EU pathways to health innovation: the Biotech Act I and medical device reform

On 16 December 2025, in implementation of the EU Life Sciences Strategy, the Commission published a package of flagship actions (see here), comprising

• the first part of the European Biotech Act (see here), and
• targeted reforms to simplify EU rules for medical devices and in vitro diagnostics (IVDs) (see here).

The EU Biotech Act aims to strengthen the EU's biotechnology and biomanufacturing base – especially in health biotechnology – and to accelerate the translation of research into products reaching patients and markets.

For companies developing health innovations – particularly those combining biotechnology, diagnostics, medical devices and artificial intelligence – the package signals a clear direction of travel: simpler pathways, closer regulatory coordination, and faster, more predictable processes from lab to market, while preserving high safety standards.

What the Biotech Act is trying to fix

The Commission's diagnosis is that, despite world-class life sciences research, commercial growth and scaling often take place outside the EU. A key barrier is the persistent funding gap: between 2015 and June 2025, US biopharma start-ups received approximately EUR 219bln in venture capital focused on health biotechnology, compared to only EUR 25bln in the EU – representing just 7 % of global health biotech venture capital investment versus 63 % in the US. EU start-ups received around nine times less late-stage funding than their US counterparts.[1] An additional barrier is the regulatory complexity that can slow development and deters investment and clinical research.

The new legal initiatives seek to address these challenges by making the EU a more predictable and innovation-friendly environment for developing and scaling health biotechnology.

"Health biotechnology" across the lifecycle

The Biotech Act focuses on health biotechnology, broadly defined as the application of science and technology to living organisms to promote, protect or restore human health. This includes related areas, such as animal health, plant health, veterinary public health and food safety, where they contribute to human health.

The Act is designed to apply across the entire product lifecycle, from research and funding through development, testing and manufacturing, to placing on the market and use.

The Biotech Act's main building blocks

The proposal relies on several practical instruments:

• Strategic projects: Member States may designate "health biotechnology strategic projects", unlocking coordinated support and fast-tracked permitting (with capped timelines). A separate category of EU-recognised "high-impact" projects targets initiatives with broader systemic value, such as centres of excellence or "biotechnology data quality accelerators". These accelerators aim to ensure high-quality, interoperable, provenance-verified and well-annotated datasets, in particular to support the training, testing and validation of AI systems used in biotechnology applications.
• Access to funding: To strengthen Europe's capacity to finance health‑biotechnology innovation, the Act introduces a set of funding tools:
  • EU Health Biotechnology Investment Pilot: A new EU‑wide investment initiative developed with the EIB Group to mobilise significant public and private capital and provide tailored financing (equity‑like instruments, venture loans, risk‑sharing tools) across the biotech lifecycle.
  • EU Late‑Stage Capital Booster: An initiative enabling certain projects to be recognised as high‑impact strategic biotech projects, improving access to later‑stage growth capital and helping to counter shallow EU public equity markets.
  • Prioritised access to EU funding programmes: Biotechnology companies and projects falling within the scope of the Act may receive preferred access to Union‑level financing instruments.
  • National financing options: Member States may additionally provide financial support for biotechnology as a strategic technology, provided measures comply with EU State aid rules.
• AI as biotechnology enabler: The Act dedicates a specific chapter (Chapter VI) to the role of artificial intelligence and data as enablers of biotechnology innovation. Recognising that AI is increasingly integral to drug discovery, clinical research and medical device development, the Act introduces several forward-looking provisions:
  • EMA guidance on AI deployment: The European Medicines Agency (EMA) is tasked with developing non-binding guidelines on the use of AI across the lifecycle of medicinal products as well as in marketing authorisation procedures. This guidance will be developed in cooperation with the Commission (including the AI Office) and national competent authorities.
  • AI-first policy approach: The Act directs Member States and the Commission to promote an AI-first policy approach and facilitate the exchange of knowledge, standards and best practices for responsible AI application.
• Targeted IP incentive (SPC extension): A 12-month extension of Supplementary Protection Certificates (SPCs) is proposed for qualifying biotech-derived medicines and advanced therapy medicinal products (ATMPs), subject to cumulative conditions, including the conduct of multi-Member State clinical trials and at least one manufacturing step in the EU.
• Regulatory simplification and flexibility: The Act streamlines existing frameworks (e.g. for clinical trials, ATMPs, substances of human origin) and introduces tools such as regulatory sandboxes for novel products not fitting neatly in existing frameworks, an EU-wide support network for innovators, and a repository compiling regulatory status outputs.
• Biosecurity safeguards: The proposal includes obligations to prevent misuse of "biotechnology products of concern", supported by screening, reporting and enforcement mechanisms.

