Insight: Why Europe's drug shortages may get worse
08/02/2023 06:00
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Most European countries reporting shortages of antibiotics
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Low generic drug prices mean razor-thin margins for firms
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Companies say they cannot boost output enough due to costs
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Some say making generics in Europe becoming unsustainable
By Maggie Fick and Natalie Grover
LONDON, Feb 8 (Reuters) - When Ignasi Biosca-Reig heard
there were shortages of amoxicillin in Spain, he quickly added
shifts at his drug company's factories to boost production of
the popular antibiotic. But a few extra shifts was as far as he
could go.
Much as he would have liked to significantly increase
supplies, Biosca-Reig said he couldn't justify investing
millions of euros in new production lines unless he was paid
more for the generic drug to cover sharply rising costs.
But, like many European countries, Spain set the price
manufacturers are paid for paediatric amoxicillin when the
generic version of the drug was first launched in the country
two decades ago, and it has barely budged since.
"It's a non-business," said Biosca-Reig, chief executive of
Spanish drugmaker Reig Jofre RJFE.MC .
"We wanted to react, but we had a problem," he said. "The
costs go up, the price remains the same."
While many countries around the world have reported
shortages of antibiotics as respiratory infections return with a
vengeance after the lifting of pandemic restrictions, the
problem in Europe is particularly acute.
With prices for generics regulated, many European drugmakers
said they are reluctant to expand capacity at a time when the
war in Ukraine has pushed up the cost of everything from energy
for factories to cardboard for packaging to aluminium for bottle
caps - suggesting more shortages are on the cards.
According to 13 European manufacturers and six generic drug
industry associations and trade groups who spoke with Reuters,
many firms are struggling to make enough money to justify making
antibiotics at all - let alone increase production.
"We cannot keep this capped pricing when all of our
production, logistics and regulatory compliance costs are
increasing at double digits or more," said Adrian van den Hoven,
director general of lobby group Medicines for Europe, which
represents makers of generic drugs in the region.
The companies Reuters spoke with declined to disclose
margins for specific generics for competitive reasons.
THE COST OF CHEAP GENERICS
Before launching tenders, many European governments compare
the price of a generic medicine to other markets in the region,
or to similar drugs at home, to set a reference price which then
serves as the benchmark in negotiations with suppliers.
They typically award contracts to manufacturers offering the
lowest price, which then results in further downward pressure on
prices in subsequent tenders, drugmakers say.
Generic medicines now account for about 70% of all dispensed
medicines in Europe, but only 29% of the money spent on drugs by
national health agencies, according to Medicines for Europe.
European generic drugmakers say the tender system and
regulated prices have fuelled a race to the bottom, and European
firms are being undercut by suppliers from Asia.
Over the past decade, this has forced some European
companies to either cut output or move manufacturing of generics
and active pharmaceutical ingredients (APIs) needed to make them
to India and China, where costs are much lower.
Industry executives now say an overhaul of pricing schemes
is the only way to reinvigorate manufacturing in Europe, both to
avoid shortages in the future and to prevent the continent
becoming even more dependent on Asia for essential medicines.
"There's a growing awareness that we may have to pay more to
ensure our supplies of these medicines is secure and not
dependent on other regions, for our own health and national
security," said Rena Conti, a drug pricing expert and professor
in the department of markets, public policy and law at Boston
University's Questrom School of Business.
BRUSSELS, WE HAVE A PROBLEM
The European Medicines Agency (EMA) and European Union
lawmakers acknowledge there is a problem.
The EMA and the European Commission have met repeatedly with
drugmakers and trade groups since the shortages were first
reported in October, but no major action has yet been announced,
all the parties involved said.
EMA chief medical officer Steffen Thirstrup told Reuters
last month that it was fairly unusual to see so many countries
reporting shortages of the same products, but forecast demand
would ease as warmer weather approaches.
In the interim, alternative medicines could be used where
amoxicillin is unavailable, Thirstrup said.
A number of patient groups warned last month, however, that
substitutions were now squeezing supplies of other drugs.
The European Commission is scheduled to table revisions to
the bloc's pharmaceuticals law in March.
It is proposing measures including requiring
manufacturers to hold larger reserve supplies and to give early
warnings about shortages, but executives want Brussels to also
back their calls for governments to change tender and pricing
systems.
