Coro­na pandemic

How we can sta­bi­li­se our phar­maceu­ti­cals supply

After the pan­de­mic is befo­re the elec­tion: While Ger­ma­ny is coping with the most seve­re public health cri­sis in deca­des, poli­ti­ci­ans are get­ting rea­dy for the next legis­la­ti­ve peri­od. What are the les­sons lear­ned from Covid-19 in terms of wide-spread medi­cal care and nati­on­wi­de pro­vi­si­on and sup­p­ly of pharmaceuticals?

Which chal­lenges will poli­ti­ci­ans have to mas­ter? And what should the new­ly elec­ted fede­ral govern­ment address first from the per­spec­ti­ve of gene­rics manu­fac­tu­r­ers? Our sug­ges­ti­ons can be found below as well as in our posi­ti­on paper (available to down­load in German).

posi­ti­on paper

Read more about what we have lear­ned from the coro­na pan­de­mic and what poli­ti­ci­ans should do now here.

Read more (in German) 

The signi­fi­can­ce of gene­rics in times of cri­sism

Covid-19 is an ear­th­qua­ke that fun­da­men­tal­ly shook our health care sys­tem. That pati­ents in Ger­ma­ny were able to recei­ve the phar­maceu­ti­cals they need at any time during the pan­de­mic is also an achie­ve­ment of Ger­man gene­rics manufacturers.

In the inten­si­ve care units (ICUs) of hos­pi­tals across Ger­ma­ny, both pati­ents with chro­nic ill­nesses and Covid-19 pati­ents bene­fit­ted from this: 69 of the 71 phar­maceu­ti­cals requi­red at ICUs are generics.

It is the­r­e­fo­re clear that gene­rics manu­fac­tu­r­ers are buil­ding the bridge lea­ding to the end of the pan­de­mic. Up until the moment when final­ly enough peo­p­le in Ger­ma­ny are vac­ci­na­ted against Covid-19.

Sup­p­ly with phar­maceu­ti­cals during the pan­de­mic was an unpre­ce­den­ted feat of strength

Gareth Fuller/PA Wire URN:57803424

In order to ensu­re secu­ri­ty of sup­p­ly with phar­maceu­ti­cals in Ger­ma­ny – espe­ci­al­ly in the first wave of the pan­de­mic when sup­p­ly chains were under extre­me pres­su­res and in lar­ge parts almost came to a standstill – a mas­si­ve and unpre­ce­den­ted feat of strength of phar­maceu­ti­cal manu­fac­tu­r­ers was nee­ded. They increased their pro­duc­tion capa­ci­ties, orga­nis­ed expen­si­ve trans­ports via air freight, and work­ed extra shifts in all are­as. Moreo­ver, workers were cal­led back in from reti­re­ment an prag­ma­tic solu­ti­ons were found in coope­ra­ti­on with the aut­ho­ri­ties, e.g. to be able to deli­ver lar­ger amounts of pro­po­fol for the inten­si­ve care units across Germany.

Most impres­si­ve­ly, the mem­ber com­pa­nies of Pro Gene­ri­ka suc­cessful­ly mana­ged the enti­re sto­cking of phar­maceu­ti­cals for the second and third wave of infec­tion. They did this at their own risk and at their own expen­se – wit­hout any sup­port from the fede­ral government.

Diskussion: Sicherheit der Versorgung mit Arzneimitteln in Deutschland

Wolf­gang Späth

Chair­man Pro Generika

This was an unpre­ce­den­ted and uni­que feat of strength. We can­not take this as a blue­print for the next time or rely on it for the future.

Cau­se of the pro­blem: cost pressures

For more than twen­ty years, health poli­cy has been gover­ned by an omni­po­tent dog­ma­tic doc­tri­ne: saving cos­ts. Espe­ci­al­ly pri­ma­ry health care – for which manu­fac­tu­r­ers of gene­rics pro­vi­de 78 per cent of phar­maceu­ti­cals – are more and more stream­li­ned towards effi­ci­en­cy. In rea­li­ty, gene­rics manu­fac­tu­r­ers sup­p­ly an ever-incre­asing amount of phar­maceu­ti­cals for an ever-decre­asing share of the real phar­maceu­ti­cals expen­dit­ures of the Ger­man Sta­tu­to­ry Health Insu­rance (GKV) – name­ly, 8,4 per cent.

The share of gene­rics in health­ca­re is incre­asing, the cos­ts are decreasing

This deve­lo­p­ment may be plea­sing for the health insu­rance funds — at least at first glan­ce: they pay the com­pa­nies an avera­ge of only six cents for the dai­ly dose of a gene­ric drug.