Medical devices reform

Alongside the Biotech Act, the Commission proposes a targeted simplification of the Medical Devices Regulation (MDR) and In Vitro Diagnostics Regulation (IVDR). The two initiatives are complementary: the Biotech Act accelerates development and evidence-generation, while the medical device reform focuses on certification and market access. Together, they aim to reduce costs and bottlenecks without compromising safety.

Key elements include:

• Reduced administrative burden and streamlined procedures: Simplified rules, streamlined procedures and more efficient reporting obligations for all actors, as well as enhanced coordination among authorities and notified bodies. For example, the proposal moves away from fixed recertification cycles of maximum five years towards risk-based periodic reviews by notified bodies, potentially extending the effective validity of certificates.
• Classification and conformity assessments: Clearer regulatory definitions to support more proportionate classification rules. In particular, a systemic shift in the classification of medical device software was included.
  
  The proposal also introduces maximum timelines for conformity assessment activities. Further simplifications include the flexible use of clinical data from equivalent products, greater reliance on non-clinical evidence in certain cases, potential remote audits for notified bodies, a single application for combined studies involving medicines and medical devices/IVDs, and mandatory fee reductions for micro and small manufacturers as well as orphan devices.
  
  
• Digital-first administration: Expanded use of electronic instructions for use, digital labelling and digitalised conformity assessment tools.
• A unified regulatory framework for AI-enabled medical devices: The reform package addresses the regulatory complexity facing AI-enabled medical devices, which currently sit at the intersection of multiple legal frameworks – in particular the AI Act and the MDR/IVDR.
  
  The Commission's proposed Digital Omnibus on AI (see here) includes an amendment to move the MDR and IVDR from Section A to Section B of Annex I of the AI Act. This change would significantly reduce compliance burdens for AI-enabled medical devices, since products under Section B would only need to comply with AI-related requirements set out in sectoral legislation. As a result, only a limited subset of AI Act provisions would apply directly to medical devices and IVDs, avoiding duplicative compliance obligations. Further, the proposals introduce a streamlined designation procedure allowing conformity assessment bodies to submit a single application and undergo a single assessment process for designation under both the AI Act and MDR/IVDR.
  
  
• EU-level support, coordination and cooperation: More coordinated oversight of notified bodies and enhanced EU-level scientific, technical, regulatory and administrative support by expert panels and the EMA, as well as contributions to monitoring device shortages through dedicated reporting tools and a proposed list of critical devices.
•  Innovation tools: Earlier expert engagement, simplifications for in-house devices, and regulatory sandboxes, allowing companies to test and validate breakthrough technologies in controlled environments under regulatory oversight, without the immediate need to comply with all standard regulatory requirements. In addition, the proposal introduces specific criteria for breakthrough and orphan devices, which will be subject to priority assessment by notified bodies to shorten evaluation timelines.

Why this matters for companies

For companies, the package has clear implications:

• Shorter and more predictable timelines for clinical trials, conformity assessments and market access can significantly reduce time-to-market.
• Lower regulatory and administrative burden, particularly for SMEs and start-ups, may free up resources for R&D and scaling.
• Improved coordination across regulatory frameworks is especially relevant for combination products, companion diagnostics and AI-enabled devices.
• New funding and investment mechanisms aim to close the EU's investment gap and support biotech companies in Europe by mobilising risk-tolerant capital across all development stages.

Both proposals will now proceed through the EU ordinary legislative procedure, with negotiations by the European Parliament and the Council. Industry associations have urged swift adoption, and the EU Life Sciences Strategy targets implementation by 2026 at the latest. Companies with EU-focused development pipelines should closely monitor the legislative process and consider early engagement with the emerging support mechanisms and regulatory tools.

authors: Sarah Rosenthaler, Daniela Birnbauer, Niklas Kerschbaumer