EU Adopts Measures to Strengthen Supply Security for Essential Medicines

The European Union has implemented new legislation aimed at improving the resilience of its pharmaceutical supply chain, particularly for critical medications. This development follows recent challenges in the availability of essential drugs, such as those used in cancer therapies, insulin, painkillers, and antibiotics, which have become more pronounced in the aftermath of the COVID-19 pandemic and subsequent severe influenza waves.

A significant proportion of the active pharmaceutical ingredients (APIs) required for the production of these medicines--approximately 80 percent--are imported from just five countries: China, the United States, the United Kingdom, Indonesia, and India. Notably, China alone supplies 45 percent of these substances. This concentration has led to concerns about dependency and vulnerability within the European healthcare system, prompting calls from member states for coordinated action at the EU level.

The new EU regulation introduces three pivotal measures:

• Joint Procurement Flexibility: Member states will now be able to collaborate more easily when purchasing medicines. The threshold for forming joint procurement groups has been reduced from nine to five countries, enhancing their collective bargaining power, especially concerning pricing.
• Broader Procurement Criteria: Public authorities involved in medicine procurement will be required to consider additional factors beyond cost. These include supply security, robust supply chains, and the presence of manufacturing sites within Europe. This shift is designed to encourage a more strategic approach that prioritizes resilience alongside affordability.
• Preference for EU-Based Production: For medicines classified as critical and where there is a high dependency on third countries, the regulation allows for preferential consideration of suppliers with European manufacturing facilities. This is intended to incentivize the development of local production capabilities and reduce overreliance on external sources.

The overarching objective of these measures is not to relocate the entirety of pharmaceutical production back to Europe, which could prove economically unfeasible. Instead, the aim is to diversify supply chains and ensure multiple reliable sources for essential drugs. By increasing the number of supplier countries and manufacturers, the risk of shortages is expected to decrease.

Europe's pharmaceutical industry remains a global leader, with exports totaling 313 billion euros in 2024. Experts note that while re-shoring all production may not be necessary or beneficial, building agile supply chains and establishing redundancies for essential medicines are key strategies to enhance resilience.

The implementation of these measures is anticipated to have cost implications. Favoring higher-priced European-made medicines and developing alternative suppliers will likely result in increased expenses for health systems and, potentially, higher out-of-pocket costs for patients. Nonetheless, the consensus among policymakers is that the investment in a more secure supply of critical medicines is a necessary step to safeguard public health and prevent future shortages.