Why are European healthcare systems not able to fix supply chain problems?

By Christoph Baller, Senior Consultant

While European citizens are entering a post-pandemic era and coping with the impact of the Russian war on Ukraine (and the ensuing economic crisis), healthcare providers are facing increasing drug shortages. An issue that, if not overcome, has the potential to pose a threat to European stability in the future.

European states need to minimise reliance on pharmaceuticals from abroad, in particular China and India. As we enter a new era of international politics dominated by increasing tensions with China, it is more urgent than ever to take action. A challenge that is not easily addressed. Reduced production costs in Asia and low prices paid in Europe are clearly having an impact and the once-thriving industry moved on years ago. The solution can only be a common European initiative to re-establish pharmaceutical production, especially in the generics industry.

Thinking beyond the healthcare system

European pharmaceutical companies, especially generics manufacturers, are facing a financial pressure many cannot absorb. Over the last years, more and more production chains and even sites have closed. Without incentives, no manufacturer will relocate or build production chains in Europe. Therefore, it requires a lot of effort, politically and financially, to establish production, including the production of necessary APIs and precursors in Europe. If companies follow, Europe would benefit from the whole value-creation chain.

To achieve this, the necessary funding sources would have to be created and structures changed in a way that empowers and creates greater impact than is possible within national healthcare systems with their limited means. Only a broader range of measures suggested in a more-encompassing discussion on this subject would yield relevant results and offer solutions to the challenges. To be successful, we need to change the narrative and think beyond the traditional boundaries of healthcare and its financing.

Security, sovereignty and sustainability and their role in providing solutions

There are four things that need to be considered and built into the new narrative and strategic direction for Europe:

1. Recognition and acceptance that the absence of secure supply chains for critical medicines poses a destabilising threat to Europe.
2. Begin the process of creating a resilient European pharmaceutical production to increase European sovereignty and security
3. Ensure that the production of critical medicines e.g., for cancer and cardiovascular diseases, as well as painkillers and antibiotics, are secured and that supply is future-protected
4. European pharmaceutical production has a clear advantage over production in any other continent. With its higher standards, increased environmental assessments and shorter supply chains, Europe should be the supplier of its own drug requirements

It takes time to change an established and complex system. It needs to be changed, however, as it is no longer fit for purpose. This will take political ambition, economic incentives, and a commitment from the industry to establish European supply chains for critical medicines. A first step could be a similar approach to the 10 percent Social Value rule of the United Kingdom’s National Health Service, which would allow European pharmaceutical manufacturers to find a reliable market for their products.

Supply chain security of medicines must be addressed in terms of geopolitical security and sustainability and must be understood as an issue of European sovereignty.