FRANKFURT – Europe’s pharmaceutical manufacturers have issued a warning that they may cease production of some inexpensive generic drugs due to soaring electricity prices and have demanded a review of their pricing structure. They are the latest industry to request assistance as the energy crisis worsens.
Medicines for Europe, which represents firms such as Teva, Novartis’ Sandoz subsidiary, and Fresenius SE (ETR:FREGKabi)’s division, wrote an open letter to the energy and health ministers of European Union member states on Tuesday.
On Friday, the 27 energy ministers of the bloc will meet to try to solve Europe’s energy crisis by putting a tax on fossil fuel companies’ windfall profits and putting a cap on gas prices.
A representative for the EU’s Czech presidency, which is responsible for organising and presiding over the conference, confirmed receipt of the letter but stated that Friday’s discussions were intended to endorse recommendations by the bloc’s executive European Commission.
These have not yet included solutions directed primarily at pharmaceutical manufacturers.
Tuesday night, the letter was also sent to the Commission, which did not immediately reply to a request for comment.
The letter says that the cost of electricity for several European drug companies has gone up by a factor of 10, while the cost of raw materials has gone up by between 50 and 160 percent.
Medicines for Europe stated that generics organisations in member states are also pressing national health authorities for greater price freedom.
“We may stop making three to five items because of the direct and indirect effects of rising energy costs,” said Elisabeth Stampa, CEO of Medichem SA, a company near Barcelona, Spain, that makes generic drugs and pharmaceutical parts.
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Adrian Van Den Hoven, the director general of Medicines for Europe, told Reuters that increasing energy prices were impacting a sector that was compelled to consolidate due to pricing pressure, making the market more susceptible to supply interruptions and shortages.
“Higher energy prices wipe up all of the profit margins of many manufacturers of important medications in Europe’s fixed-price system,” he added.
The problem revolves around the price structure. Off-patent medications are often offered by low-cost drug manufacturers at pricing established by national health authorities or insurers’ organisations, which frequently also reduce costs.
According to the advocacy organisation, generics account for over 70% of all medications supplied in Europe, many of which are used to treat critical ailments such as infections or cancer, but just 29% of the region’s drug expenses.
After the COVID-19 epidemic showed how much the area depended on foreign suppliers and shut down some supply lines, people tried to make more medicines in Europe and make the area less reliant on foreign suppliers. However, the rise in energy prices could hurt those efforts.
The COVID-related restrictions in China and the conflict in Ukraine have exacerbated logistical and raw material supply issues.
Medicine supply shortages, which impair patient care when alternative sources are unavailable, have a decade-long history in the European off-patent generic drug business, where only the most cost-effective providers can remain due to pricing pressure from cash-strapped health systems.
Despite the fact that manufacturers of patented novel pharmaceuticals are often prohibited from increasing prices after a reimbursement rate has been established, the substantially greater margins on most of these goods ensure their profitability.
ENERGY IMPORTANT
Because they must be heated and chilled to ensure sterility, standard hospital infusions are among the most energy-intensive medications to create. Van den Hoven stated that the same holds true for the fermentation process underlying routinely used antibiotics and therapeutic hormones.
The implications of pricey energy, according to Medichem’s Stampa, range from increased shipping costs to trash disposal providers costing 30% more.
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She declined to mention pharmaceuticals that may be affected as a result of this year’s annual assessment, but said clients will have six to twelve months to locate a replacement supplier if a product is discontinued.
Last year, the privately owned company sold off-patent goods such as antibiotic drips, blood thinners, and schizophrenia treatments to generic pharma companies like Teva and Viatris, generating sales of 110 million euros ($106 million).
Stampa stated that indexing medicine pricing to account for production costs would be an economical solution for health organisations in Europe, where some off-patent prescription eye drops are reimbursed for less than a pack of gum.
Marcello Cattani, the head of the Italian pharmaceutical industry group, stated that energy prices are seven times greater than they were a year ago, while the U.S. dollar, the currency in which imported materials are normally paid, has strengthened against the euro.
“The industry cannot pass on rising expenses… there are extremely significant chances of adverse effects on the manufacture and supply of medications,” he stated.
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