Over the past few decades, Europe’s manufacturing base for off-patent medicines, APIs, and starting materials has gradually decreased. This decline is clearly visible on the ground: each year, member states experience market disruptions and shortages as a result of manufacturers ceasing production within the EU. This year’s thrombolytic shortage was caused in part by a German manufacturer permanently ceasing production as a result of a poor quality report. In the Netherlands, a producer of epileptics and other scarce products also announced closure of business. In Austria, the government bailed out the last European end-to-end manufacturer of antibiotics.
The problems we face today are part of a larger trend. While Europe still accounted for 53% of global production in Active Pharmaceutical Ingredients (APIs) in 2000, this figure dropped to 25% by 2020, with the vast majority of production shifting towards Asia, and particularly China.
Trade data show that China accounted for 40% of global trade in APIs in 2019. This is also true for other ingredients necessary for API and medicines production, for which Europe relies for 74% on Asian imports, 70 percent of which coming from China. This Asian shift goes hand in hand with increased monopolisation across the value chain: in many cases, one or two producers control the global market, and several different APIs or components are manufactured at the same facility.
Time for a Critical Medicines Act
The consequences of the decline in European production are becoming increasingly problematic for our patients. The medicines market is not a flexible one: when a producer withdraws from the market it is often difficult, if not impossible, to find a replacement. We also see that there is a strong link between access to medicines and having domestic production: it is much easier for our medicines agencies to negotiate with a European producer than with a Chinese, Indian or American one. This was demonstrated not only during the COVID-19 crisis, but also during recent thrombolytics and antibiotics shortages. Moreover, the increased dependencies and market monopolisations pose security risks that must be addressed: a new pandemic, natural disaster, (trade) war or even a manufacturing glitch could have disastrous consequences for the world’s medicines supply.
That is why Belgium, together with 21 other member states, proposed to launch a Critical Medicines Act (CMA). While the modalities for the Act are still under discussion in Council and within the Commission, we believe it should serve a three-fold goal: (1) to reverse the general negative trend of declining production of off-patent medicines in Europe, (2) to diversify our pharmaceutical supply chains, and (3) to secure some degree of “strategic autonomy” for certain critical medicines.
A toolbox with different instruments
There is not one silver bullet for solving Europe’s supply problems. The Critical Medicines Act should therefore be viewed as a toolbox with different instruments, which can be roughly divided between “broad instruments” and “targeted instruments”.
While the former should help reverse the general decline in European manufacturing and diversify supply chains, the latter should ensure that Europe has in-house capacity to produce the most vital classes of medicines at scale to reduce security risks.
For instance, broad instruments could include specialised rules on public procurement which oblige procurers at national, regional and even hospital level to integrate security of supply, environmental and social criteria in their tenders. Today, the vast majority of tenders uses price as the sole criterium. This means that EU companies, who must comply with stricter environmental and social obligations, frequently lose out to Asian competitors, even when price differences remain as small as a few cents per product.
On top of this, many procurers also use winner-takes-all approaches, meaning that only one big player is selected to supply the market, thereby eliminating competition and creating de facto monopolies. A coordinated European effort on public procurement could help increase the resilience of our medicines ecosystem, with several different companies supplying the market and security, social and environmental efforts being properly rewarded.
Measures like these would benefit our overall resilience. However, in view of the rising geopolitical tensions, there are a few product classes for which we should not leave it to mere chance whether they are produced in Europe. These would for example include vaccines, antibiotics, and some oncology and ICU medicines.
For such products, the Critical Medicines Act should contain targeted instruments.
One such instrument, could be a specialised Important Project of Common European Interest (IPCEI) to reshore or expand production for some types of medicines, APIs and starting materials. This IPCEI should break away with some of the rigid EU criteria which traditionally inhibit the off-patent sector from participating in IPCEIs (such as strict innovation criteria), create faster, more predictable and less administratively burdensome procedures for companies and governments and pay attention to the whole supply chain. Instead of the traditional bottom-up coordination by member states, the Commission should take up a coordinating role to ensure that Europe meets its objectives. The special IPCEI should also be backed by EU-funding.
Europe’s Added Value
We can expect that the debate on medicines shortages and EU strategic autonomy will remain high on the political agenda over the next few years. In absence of EU concerted efforts, Germany, France, Italy and Spain – the four biggest member states – have each announced their own action plans to promote or reshore European medicines production. A European coordinated approach would be less costly and much more efficient than a scenario where member states go their own way. Moreover, a fragmented, national approach would negatively affect smaller or poorer member states who are not able to hand out large sums to expand their domestic industry. The Commission should use the current momentum and propose a Critical Medicines Act for Europe. We have no time to lose.