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Europe Must Look Beyond Price To Secure Supply Chain

Focus On Lowest-Cost Generic Runs Against Aim To Localize Manufacturing

Executive Summary

European procurement models that focus solely on the lowest-cost generics are jeopardizing efforts to strengthen the supply chain and secure investments in local manufacturing, says Christoph Stoller, president of Medicines for Europe.

European health systems are jeopardizing efforts to strengthen the local supply chain and bolster manufacturing in the region by opting for the lowest-cost generics rather than considering important non-price factors, according to Christoph Stoller, president of off-patent industry association Medicines for Europe.

Speaking at an event held by German body ProGenerika – during the German presidency of the Council of the EU, which runs until the end of 2020 – Stoller insisted that the upcoming EU pharmaceutical strategy “provides a one-of-a-kind opportunity to strengthen Europe’s role as a global player for medicines manufacturing.”

Christoph Stoller Christoph Stoller

But he warned that “healthcare systems’ unsustainable preference for the lowest-cost generic option without regard for companies’ investments to secure supply or pursue Europe’s key transformative priorities, like the green agenda, is playing against the ambition to secure manufacturing in Europe and therefore a more resilient supply chain.”

With the coronavirus pandemic having highlighted the increasing consolidation of the supply chain, Stoller noted that Europe was “gradually losing its pharmaceutical production, opening up areas of vulnerability which leads in severe cases to shortages.”

“This cannot continue,” he insisted. “Solutions must be found.”

It was essential, Stoller said, to reform tender policies by “designing new pricing models which encourage investments in security of supply and manufacturing resilience, covering the whole value chain from active pharmaceutical ingredients to finished products.”  (Also see "Procurement Must Look Beyond Price To Ensure Supply Chain Security" - Generics Bulletin, 31 Jul, 2020.)

Must ‘Assess Reality’ Of European Manufacturing

A first step, Stoller said, would be to “assess the reality of medicines manufacturing in Europe,” which included generics industry sites across Europe that were “working day and night to produce the essential ingredients and finished products needed to make the medicines in our cabinets, pharmacies and in our hospitals.”

“In fact, the off-patent medicines sector can count on 190,000 people at over 400 manufacturing and 126 research and development sites in Europe,” he highlighted, “developing and manufacturing the medicines that patients across Europe need.”

With Europe still accounting for around 35% of global API production – compared to 33% from China, 25% from India and 12% from the US, according to data from Charles River Associates – Stoller nevertheless emphasized that “the sector has been consolidated over time and various aspects of the supply chain have become globalized as a result of sustainability challenges faced by our industry.”

Digital Innovations Open Up Flexibilities

“Medicines are not like any other commodity,” Stoller insisted. “Disruptions in global supply have a much more profound impact on people’s lives than other goods. In that sense, we broadly support the EU’s vision for securing supply and strengthening medicines manufacturing in Europe through its upcoming pharmaceutical strategy.”

But “what concerns Medicines for Europe members is that we take this unique moment to put in place the right solutions that will make a tangible and systemic difference for the long term.”

As well as looking beyond price in procurement processes, Stoller said that other key actions to be taken included using digital technologies and telematics to create a regulatory environment “which is flexible enough to ensure fast transfers of information between the industry and regulators and to approve fast shipment of medicines between member states to address shortages.”

Meanwhile, Europe should look to upgrade the EU single market’s intellectual-property framework by “implementing measures such as a broad Bolar exemption which extends to third party API suppliers.”

And finally, Stoller renewed his call for greater high-level European dialog between industry stakeholders. (Also see "Stoller Sets Agenda As Medicines For Europe’s President" - Generics Bulletin, 25 Sep, 2019.)

“Leveraging the COVID-19 lessons learned,” he outlined, “we need at European level a platform where policy makers, payers, regulators, industry and other actors of the pharmaceutical supply chain can meet regularly to develop and implement sustainable policy reforms – and not a talking shop – so that patients get the medicines they need.” (Also see "Joined-Up EU Approach Is Key To Continuing COVID-19 Fight" - Generics Bulletin, 9 Jul, 2020.)

Collaboration Should Not Be Reserved For Crises

“If one positive has come from the COVID-19 crisis,” Stoller concluded, “it has been the power of collaboration. When faced with an urgent crisis, industry and governments worked together to manage the risk and reduce the impact.” (Also see "European Industry Played Key Role In Mitigating COVID-19" - Generics Bulletin, 30 Jul, 2020.)

But this approach “should not be confined to crises only,” Stoller insisted. “Building manufacturing capacity in Europe is a long-term goal, and one which cannot be accomplished by any one actor alone.”

Suggesting that the opportunity was “now or never” to implement solutions, Stoller pledged that “at Medicines for Europe, we are ready to contribute to an EU pharma strategy that works, that makes sense, and that delivers for patients and health systems in Europe.”

MEAT Criteria Can Enhance Supply-Chain Security

Medicines for Europe had recently applauded a report from the European Parliament’s health committee that it said “clearly recognized the key role that off-patent medicines bring to patient access to essential medicines” and which urged the examination of “measures aimed at stimulating healthy competition for generic and biosimilar medicines.”

The “Own Initiative” report, led by members of the ENVI committee, endorsed “concrete policy solutions” that included “targeted guidelines on medicines procurement to help member states improve their unsustainable purchasing practices,” Medicines for Europe pointed out.

This included implementing “most economically advantageous tender” – or MEAT – criteria and awarding tenders to more than one company as part of efforts to bolster supply-chain security.

“The report factors in best-practice initiatives from the COVID-19 outbreak such as dialog with industry and pragmatic regulatory flexibilities,” the off-patent industry association noted, such as flexibilities on pack size and the introduction of electronic product information, or “e-leaflets.”

“To enable regulatory authorities to promptly share key information, the report calls for regulatory optimization,” Medicines for Europe observed. “This can be achieved by amending the EU Variations Regulation and implementing telematics reform.”

The report “also provides a clear signal to strengthen pharmaceutical supply chains, with support from the EU and member states to introduce the right incentives to encourage manufacturing in Europe.”

AOK Antibiotics Tender Goes Beyond Price

A recent antibiotics tender announced by German’s AOK group of statutory health insurance funds suggests that industry’s message on non-price criteria is beginning to be heard, with the AOK explicitly stating that the tender would not be awarded solely on the basis of the cheapest price.

Instead, it expanded its tender criteria to incorporate non-price aspects, particularly involving environmental elements, into the tender award.

The three-partner model tender for cefaclor, cefuroxime, ciprofloxacin, clarithromycin and roxithromycin is worth around €63m ($74m) and runs from 1 June 2021 to 31 May 2023.

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