December 04
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European pharmaceutical companies have warned that they may stop production of some cheap generic drugs due to a sharp rise in electricity prices, Reuters reports.

The generic drug lobby group Medicines for Europe, which represents companies such as Teva, Novartis' Sandoz unit and Fresenius SE's Kabi unit, has sent an open letter to European Union energy and health ministers.

The 27 EU energy ministers are meeting Friday to agree on measures to ease Europe's energy crisis, including a windfall profits tax on fossil fuel companies and a cap on gas prices.

A spokesman for the Czech presidency of the EU confirmed receipt of the letter, but said Friday's talks were to approve proposals from the executive European Commission. So far, they have not included solutions specifically for drug manufacturers.

According to the letter, electricity prices for some pharmaceutical plants in Europe have increased tenfold and the cost of raw materials has risen 50 to 160 percent.

“We may discontinue maybe three, maybe five products due to the direct and indirect impact of increasing energy costs,” said Elisabeth Stampa, chief executive of Medichem SA, a generic drugs and pharmaceutical ingredients maker based near Barcelona, Spain.

Adrian Van Den Hoven, CEO of Medichem for Europe, said higher energy costs have hit the sector, which has been forced to consolidate because of price pressures, making the market more vulnerable to supply disruptions and shortages.

“Higher energy costs just eat all of the margins of many makers of essential medicines in the fixed price system that we operate under in Europe,” he said.

The problem is the pricing regime. Generic drugs are usually sold by low-cost drug manufacturers at prices set by national health agencies or insurers' associations, which also often lower prices.

The surge in energy prices could undermine a recent drive to increase drug production in Europe and make the region more self-sufficient after the COVID-19 pandemic exposed dependence on foreign suppliers and disrupted certain supply routes.

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