Europe's generic drugmakers may cut output due to surging energy bills

FRANKFURT, Sept 27 (Reuters) – Europe’s drug makers have warned they could cease making some low cost generic medicines due to surging electrical energy prices and are calling for an overhaul of the way in which they’re priced, the newest trade to hunt assist because the power disaster deepens.

The generic drug trade foyer group Medicines for Europe, which represents firms together with Teva (TEVA.TA), Novartis’s (NOVN.S) Sandoz unit and Fresenius SE’s (FREG.DE) Kabi enterprise, on Tuesday despatched an open letter to European Union member states’ power and well being ministers forward of their extraordinary EU Council assembly on Friday, calling for measures to ease the associated fee burden.

The letter was additionally addressed to key European Commissioners. The recipients didn’t reply to requests for remark given the late hour.

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Electrical energy costs have risen ten-fold for some drug factories in Europe and uncooked materials prices have risen by between 50% and 160%, based on the letter.

Generics associations in member states are additionally petitioning nationwide heath authorities for extra flexibility on drug costs, stated Medicines for Europe.

“We could discontinue perhaps three, perhaps 5 merchandise because of the direct and oblique influence of accelerating power prices,” stated Elisabeth Stampa, chief govt of Medichem SA, a generic medication and pharmaceutical substances maker primarily based close to Barcelona, Spain.

Medicines for Europe’s director common Adrian Van Den Hoven informed Reuters that larger power prices had been hitting a sector that was pressured to consolidate attributable to value strain, making the market extra susceptible to produce outages and shortages.

“Increased power prices simply eat the entire margins of many manufacturers of important medicines within the mounted value system that we function beneath in Europe,” he stated.

The difficulty centres on the pricing regime. Off-patent medicines are sometimes bought by low-cost drugmakers at costs set by nationwide well being companies or insurers’ associations, which incessantly additionally reduce costs.

Generics account for about 70% all distributed medicines in Europe, a lot of them to deal with severe situations equivalent to infections or most cancers, however make up solely 29% of the area’s drug payments, based on the foyer group.

The surge in power prices dangers undermining a latest push to spice up medicines manufacturing in Europe and make the area extra self-sufficient after the COVID-19 pandemic uncovered a dependence on suppliers overseas and led to a breakdown of sure provide routes.

COVID-lockdown measures in China and the struggle in Ukraine have made issues worse for logistic and uncooked materials provides.

Drug provide shortages, which at instances disrupt affected person care when various sources are usually not obtainable, have a decade-long historical past within the European off-patent generic drug sector, the place strain on costs by cash-strapped well being programs permits solely probably the most cost-efficient suppliers to outlive.

Whereas makers of patented revolutionary medication are additionally sometimes banned from elevating costs after a reimbursement price has been set, the a lot larger margins preserve most of these merchandise worthwhile.

ENERGY INTENSE

Normal infusions for hospitals are among the many most power intensive medication to provide as a result of they should be heated and cooled for sterility. The identical goes for the fermentation course of behind generally used antibiotics and therapeutic hormones, stated van den Hoven.

Medichem’s Stampa stated the consequences of pricey power ranged from larger delivery charges to waste disposal contractors charging 30% extra.

She declined to call medication that may be affected as a part of an annual assessment this 12 months, however stated clients could be given about six to 12 months to discover a new provider if a product is phased out.

The privately held group made 110 million euros ($106 million) in gross sales final 12 months with off-patent merchandise equivalent to antibiotic drips, blood thinners and schizophrenia medication, promoting to generic drug firms together with Teva (TEVA.TA) and Viatris (VTRS.O).

Stampa stated indexing drug costs to take manufacturing prices into consideration could be an inexpensive repair for well being our bodies in Europe the place some off-patent prescription eye drops are reimbursed for lower than the value of a pack of gum.

The president of the Italian pharmaceutical trade affiliation, Marcello Cattani, stated power prices are seven instances larger than final 12 months, whereas the U.S. greenback, by which worldwide substances are sometimes paid, is up towards the euro.

“The sector can’t move on larger prices … The dangers of destructive impacts on the manufacturing and availability of medicines are very excessive,” he stated.

($1 = 1.0394 euros)