With the announced European Innovation Act (“EIA”), the European Commission is preparing a central legislative initiative aimed at structurally strengthening the innovation capacity and competitiveness of the European Union. As a horizontal, cross-sectoral legal framework, the EIA is expected to be presented in the first quarter of 2026 in the form of a Regulation. The objective is direct applicability and the express avoidance of divergences arising from national implementation.
Unlike classical innovation policy measures, the EIA is not directed at the promotion of individual technologies or sectors, but at improving the Union-wide framework conditions of the innovation ecosystem as a whole. Its starting point is the long-diagnosed discrepancy between the EU’s high level of scientific performance and its comparatively limited ability to translate research results into industrial scale-up, market penetration and global competitiveness. Against this background, the Commission addresses in particular the fragmentation of the internal market, regulatory and administrative burdens, as well as deficits in access to capital, infrastructure and sales markets. Existing 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 Union—are not intended to be replaced, but rather to be coherently bundled and legally systematised.
Between Scientific Excellence and Market Reality – Europe’s Incomplete Innovation Process
Europe continues to rank among the world’s leading regions in basic research, but is increasingly losing ground in international comparison when it comes to the economic exploitation of that research. This is particularly evident in capital-intensive and regulated high-technology sectors such as the life sciences, in which the gap between scientific discovery and marketable application increasingly leads to a relocation of investment, development activities and skilled professionals to non-European markets.
A central driver of this development is the continuing regulatory fragmentation of the internal market. Despite formal harmonisation, there exist in practice 27 different regulatory and enforcement realities. These are shaped by divergent national implementations, administrative practices, approval timelines and funding logics. For innovative companies, this results in considerable transaction costs, legal uncertainty and delays along the entire innovation chain. In the life sciences in particular, where innovation regularly arises through a division of labour between academic research, SMEs, mid-cap companies and established industrial undertakings, this fragmentation has a systemically innovation-inhibiting effect.
This is compounded by a structural mismatch between innovation cycles and regulatory decision-making processes. Legislation and administrative authorities often react ex post to technological developments rather than acting in an innovation-anticipatory manner. Although instruments such as regulatory sandboxes or real-world laboratories exist, they are neither systematically coordinated nor usable on a cross-border basis. In highly regulated areas, scale-up therefore frequently fails at national borders. Against this background, the EIA is deliberately broad in its scope. It is not intended to create another sector-specific special regime, but rather a horizontal governance framework that interlinks existing regulations in an innovation-compatible manner and reduces administrative hurdles.
A Horizontal Legal Framework for Innovation – Ambition and Objectives of the EIA
The European Innovation Act pursues an expressly horizontal objective. It is intended to accelerate the introduction and diffusion of innovations within the internal market and to create innovation-friendly, level playing field conditions for companies seeking to grow across the Union. Innovation is not understood as a sectoral funding task. Rather, it is conceived as a cross-cutting challenge of regulatory policy. An innovation-friendly internal market presupposes regulatory framework conditions that safeguard investment decisions and enable the economic exploitation of research within the Union.
In contrast to project-based funding instruments, the EIA follows a structural approach. Innovation is to be less selectively subsidised and instead systematically enabled through appropriate legal, institutional and financial framework conditions. In doing so, the EIA claims to anchor innovation as an autonomous regulatory objective within the internal market order.
To achieve these objectives, the European Commission identifies a number of intervention areas which, taken together, are intended to form a horizontal innovation framework:
- Simplification and a more innovation-friendly design of the existing legal framework: EU-wide uniform definitions of “innovative companies”, “start-ups” and “scale-ups” are being discussed as horizontal reference points for funding, State aid and procurement regimes. This promises simplification, but entails the risk of sector-blind standardisation, particularly where multiple regulatory regimes apply cumulatively. From a legal perspective, this opens up significant simplification potential, but at the same time carries the risk of sector-blind generalisations that do not adequately reflect differing innovation logics—such as long development and authorisation cycles in the life sciences. This applies in particular where several regulatory regimes apply cumulatively. Innovation-friendly simplification therefore requires less the creation of new meta-levels and more clarity, coherence and predictability at the interfaces of existing regulatory frameworks.
- Facilitating access to finance: A particular focus lies on the mobilisation of private capital, for example through the increased use of intellectual property rights as collateral. Accompanying measures include more innovation-friendly State aid rules and improved coordination of public funding instruments. The decisive factor will be whether Union-wide instruments are in fact designed in a competitive manner.
- Improved access to research and technology infrastructures: Innovative companies are to be enabled to develop and test their products and technologies more easily within state-of-the-art research and technology infrastructures. This includes real-world laboratories and test environments under market-like conditions. For highly regulated sectors such as the life sciences, this is of particular importance, as pre-clinical and clinical development phases are heavily dependent on the availability of appropriate infrastructure.
- Facilitating market entry and scale-up: A more innovation-friendly design of public and private procurement is intended to function as a lever for market entry and to stimulate demand for innovative products. This complements the planned reforms of the EU procurement directives and underscores the role of the public sector as a lead market for innovation. Beyond initial market entry, specific instruments are required that actively support the scaling and broad deployment of innovative solutions in regulated practice, such as medical care, clinical application and industrial production.
- Improved conditions for attracting and retaining talent: Innovative companies are to be placed in a better position to attract and retain qualified professionals. This includes, for example, more attractive employee participation schemes. These measures are situated within the context of the proposed “28th regime” for companies and the Union of Skills.
