EU lays out pros and cons to onshoring more API production
As the US embarks on a billion-dollar initiative to onshore active pharmaceutical ingredient (API) manufacturing, the European Union released a report earlier this month weighing the pros and cons of any possible reshoring of API production.
The 58-page report notes that over the past decade, medicine shortages have been increasing throughout Europe, as they have across the pond, with concerns raised that outsourcing API manufacturing abroad may have contributed to disruptions in the supply chain. A proposal to reshore API manufacturing to EU member states has been proposed, but it’s unclear if it will gain traction.
The new report, which was requested by the European Parliament’s Committee on Environment, Public Health and Food Safety, found that several policy documents have addressed API manufacturing as a potential solution to try and prevent, or at least mitigate, medicine shortages on the continent. Those documents explain how reshoring API production is challenging and has high costs and workforce needs, along with regulatory changes attached.
However, the report states that any increase of API production in Europe should be a beneficial endeavor, which could serve to strengthen continental supply chains, possibly reducing disruptions and improving quality.
The report said:
While the supply chains in the pharmaceutical sector are highly globalised, Europe still has some API production, mainly those of low production volumes, complex production processes, and the European API sector is considered highly competitive, given its technical know-how and strong workforce capacities.
The report detailed that in 2019, nearly 36% of API manufacturing sites were in Europe, while 55% were in Asia, primarily China and India. The EU’s generic API production was found to represent 24% of the total, while 66% went to India and China.
“Relocating manufacturing operations back to Europe is a growing trend in nearly every industry sector, including the pharmaceutical sector. Several pharmaceutical manufacturers in Europe have announced plans for new in-country API development and manufacturing capabilities,” the report said.
It also looked at three examples of European API manufacturing, mainly in France and Austria, that have government funding going to companies from EU member states to boost API production.
Ultimately, the report found that having a local source of APIs is beneficial in terms of ensuring better quality, better delivery times, and overcoming certain challenges.
When it comes to higher operating costs, the report states that:
Central and Eastern European countries (e.g., Czech Republic, Poland, Hungary) may likely be potential candidates for new production locations in Europe given their lower staff costs. In practice, however, higher-income countries, such as Germany, the Netherlands and Belgium have also been mentioned as attractive production locations. It has been argued that new technologies will lead to an increase in automation and robotisation, and as a result staff cost may play a lower role.
But, while the EU also has current initiatives in play to reshore API manufacturing, which are usually backed by financial support from national governments, it is not clear whether these can secure API production in the long run, the report laid out.
The report recommends that if governments are looking to bring API manufacturing back to the continent, it should consider what APIs are critical for patients and if so, governments should consider the “economic parameters” or the feasibility of the process. Also, the supply of APIs and medicine production should be ensured, and the focus of reshoring should not primarily be on APIs to prevent shortages.
Initiatives to support local manufacturing of APIs should also not exclusively focus on financial invectives but also regulatory and administrative processes as well.
“It should be considered that further countries (mainly China, India and the USA) are also undertaking efforts to strengthen or intensify local production. These efforts might result in increased competition between countries,” the report notes.