"The key long-term issue is not the production cost, it's
the overall European market framework, which doesn't allow us as
a producer to adjust prices flexibly to reflect change in input
costs, especially on essential medicines," said Giovanni
Barbella, global supply chain head at Sandoz, the generic
division of Swiss pharmaceutical giant Novartis NOVN.S .
In Spain, the price of paediatric amoxicillin was set at 98
cents ($1.05) for 60 ml in 2003. In 2013, that became the price
for 40 ml but it hasn't changed since. Half the generic
medicines sold in Spain are priced below 1.60 euros per box or
bottle, the country's generics manufacturing association said.
Prices of antibiotic generics in Britain are on a par with
Spain, according to drug pricing expert Melissa Barber, while in
Germany, the biggest generics market in Europe, the average
amount manufacturers receive has fallen 66% over the past
decade, Germany's generic drug association Pro Generika said.
Elisabeth Stampa, a member of Spanish pharmaceutical company
Medichem's advisory board, said in most European countries there
was no mechanism to review prices, link them to inflation, or
justify an increase because APIs have become scarce.
"It's extremely difficult to keep the same products you
launch competitive after 10 years," said Stampa, who was
previously Medichem chief executive.
NO SPARE CAPACITY
Some countries are promising to take action.
Germany's parliament is due this year to consider legal
changes to its tender system for generic drugs while Spain's
Health Ministry told Reuters last month the government was
considering changes to its pricing system that could result in
temporarily paying higher prices for drugs such as amoxicillin.
Executives and trade groups also said that they were often
unaware when there was a risk of shortages because there was no
central EU system that tracks supplies of essential generic
drugs in each country, as is the case for patented medicines.
"You get what you pay for. With price being the decisive
criterion in tenders, you are sending a message that security of
supply, quality and environmental standards are less important,"
said Thomas Cueni, director general of the International
Federation of Pharmaceutical Manufacturers & Associations.
Years of price pressures on manufacturers has forced many
smaller firms to get out of the business and only a few generics
makers service much of Europe for drugs such as amoxicillin.
Five companies - Britain's GSK GSK.L , Sandoz, American
drug company Viatris VTRS.O , India's Aurobindo ARBN.NS , and
France's Servier - have nearly 60% of the amoxicillin market in
Europe, according to market researcher IQVIA.
In Germany, for instance, Sandoz has a 70% market share for
amoxicillin drugs, says Pro Generika.
When the shortfalls became apparent, some companies ramped
up production, but not by enough to meet immediate demand.
"There has been a decline in European capacity and right now
in this situation, there is not the spare capacity to really
respond to these shortages," said Rex Clements, chief executive
of Dutch API maker Centrient Pharmaceuticals.
Sandoz told Reuters that by adding extra shifts at its
Austrian factory, it aims to increase production of amoxicillin
by a double-digit percentage this year compared with 2022, and
an expanded facility will also come on stream in 2024.
GSK also hired new staff and added shifts at its amoxicillin
plants in Britain and France, a spokesperson said.
But companies with smaller market shares, such as Israel's
Teva TEVA.TA , which has 5% of the region's amoxicillin market
according to Medicines for Europe, are constrained.
"There is no way we can increase our capacity in order to
fill the market gap," said Erick Tyssier, Teva's head of
government affairs in Europe. "It's just not possible."
($1 = 0.9348 euros)
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
EU must do more to tackle antibiotic shortages, say patient
groups urn:newsml:reuters.com:*:nL1N3490OV
EU plans changes to pharmaceuticals law to avoid medicine
shortages urn:newsml:reuters.com:*:nL8N3423P8
EU drug regulator decides antibiotic shortage not a 'major
event' urn:newsml:reuters.com:*:nL1N34B1AW
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(Reporting by Maggie Fick and Natalie Grover in London;
Additional reporting by Emilio Parodi in Milan, Emma Pinedo
Gonzalez in Madrid, Renee Maltezou and Eleftherios Papadimas in
Athens, Jacob Gronholt-Pedersen in Copenhagen and Ludwig Burger
in Frankfurt; Editing by Josephine Mason and David Clarke)
((maggie.fick@thomsonreuters.com; +44 7890 916 706;))