European Generics Industry Seek Reforms to Combat Inflation in API Mfg
Medicines for Europe, which represents the generic drug industry in Europe, is calling for reforms in medicines procurement and pricing models to include security of supply as a criteria and is asking for further support for pharma manufacturing as a means to combat inflationary pressures in raw materials, transportation, and production.
Calling for action
Citing inflation across Europe of more than 10%, Medicines for Europe, which represents generic and biosimilar companies in Europe, is calling for policy action by the European Union (EU) to mitigate the adverse impact of rising costs on the industry. It points to inflationary pressures impacting all major components needed to manufacture medicines, such as raw materials, transport, fuel, and energy. These inflationary pressures, coupled with what it characterizes as “rigid pricing policies in Europe,” have created a situation that threatens the availability of essential medicines in Europe.
“Rampant inflation has been especially challenging for off-patent medicine manufacturers, and members of Medicines for Europe have worked tirelessly to make sure patients get the medicines they need,” said Victor Lino Mendonça, Chair of the Generic Market Access Committee at Medicines for Europe, in an October 12, 2022 statement. “The entire sector has mobilized to successfully deliver medicines during two major crises: COVID-19 and the war in Ukraine. But the economic reality of inflation is threatening the viability of our industry’s essential role in public health. The EU and member states must quickly implement policy measures that protect patient access to essential medicines, particularly during these challenging times.”
Medicines for Europe is calling for action in two key areas: reforming pricing policies and supporting manufacturing operations in Europe. Specifically, the association is calling for reforms in medicines procurement and pricing models to include security of supply as a criteria and to allow companies to adjust off-patent medicine prices to inflation. To support manufacturing operations in Europe, Medicines for Europe is calling for protection of the prescription medicines manufacturing sector in the EU and national emergency plans for gas/oil supplies. It is further calling on EU member states to tackle the impact of inflation with the local industry to maintain the availability of essential medicines.
Last month (September 2022), Medicines for Europe issued an open letter to EU Energy and Health Ministers and the EU Commissioners for Health and Food Safety, Energy, Internal Markets, and the Economy calling on them to address inflation and rising energy costs impacting the supply of generic medicines in the EU.
The open letter, signed by Elisabeth Stampa, President of Medicines for Europe and issued on September 27, 2022, called on EU officials to take further measures to address rising energy, raw materials, and transportation costs in the EU, which have been exacerbated by the COVID-19 pandemic and the war in Ukraine. The association estimates these factors have led to increased general inflation (now over 9%), raw material costs (risen by between 50% and 160%), transportation costs (up to 500%) and higher energy prices.
“Gas and electricity prices have reached record levels in 2022 following the Russian invasion of Ukraine, and some of our producers are at risk of having gas supplies rationed or not being able to continue manufacturing activities due to the high prices,” said Medicines for Europe in its open letter. “This is translating into electricity prices rising ten-fold for some of our factories in Europe. This threatens to undermine medicines supply and our industry’s efforts to invest in manufacturing in Europe.”
While recognizing the EU’s recent measure to address natural gas storage requirements and coordinated gas demand reduction to address energy supply and cost issues in the EU, Medicines for Europe emphasizes that “[i]t is also imperative that the EU introduces measures to lower energy costs for the generic medicines sector, which cannot legally increase prices anywhere in Europe due to reference pricing.”
The European Commission proposed last month (September 2022) an emergency intervention in Europe’s energy markets to address the recent dramatic price rises, which it says will help reduce the cost of electricity for consumers (both businesses and households), and measures to redistribute the energy sector’s surplus revenues to final customers. The new proposal follows previously agreed measures on filling gas storage and reducing gas demand to prepare for the upcoming winter.
Medicines for Europe is calling on the EU in its electricity demand reduction plan to introduce clear references to industrial sectors critical for the society to ensure that, regardless of the company size, they can benefit from proposed exemptions allowing EU member states to apply interventions in price setting for the supply of electricity to small and mid-sized enterprises.
In addition, Medicines for Europe is calling on EU officials to require that EU member states exclude the pharmaceutical industry from demand-reduction measures in their national gas security of supply emergency plans that are to updated by October 31, 2022, in line with the European Commission’s “Safe gas for a safe winter” guidelines. The association is also requesting that off-patent medicines sector be included in the temporary crisis framework for state aid measures to support the economy following the invasion of Ukraine by Russia.
“These steps would be crucial to safeguard public health which relies on inexpensive off-patent medicines for pharmaceutical care,” said Medicines for Europe in its letter. “Any shutdown of production, even temporary, would have detrimental effects on the supply of medicines to patients and would demand a significant effort and long delays to resume operations. Several medicines (e.g. sterile, biological substances and antibiotics) are produced with highly specialized heating and cooling for their production and delivery to hospitals and clinics or require energy-intensive processes for active ingredient or formulation production. This requires a continuous supply of energy at affordable prices and, which enable European manufacturers to compete with China where industrial energy prices are controlled.”