The dai­ly defi­ned dosa­ge of a gene­ric cos­ts 6 cents on average

Cost pres­su­res desta­bi­li­se secu­ri­ty of supply

In terms of secu­ri­ty of sup­p­ly, this dog­ma is devas­ta­ting as evi­den­ced by the gro­wing num­ber of shorta­ges. Due to the con­ti­nuous­ly incre­asing pres­su­res on cos­ts, com­pa­nies and manu­fac­tu­r­ers have to stream­li­ne their sup­p­ly chains for ever-incre­asing effi­ci­en­cy, they have to con­stant­ly ana­ly­se their pro­duct port­fo­li­os and search for pre­pa­ra­ti­ons con­side­red eco­no­mic­al­ly unfe­a­si­ble and – e.g. when it comes to decis­i­ons over whe­ther the API should be pro­cu­red from Euro­pe or Asia – it forces manu­fac­tu­r­ers to always cho­se the che­a­per opti­on, and thus choo­sing the Asi­an one.

What a decis­i­on like this looks like from the per­spec­ti­ve of a com­pa­ny and why manu­fac­tu­r­ers are forced to buy the APIs in Asia in order to remain com­pe­ti­ti­ve on the mar­ket – has been explai­ned by Chris­toph Stol­ler, mana­ging direc­tor of Teva Ger­ma­ny, at the Pro Gene­ri­ka spring event.

Why I have to buy APIs from Asia (in German)

This deve­lo­p­ment has led to mas­si­ve dependencies

In par­ti­cu­lar

  • the con­cen­tra­ti­on on very few effi­ci­ent sup­pli­ers (insuf­fi­ci­ent varie­ty of sup­pli­ers), e.g. for important APIs
  • the relo­ca­ti­on of pro­duc­tion away from Ger­ma­ny: while around 20 years ago rough­ly two thirds of APIs essen­ti­al for pri­ma­ry health care were pro­du­ced in Euro­pe and a third in Asia, this ratio has com­ple­te­ly tur­ned into the opposite.

The shift of API cer­ti­fi­ca­tes from Euro­pe to Asia

The poli­ti­cal under­stan­ding and poli­cy insights alre­a­dy exist!

During the Coro­na cri­sis, many health poli­ti­ci­ans have rea­li­sed the ways in which health care in Ger­ma­ny is depen­dent on count­ries out­side of Euro­pe. They have unders­tood that pri­ma­ry care with phar­maceu­ti­cals is not a cost dri­ver – ins­tead it has been under­fi­nan­ced for a long time.

Recent­ly, mem­ber of the Bun­des­tag Micha­el Henn­rich (CDU) announ­ced that this pro­blem will final­ly be dealt with in the next legis­la­ti­ve period.

Micha­el Henn­rich (CDU): Why poli­tics must step in now (in German)

In March 2020, Fede­ral Health Minis­ter Jens Spahn also empha­sis­ed that he wan­ted to shift the pro­duc­tion of medi­ci­nes and acti­ve ingre­di­ents back to Euro­pe — even if this would lead to hig­her cos­ts for generics. 

Für eine sichere Arzneimittelversorgung in Europa

Jens Spahn

Fede­ral Minis­ter of Health

This could mean that we will have to pay more again, for exam­p­le for gene­rics – not just amounts in cents. But I think that secu­ri­ty must come befo­re eco­no­mic effi­ci­en­cy in this case.“

The neces­si­ty of more sus­taina­bi­li­ty in ten­de­ring agree­ments has been unders­tood by many health insu­rance pro­vi­ders, as Dr. André Bred­de­mann of BAR­MER health insu­rance announ­ced at Pro Generika’s spring event 2021.

Dr. André Breddemann


Resi­li­ence must beco­me a stron­ger focus of our ten­de­ring pro­ce­du­res for sus­taina­bi­li­ty to beco­me a com­pe­ti­ti­ve advan­ta­ge. Let’s include sus­taina­bi­li­ty as a rele­vant com­pe­ti­ti­ve fac­tor in tenders!“

New poli­ti­cal agen­da set for the begin­ning of the new legis­la­ti­ve period

What poli­tics needs for the future is a new para­digm for health poli­cy and legis­la­ti­on: ins­tead of always focus­sing on more and more effi­ci­en­cy, the focus must be on secu­ri­ty of sup­p­ly from now on. For this, more robust sup­p­ly chains and a stron­ger regio­nal diver­si­fi­ca­ti­on – also via streng­thening pro­duc­tion in Euro­pe – are indispensable.

