Energy crisis risks upending Europe’s key medicine supply chains – industry says

Energy crisis risks upending Europe’s key medicine supply chains – industry says

27 Oct    Finance News

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LONDON — Surging energy costs in Europe risk accelerating an exodus of companies critical in the manufacture of essential medicines, further endangering drug supply chains hit by shortages at the height of COVID-19, drug ingredient makers say.

Essential medicines are crucial in treating long-term conditions as well as for surgical procedures. They are also typically off-patent, and sold at the lowest possible prices set by national health agencies or insurers’ associations in European Union member states allowing only the most cost-efficient suppliers to survive.

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The pricing pressure for these generic medicines has long pushed manufacturing of the most energy-intensive component – active pharmaceutical ingredients (APIs) – from Europe eastwards to India and China, where costs are much lower.

Now, the war in Ukraine and the associated energy and economic crises threaten to “debase the continent’s pharmaceutical sector for good for some critical medicines,” , Teva, one of the world’s biggest generic drug makers, wrote in a report published on Thursday.

This could mean that key drugs – from antibiotics to generic diabetes and cancer treatments – could disappear from European factories over the next five to ten years, leaving the continent dependent on other countries, Teva’s report said.

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Teva officials highlighted recent shortages of tamoxifen, an active ingredient used in a key breast cancer therapy, in Germany.

The only European API manufacturer of tamoxifen halted production because it had become uneconomical, taking European finished drug producers by surprise and leaving only a few suppliers in Asia, they said.

Paracetamol is another case in point. The last European drug factory to produce paracetamol closed in 2008, leaving Asia as the primary source of production.

There was significant supply friction for paracetamol in Europe at the height of the pandemic, because the region did not have “the leverage nor logistical capacity to scale up production in the short term,” the report said.

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At the same time, when the major paracetamol producing country India temporarily banned exports of the ingredient to meet its own needs, Europe was temporarily left without the key API.

Given the current economic climate, Erick Tyssier, Teva’s head of government affairs in Europe, said: “What we are witnessing is certainly an acceleration of that trend.”

In relation to its European portfolio of medicines, Teva currently sources 40% of its APIs from its own European sites, while the rest is outsourced, Philippe Drechsle, VP of EU portfolio management at Teva Europe, told Reuters.

Teva is currently absorbing higher drug production costs in Europe, but there is a limit to that, he said.


The production of APIs precedes a finished drug product by roughly six to 12 month period, and many API producers have existing energy contracts that have at least partially shielded them from spiraling energy prices, said Drechsle.

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As soon as those two elements are gone, that’s when the real impact will become apparent, he said.

“It’s still early days…there’s a lot of disruption still coming,” Rex Clements, CEO of Netherlands-based API-maker Centrient Pharmaceuticals, said.

Centrient’s Dutch facility has seen about an eight-fold increase in energy costs. As a result, the plant is being run at about a 70% to 75% level compared with last year, he said.

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“It’s not because we don’t have the demand … but it’s the inability to serve that demand in any profitable way,” he noted, adding that other European API makers are also being forced to slow or cut production.

As a person living in Europe dependent on the region’s healthcare system, he added, “I’m worried.”

Energy costs also risk undermining the recent push to boost medicines production in Europe to make the region more self-sufficient.

No major improvements in European drug supply chains have yet emerged since those calls at the height of the pandemic, said Teva’s Tyssier.

“It seems like the memory is a bit short, unfortunately,” he said. “And that’s why we’ve made the report.” (Reporting by Natalie Grover in London; Editing by William Maclean, David Holmes and Jane Merriman)


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