Of all medicines distributed in Europe, generic drugs make up 70% of the market, yet they only account for less than 30% of the region’s drug bills, reported Medicine in Europe. This can be attributed to the fact that these off-patent drugs are sold at prices set by national health institutes and insurance companies that often slashed prices.
The issue of the pricing regime combined with rising electricity and raw material costs has caused the Generic Association to protest against national agencies in order to set flexible prices.
Medicines for Europe, a lobby group that represents businesses such as Sandoz, Teva, and Kabi recently reached out to the health and energy ministers in European Union states calling for measures to reduce the cost burden. The open letter was sent ahead of the EU Council meeting and recipients have as of yet not commented on it. What is most concerning about the current situation is that some generic drug companies such as Medichem SA have already announced that they will have to halt the production of some 3-5 drugs due to the energy crisis.
The situation is made particularly dire by the fact that some generic drugs are crucial in the treatment of serious conditions such as cancer and infections.
To put things in perspective, for some drug factories in Europe, electricity prices have increased ten-fold and raw material prices have gone up by somewhere between 50% to a 160%. This, coupled with the Covid-19 lockdown measures in China, have led to the breakdown of certain supply routes sets Europe back in its mission to become self-sufficient and reduce dependency on foreign suppliers. Moreover, the war in Ukraine also raises logistical and supply concerns.
Marcello Cattani, the president of the Italian pharmaceutical industry association mentioned how compared to last year energy costs have gone up by 7x. Most foreign ingredients are also paid for in U.S. dollars to the exchange rate between the dollar and the Euro has to be kept in mind too.
This will likely impact the production of standard infusions, the production of which requires copious amounts of energy. Similarly, antibiotics and therapeutic hormones go through extensive fermentation processes which also has a significant energy requirement. In order to sterilize drugs, they need to be heated and cooled and both processes are energy-intensive.
Other consequences of the energy crisis for the off-patent generic drug industry include waste disposal contractors charging 30% more from producers and higher shipping charges. In addition to this, if higher costs cause drug producers to stop production, patients will have to look for alternatives as well. They will have no longer than a year to look for new suppliers.
Some non-patent drugs are reimbursed for less than the price of a pack of gum, in comparison these patented innovative drugs have higher margins to insure that their products are profitable. However, even they cannot raise prices once the government has set a rate for reimbursement.
According to the Medicine of Europe,” In order for European producers to compete with producers in China, they need a continuous supply of affordable energy without which production can shut down, it may even cause delays and jeopardize the operations process.”
