European Commission approves EUR1 billion of state aid to revolutionize healthcare

Under the IPCEI, six EU member states will provide up to EUR1bn of state aid to support significant innovation, research and development projects across all key steps of the pharmaceutical value chain.

Accelerating both medical advancement and private investments

IPCEI Med4Cure, involving 14 projects from 13 companies “of all sizes”, was jointly notified by Belgium, France, Hungary, Italy, Slovakia and Spain. 11 associated partners in Belgium, the Netherlands, Poland and Spain will also be involved in “the wider IPCEI Med4Cure ecosystem”, as well as around 175 indirect partners all over Europe.

Notably, IPCEI Med4Cure aims to accelerate medical advancement and foster the resilience of the EU health industry by: (i) enhancing drug discovery, in particular for unmet medical needs such as rare diseases; and (ii) developing innovative and more sustainable production processes for pharmaceuticals.

The participating member states’ provision of up to EUR1bn in public funding is expected to attract another EUR5.9bn in private investments. 

The factors that led the EC to approve IPCEI Med4Cure

The EC assessed IPCEI Med4Cure under the IPCEI Communication. In finding IPCEI Med4Cure in line with the rules, the EC concluded that: 

• EU objectives : The project directly contributes to achieving several EU objectives of a greener, more secure and resilient economy as well as a more accessible healthcare. Notably, IPCEI Med4Cure will contribute to the European Health Union’s objectives by:
• Delivering innovations addressing diseases for which there are no satisfactory means of prevention or treatment, and
• Increasing the EU’s preparedness for emerging health threats. 
• Breakthrough innovation: All 14 projects that form part of the IPCEI are highly ambitious and will allow for developments and achievements going beyond current market offerings in key areas including diagnostic solutions and management of rare diseases, cancers and antimicrobial resistance. 
• Proportionate public spending and safeguards: Support from public authorities is necessary to incentivize the companies to carry out the investments due to the extent of technological and financial risks involved in the IPCEI. In addition, aid to these individual companies is limited to what is necessary, proportionate and does not unduly distort competition. The total planned maximum aid amounts are in line with the eligible costs of the projects and their funding gaps, and a claw-back mechanism will apply if large projects covered by the IPCEI generate extra net revenues.
• Positive spill-over effects across the EU: Beyond the companies and countries engaged in IPCEI Med4Cure itself, the results of the project will be shared with the European scientific community and industry, including through conferences, publications, access to pilot and production facilities, or licensing of intellectual property rights.

IPCEI Med4Cure has been in the works since March 2022 when 16 Member States signed a joint manifesto towards a health IPCEI. However, full completion of the project is not anticipated before 2036, with timelines varying according to the individual projects and companies involved. 

IPCEI Med4Cure falls within the first wave of IPCEI projects in the health sector but is anticipated to be followed by additional health sector IPCEIs in the coming years. As hinted in the joint manifesto, any future health IPCEI is likely to focus on developing cell and gene therapies, digital health, medtech and medical devices. 

IPCEIs fuel EU’s competitive edge in developing industries

In addition to another IPCEI approved on the same day in the hydrogen space, IPCEI Med4Care is the tenth IPCEI approved under EU state aid rules since 2018, with at least one integrated IPCEI having been approved each year. Of these ten approved projects, 20% of all participating companies are SMEs. 

Given the nature of IPCEIs, it is no surprise that the ten previously approved IPCEIs relate to four developing and competitively significant industries: Microelectronics and communication technologies, batteries, hydrogen and next generation cloud infrastructure.

The EC has approved State aid of more than EUR37bn across these ten projects and, thanks to spillover effects, it is anticipated that EUR66bn in additional private investments will be attracted to foster the competitiveness of the European industry.

Background— what are IPCEIs? 

IPCEIs are an integral tool available to EU member states to promote the execution of important cross-border projects or remedy serious market failures with a view to creating positive spillover effects for the whole EU, without distorting competition. 

Member states are encouraged to support projects that make a clear contribution to EU strategic objectives, including with respect to the European Green Deal, the New Industrial Strategy and European Research Area, amongst others. 

The EC can approve State aid to IPCEIs under Article 107(3)(b) of the Treaty on the Functioning of the EU (TFEU) which provides inter alia that aid to promote the execution of an IPCEI may be considered compatible with the internal market. In assessing an IPCEI’s compatibility with the internal market, the EC also relies on the IPCEI Communication (adopted in 2021) which sets out relevant assessment criteria.