Drug expert Ulrike Holzgrabe believes that no atomic bomb is needed to deal a serious blow to Europe. The Chinese could also hit the Europeans hard by stopping the supply of antibiotics.
“China recognized how important it was to have its own antibiotic production as early as the 1980s,” says Jasmina Kirchhoff from the German Economic Institute in Cologne (IW). “Massive investments were made in factories that produce relatively cheaply, initially primarily for the domestic market. China then exported the ‘surplus’,” says Kirchhoff.
A large proportion of the chemical precursors that are essential for the pharmaceutical industry are also manufactured in China.
Alongside China, India has become a major supplier of pharmaceutical products. Generics are mainly produced here, i.e. medicines for which patent protection has expired. But India also depends on China because many pharmaceutical ingredients have to be imported from there.
“Public health is a geostrategic weapon that can bring a continent to its knees,” said the European Parliament in 2020.
In order to clearly outline the problem, a list of medicines for which there should be no dependence on Asia was drawn up at EU level. The next step would be to find out where these drugs and their precursors are manufactured – i.e. how great the dependence is exactly, says Holzgrabe, who teaches at the University of Würzburg.
And that’s where things start to get difficult. Kirchhoff says that such information is particularly difficult to find out about individual medications. “Which manufacturer sources which intermediate products, excipients and active ingredients from where is part of the trade secret and is therefore hardly known.”
Both the recipes and the supply chains are often very complex and it is therefore unclear how many companies in which countries are involved, says Kirchhoff. Especially in the area of generics, whose success depends on low prices, it is particularly important for manufacturers to keep market advantages secret from competitors.
Supply bottlenecks for individual medications in recent years have repeatedly shown that precautionary measures are necessary. This was already apparent during the corona pandemic – and with the Russian gas supply stop in autumn 2022, the topic of ‘dependencies’ came into focus.
In Germany, the Federal Cabinet approved the National Pharmaceutical Strategy in December last year. Among other things, this is intended to strengthen pharmaceutical production in Europe. The government wants to achieve this, for example, by reducing bureaucracy and providing subsidies for investments in production facilities.
It is not the case that there is no longer any pharmaceutical production in Europe. The European pharmaceutical industry primarily produces innovative, patent-protected medications here. Investments are also being made in this area, says Holzgrabe. “Germany is really at the top in the pharmaceutical industry, medicine, research and development,” Economics Minister Robert Habeck (Greens) told DW.
At some point, however, the patent protection for pharmaceuticals expires and they enter the generic market. And especially in the area of generics, production in Europe is hardly or not at all worthwhile because the margins here are very low. Generics are very important for the health system because they cover around 80 percent of the basic medication supply. Many antibiotics also fall into this area.
That’s why it’s so important to build structures so that it’s worthwhile for companies to be able to continue producing their product even after the patent protection expires, says Kirchhoff. The key to this is less about promoting investments and more about a different pricing system, says Bork Bretthauer, managing director of Pro Generika. “We don’t need zombie plants in Europe that have to be permanently subsidized,” says the representative of the interest group for generic and biosimilar companies. In other words: Europe must be prepared to pay higher prices for European medicines from Europe and thus greater independence.
A first step in this direction has already been taken in Germany. A law has been in force in Germany since the middle of last year with the cumbersome name of the Drug Supply Bottleneck Combating and Care Improvement Act, or ALBVVG for short. This law is also intended to motivate pharmaceutical companies to establish themselves in Europe again or to continue producing here by offering them better prices.
Until now, the main focus in Germany has been to keep the costs of the healthcare system as low as possible. To this end, the statutory health insurance companies have agreed contracts with drug manufacturers for the delivery of certain quantities of medication. The prices are capped. There are fixed amounts for around 80 percent of medications, including mostly generics. These are the maximum amounts that statutory health insurance companies pay. The company that can deliver the cheapest price will be awarded the contract.
The new law partially changes this approach. When health insurance companies now put out tenders for certain active ingredients and patent-free antibiotics, a contract should always go to a European company.
“With the rest of the generics, everything stays as it is,” complains the Pro Generics Association. Ulrike Holzgrabe thinks the law’s approach is generally good. However, she believes that the provisions cannot be implemented in many areas because there is simply no European production.
Even if the ALBVVG has not yet ensured that more manufacturers settle here, it has at least helped that more manufacturers have not left the market, says Kirchhoff.
Higher prices seem unavoidable if Europe wants more security. Production in Europe cannot be as cheap as in Asia. “We have a bad quartet of excessive bureaucracy, a shortage of skilled workers, high energy costs and crumbling infrastructure,” said the managing director of the Chemical Industry Association, Wolfgang Große Entrup, at the end of April.
In China, in addition to lower labor and energy costs, companies benefit from the fact that the state would make land available to them if they set up production, said Holzgrabe. And they don’t have to meet environmental regulations as strict as in Europe. For example, the REACH law introduced in 2007 requires all manufacturers to ensure that the substances they produce do not have a negative impact on human health or the environment. A huge hurdle for manufacturers of generic drugs to produce here.
This makes it difficult, especially to bring active ingredient production back to Europe, says Holzgrabe. “There will be no independence from China,” she believes. It is much more important that the production that we have here does not also move away. Especially since the European pharmaceutical industry is not only important for offering help with illnesses. Holzgrabe is convinced that vaccines could only have been developed quickly during the corona pandemic because there was still a research-based pharmaceutical industry in Europe.
Author: Insa Wrede
*The article “Pharma: More production in Europe” is published by Deutsche Welle. Contact the person responsible here.