- Strengthening the commercialisation of publicly funded research: More uniform IP rules, increased use of standardisation and certification, and improved technology transfer structures are intended to prevent scientific excellence from being generated in Europe while the economic benefit is realised elsewhere. In this respect, the EIA complements the measures of the European Research Area Act and the Single Market Strategy.
- Improved coordination of innovation policy: Finally, a framework is to be established that facilitates coordination between the Member States as well as between national and European levels. The objective is to avoid duplicative structures and to align innovation policy measures more coherently.
The European Innovation Act understands innovation as an autonomous cross-cutting task of regulatory policy. Whether this ambition can be fulfilled will largely depend on whether it succeeds in designing the envisaged simplifications and coordination mechanisms in a legally binding manner while at the same time maintaining sufficient flexibility to accommodate the different innovation logics of individual sectors—particularly in highly regulated areas 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 cost issue, but as the result of targeted investment in innovation, skills and resilience.
It is noteworthy that innovation is not narrowed to research policy, but is regarded as a cross-cutting task across all policy areas. In this respect, the EIA functions as a legal link between internal market, industrial, research and financial policy. The aim is not to overlay existing initiatives, but to orchestrate them coherently. In key sectors—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, the European Innovation Act is of particular importance. Hardly any other sector is so dependent on innovation, so capital-intensive and so pervasively regulated. At the same time, central value creation stages—from pre-clinical research and clinical development to market access and reimbursement—are each subject to distinct, in part sectorally fragmented regulatory regimes.
It is initially positive that the EIA at least implicitly addresses the structural characteristics of the sector. These include long development cycles, high barriers to entry, dependence on IP and the importance of public infrastructure. Consultations show that regulatory fragmentation, complex approval procedures and a lack of scale-up financing are perceived in particular as obstacles to innovation.
Equally central is the question of IP and incentive systems. Innovation-friendliness does not arise solely from procedural acceleration, but from reliable investment conditions. The EIA will have to be measured against whether it coherently complements existing protection and incentive mechanisms—such as data and market exclusivity—or inadvertently undermines them through horizontal simplification logics. For research-intensive sectors, robust and predictable IP and market incentive systems—including data and market exclusivity—are a central prerequisite for investment decisions. Innovation-friendliness does not arise solely from acceleration, but from the reliability of regulatory protection and refinancing mechanisms. This applies in particular against the background of the planned Pharma Package, which envisages a recalibration of regulatory incentive systems and must therefore be directly aligned with the innovation policy objectives of the EIA.
Critical scrutiny is also required with regard 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 in value creation between academic research, SMEs and established industrial companies. Large and medium-sized companies are an essential component of the innovation ecosystem—whether as financing partners, development platforms or scale-up engines.
An overly narrow understanding of “innovation actors” could prove counterproductive. Differentiating innovation policy by company size risks artificially fragmenting existing value chains. Effective innovation ecosystems require the equal integration of all actors—from early-stage research through to industrial scale-up.
From Political Ambition to Legislative Reality – A Cautiously Optimistic Outlook
The objectives of the European Innovation Act are, in principle, to be welcomed. The focus on regulatory fragmentation and investment certainty addresses central weaknesses of the European innovation landscape, particularly in research-intensive sectors. Whether the EIA will have a tangible impact will depend less on its programmatic breadth than on its legislative precision.
The conception of the EIA as a Regulation promises harmonisation. At the same time, it carries the risk of remaining an additional meta-level if it is not consistently integrated into existing sectoral regimes. In the life sciences in particular, innovation capacity is determined by very concrete regulatory levers. These include reliable durations of IP protection, predictable authorisation and reimbursement procedures, and consistent interfaces between health law, data protection law and environmental law.
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. It thereby directly affects investment decisions along the entire value chain. In parallel, amendments 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 practicable again. In addition, further initiatives—the European Research Area Act (ERA Act), the proposed “28th regime” for innovative companies and the Biotech Act—address individual components of the innovation ecosystem. These range from the mobility of knowledge and talent, to simplified corporate structures, to the strengthening of biotechnological value creation in Europe. Within this constellation, the EIA can only be effective if it functions as a connective element that legally aligns these sectoral and structural reforms coherently, rather than generating new interface problems.
Particular attention should be paid in this context to the underlying concept of innovation. The recognition of incremental innovation is of central importance for the life sciences sector. In pharmaceutical and biotechnological practice, substantial medical progress does not arise exclusively through disruptive breakthroughs. Rather, it frequently emerges through the further development of known active substances, new dosage forms, improved manufacturing processes or expanded indications. A concept of innovation that focuses primarily on “disruption” fails to capture this reality. It risks systematically underestimating substantial medical advances and cost-efficient improvements in care. Incremental innovations can produce significant patient-relevant effects in the short term while simultaneously securing economic sustainability. The EIA will have to be assessed on whether it establishes an innovation policy concept that reflects this diversity and secures it in regulatory terms.
Should it succeed in establishing the European Innovation Act as a binding regulatory framework that systematically takes innovation effects into account, reduces regulatory fragmentation and strengthens investment certainty, it could become a central pillar of a more coherent European innovation policy. This presupposes, however, that the ambition of enablement is not lost in a thicket of additional governance structures, soft-law-based coordination formats or non-binding evaluation mechanisms. It will also be decisive that the regulatory ambition of the EIA is underpinned by appropriate financial and institutional resources. If this balance can be achieved, the EIA could evolve beyond its symbolic significance and become a legally robust lever that consolidates the multitude of ongoing reforms and sustainably strengthens Europe’s innovative capacity—particularly in the life sciences.
