Shortages of medicinal supply: Do we need more production in Europe?

More and more often, medicines are in short supply. The problem of supply shortages has been a burning issue for years, and the health crisis surrounding Covid-19 has now brought it to public attention. Politicians want to act, and German Health Minister Jens Spahn has set out to shift the production of critical medicines back to Europe as part of Germany's presidency of the EU Council. He wants more independence for Europe.

But how realistic is that? How can production in Europe be strengthened? And what is the path - because that is what we must be concerned with first and foremost - towards more security of supply?

It is worth taking a look at the causes. For they lie in a development that is structural and thus seems difficult to reverse. In the past two decades, there has been an increasing migration of production to Asia. This affects active ingredients and increasingly also finished medicines. The drivers of this process were the state-directed development of industrial production in China, the increasing demand for medicines in Asia as well, the price and cost pressure in national health systems and regulatory requirements in Germany, e.g. in the area of the environment.

The result is a high dependence on India and China - especially for active ingredients and finished medicines that are needed frequently and in large volumes. The Corona crisis has shown: supply chains are widely ramified, highly sensitive and vulnerable to disruptions.

But will moving production back to Europe solve the problem and eliminate dependency?

The answer is yes and no at the same time. Because: Due to the complexity of the initial situation, there is no one viable solution. More "Made in Europe" can be a building block for more security of supply. European self-sufficiency in the production of medicines and active ingredients is not realistic. And above all, it is not desirable. Rather, it is important not only to focus on domestic production. We must also focus on more resilience in the supply chains. We should start at the following levels:

Level 1: Expansion of the existing infrastructure

The Covid 19 crisis has shown: many medicines - such as those needed in intensive care units - are produced in Europe. The production of medicines and active ingredients in Europe proved to be robust overall during the crisis. No patient was left untreated.

Pro Generika has presented a study that shows for the first time where which active ingredients are produced worldwide. This can be the basis for a discourse on the possible expansion of existing active ingredient production sites (e.g. in Europe). At the same time, we need mechanisms to stop the migration and further erosion of Europe as a location.

In addition, Pro Generika initiated a conference that was part of the associated programme of the German EU Presidency 2020. The digital conference in October 2020 was entitled "For a Healthy Europe. Strengthening security of supply and pharmaceutical production in Europe" and was organised by FAZ Conferences. Federal Minister of Health Jens Spahn opened the conference and representatives from industry, health insurance companies, patient associations and European policy, such as EU Internal Market Commissioner Thierry Breton, took part.

Level 2: Definition of supply-critical active substances to be produced in this country

Policymakers must define which supply-critical medicines and active ingredients Europe would like to become a little more independent of. Once this has been defined, it must be examined what is already being produced here and what is needed to strengthen the corresponding locations.

Level 3: Establishing measures that enable more diversification

De-globalisation does not solve the problem. It has to be about de-risking. The fact that the majority of active ingredients and medicines are produced abroad is less of a problem than that they are produced almost exclusively in a few regions in India and China. This creates a cluster risk, which must now be softened.

What is needed now is a sensible overall strategy!

A comprehensive and long-term approach is now needed to strengthen production and security of supply. This means looking at all areas that are structurally responsible for the problem. Individual financial injections or subsidies will not solve a structural problem. That is why it is important now:

  • Don't just think in terms of industrial policy! The sole financial support of production (e.g. through subsidies) does not go far enough, because it ignores the demand side: where there is a product, there must also be a buyer!
  • Also look at the demand side! As long as health insurance companies have to focus on the lowest price, European products will not become more competitive.
  • Become active at the regulatory level! Those who want to make their supply chain more robust (for example, by adding a second active ingredient supplier) should be able to do so without additional regulatory costs and major regulatory effort, and the buyers must also recognise the additional effort.

All this calls for a fundamental rethink, because these steps will cost money. For too long, health policy has only been about saving on basic care. More and more efficiency led to cuts in the security of care. Now we need a new balance between efficiency and resilience.

The market must be prepared to pay higher prices. Only then will European production and resilient global supply chains also be competitive. For six cents a day - that is how low the average cost of a generic drug is at present - more stability will not be feasible.

Using the example of cephalosporins, the consultancy Roland Berger has calculated how much it would cost to relocate antibiotics production back to Europe and has shown ways in which production could be strengthened in this country. You can access the 2018 study here.

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