research, SMEs and established industrial companies. Large and medium-sized enterprises are an essential component of the innovation ecosystem—whether as financing partners, development platforms or scaling engines. An overly narrow understanding of “innovation actors” could therefore prove counterproductive. A size-based differentiation in innovation policy risks artificially fragmenting existing value chains. Effective innovation ecosystems presuppose the equal and integrated participation of all actors—from early-stage research through to industrial-scale development and deployment.
Finally, the EIA opens up opportunities for better integration of research, health and industry policy. Whether it succeeds in coordinating sectoral regulatory frameworks—such as pharmaceutical, chemicals, medical devices, IVD or health data law—in an innovation-friendly manner without creating new legal uncertainties will be decisive in determining whether the European Innovation Act evolves into an effective enabling framework for innovation or falls short of its regulatory-policy ambition.
From Political Ambition to Legislative Reality – A Cautiously Optimistic Outlook
The objectives pursued by the European Commission with the European Innovation Act are, in principle, to be welcomed, but raise key questions of implementation and delimitation. Particularly positive is the clear focus on regulatory fragmentation and investment certainty—both key factors for research-intensive business models and long-term capital commitments, which are structurally characteristic of the life sciences. The EIA thus addresses a long-standing deficit of European innovation policy and does so for the first time within a horizontal, Union-wide legal framework.
Whether this ambition can be realised will depend less on the programmatic breadth of the instrument than by its legislative precision. The design as a Regulation promises immediate effect and genuine harmonisation, but at the same time carries the risk that the EIA remains overly abstract or symbolic if it is not consistently and coherently integrated into existing sectoral regimes. In the life sciences in particular, innovation capacity is determined less by general innovation programmes than by very concrete regulatory levers: reliable durations of IP protection, predictable authorisation and reimbursement procedures, and consistent interfaces between health, data protection and environmental law. In this respect, the EIA must not operate as an additional meta-regulatory layer, but must embed itself functionally within established regulatory architectures.
Against this background, the European Innovation Act must be viewed in the context of other major reform initiatives. The announced Pharma Package aims at a fundamental recalibration of pharmaceutical incentive and protection systems and thus directly affects investment decisions along the entire value chain. In parallel, adjustments to the MDR and IVDR are intended to remedy structural implementation deficits and to render market access for innovative medical devices and in-vitro diagnostics more practicable again. In addition, further initiatives such as the European Research Area Act (ERA Act), the planned “28th Regime” for innovative companies and the Biotech Act address individual components of the innovation ecosystem—from the mobility of knowledge and talent to simplified corporate structures and the strengthening of biotechnological value creation in Europe. Within this constellation, the EIA can only be effective if it functions as a connecting element that legally interlinks these sectoral and structural reforms in a coherent manner, rather than generating new interface problems.
Particular attention should be paid to the underlying concept of innovation. The recognition of incremental innovation is of central importance to the life sciences sector. In pharmaceutical and biotechnological practice, significant medical progress often arises not exclusively from disruptive breakthroughs, but from the further development of known active substances, new dosage forms, improved manufacturing processes or expanded indications. A concept of innovation primarily focused on “disruption” fails to reflect this reality and risks systematically underestimating substantial medical advances and cost-efficient improvements in healthcare delivery. Incremental innovations, in particular, can generate highly patient-relevant benefits in the short term while simultaneously ensuring economic sustainability. The EIA will have to be assessed on whether it establishes an innovation policy understanding that captures this diversity and provides regulatory safeguards for it.
Should it succeed in establishing the European Innovation Act as a binding regulatory framework that systematically takes innovation impacts into account, reduces regulatory fragmentation and strengthens investment certainty, it could become a cornerstone of a more coherent European innovation policy. The prerequisite remains, however, that the enabling ambition is not lost in a thicket of additional governance structures, soft-law-based coordination formats or non-binding evaluation mechanisms. It will be equally decisive that the regulatory ambition of the EIA is underpinned by adequate financial and institutional resourcing, in particular with regard to research, clinical and regulatory infrastructures. If this delicate balance can be achieved, the EIA could go beyond its symbolic significance and become a legally robust lever that consolidates the multitude of ongoing reforms and sustainably strengthens Europe’s innovation capacity—particularly in the life sciences.