For gene­rics, the cor­ner­stone of pri­ma­ry health care, the­re must not be any more addi­tio­nal legis­la­ti­ve cost con­tain­ment mea­su­res. The con­se­quen­ces for sup­p­ly and the­r­e­fo­re for pati­ents would be fatal. Now the focus must be on mea­su­res poin­ting in the oppo­si­te direction.

More robust sup­p­ly chains must be the aim

The focus must be on streng­thening sup­p­ly chains and making them even more resi­li­ent. Often­ti­mes the­se are 10,000 kilo­me­t­res (~6,200 miles) and span across the enti­re glo­be. Becau­se: the raw mate­ri­als for a gene­ric ori­gi­na­te most­ly from main­land Chi­na. API and finis­hed phar­maceu­ti­cal pro­duct, on the other hand, are lar­ge­ly manu­fac­tu­red in various fac­to­ries in India. This can beco­me a pro­blem – as shown by the depic­tion of a typi­cal sup­p­ly chain.

From Chi­na to Ger­ma­ny: What the typi­cal sup­p­ly chain of a gene­ric looks like

But what could hap­pen for sup­p­ly chains to beco­me more sta­ble again? To achie­ve this, com­pa­nies must take seve­ral dif­fe­rent mea­su­res. One pos­si­bi­li­ty is to keep a second API source under con­tract, as sup­p­ly chain expert Mar­tin Schwarz explains in the video below. In this way, they have ano­ther sup­pli­er to fall back on in case of emer­gen­cy. But: Hol­ding a second API source rea­di­ly available incurs cos­ts which must be con­side­red within the Ger­man pri­cing and reim­bur­se­ment sys­tem. Other­wi­se invest­ments of this kind can­not be made.

Dr. Mar­tin Schwarz (sup­p­ly chain expert): Why com­pa­nies can­not just sta­bi­li­se their sup­p­ly chains (in German)

We need new ten­de­ring models with the health insurances

For the future it is the­r­e­fo­re essen­ti­al that ten­de­ring agree­ments and pro­ce­du­res of the health insu­ran­ces must be adjus­ted. So-cal­led one part­ner models might be che­a­per for the health insu­ran­ces, but they result in shorta­ges much quicker.

Ten­de­ring agree­ments should the­r­e­fo­re always include more than one com­pa­ny (i.e. „Mehr­part­ner­mo­dell“, more part­ners model). In this way, the respon­si­bi­li­ty for secu­ri­ty of sup­p­ly rests on mul­ti­ple shoulders.

Dis­count agreements:

Dis­count agreements:

  • must the­r­e­fo­re no lon­ger sole­ly reward tho­se who offer maxi­mum dis­counts, but must ins­tead include and con­sider addi­tio­nal cri­te­ria (e.g. second API source)
  • still every third con­tract is crea­ted in such a way by the health insu­ran­ces that only one com­pa­ny must sup­p­ly all peo­p­le insu­red with this health insu­rance pro­vi­der – this must final­ly come to an end and dis­count agree­ments must gene­ral­ly be given to more than one com­pa­ny sin­ce if the­re is only one manu­fac­tu­rer and they drop out or mal­func­tion, the­re usual­ly isn’t ano­ther one who can jump in at short noti­ce and pro­vi­de the enti­re load.
  • Envi­ron­ment-fri­end­ly pro­duc­tion is soci­al­ly more and more desi­red – but, tho­se who are serious about this must also reim­bur­se addi­tio­nal invest­ments made by com­pa­nies for an even more envi­ron­ment-fri­end­ly pro­duc­tion in Euro­pe or else­whe­re – so too in dis­count agree­ments and in the form of real boni.

At a glan­ce: What you should know about generics!

Gene­rics pro­vi­de the main share of phar­maceu­ti­cals supply

They make up 78,8 per cent of phar­maceu­ti­cals (in terms of dai­ly defi­ned dosa­ges). Their share of phar­maceu­ti­cals expen­dit­u­re, howe­ver, only amounts to 8,4 per cent.

Gene­rics are get­ting che­a­per and cheaper

While manu­fac­tu­r­ers recei­ved an avera­ge of 12 cents per dai­ly defi­ned dosa­ge for a gene­ric in 2010, nowa­days they mere­ly recei­ve 6 cents on average.

More and more gene­rics are manu­fac­tu­red in Asia

Two thirds of our acti­ve phar­maceu­ti­cal ingre­di­ents (API) ori­gi­na­te from a handful of pro­vin­ces in India and Chi­na. 20 years ago, the oppo­si­te was the case.

Dis­count agree­ments are pri­ce pressures

90 per cent of pack­a­ging units that are part of a dis­count agree­ment are generics