Study finds GDPR impacts pharmaceutical innovation

A new working paper from the Research Institute of the Finnish Economy (ETLA) investigates the effect of modern data protection laws, such as the EU General Data Protection Regulation (GDPR), on global biopharmaceutical innovation. The paper finds that the introduction of strict data protection regulations leads to a substantial decline in Research and Development (R&D) investments among global pharmaceutical and biotechnology firms.

The decline is significant, with R&D spending falling by approximately 39% four years after a regulation's implementation. The level of impact varies, with smaller and domestic-only firms being hit hardest. Companies unable to shift data-sensitive operations abroad saw R&D drop by roughly 63%, compared to a 27% decline for multinational corporations. Similarly, SMEs reduced R&D spending by about 50% versus 28% for larger firms.

The paper argues that by constraining access to the sensitive data needed for drug discovery, these regulations impose high compliance costs and regulatory complexity. These factors collectively cause companies to scale back R&D programmes, potentially translating into fewer novel therapies. The paper suggests that policy support for privacy-enhancing technologies (PETs) could enable compliance while simultaneously advancing innovation.