Not just aluminum, copper, steel, zinc and semiconductors. Among the scarce raw materials there are also active ingredients and pharmaceutical raw materials. The Covid-19 pandemic has brought out the dependence on imports in a vital and strategic sector such as the pharmaceutical one. For the medicines used in the European Union, in fact, we know that about 40% come from foreign countries, while for the active ingredients it is estimated that more than half are produced in China and India. A problem that affects everyone very closely because the shortage of raw materials in this sector risks leaving patients under treatment without drugs. The theme was analyzed by2021 edition of the Observatory on the generic drug system, created by the Nomisma Economic Studies Society for Egualia (formerly Assogenerici) and presented today in Rome.
The OECD has improved the estimates of the Italian GDP expected for 2021: for the current year growth is now forecast at 5.9%, but the shortage of raw materials and packages weigh like a boulder on the rosiest growth prospects. of bottle in the value chains, which involve all production sectors, including the pharmaceutical one. During the most intense phases of the pandemic, the demand for certain types of drugs, and therefore for active ingredients, flew upwards with increases of up to 700%. This extraordinary peak in demand was faced in a difficult organizational situation of internal and external production. But now we must deal with the scarcity of raw materials and the weakness of the value chain by intervening in an incisive way before it is too late.
The control of Asian countries on raw materials
Under the lens of the Nomisma Report, the outcomes of relocations so far perceived as an advantage both in Italy and in Europe: after being impoverished for decades of primary processes with low added value, left to emerging countries, the European Union is now forced to run take shelter. “The control of new raw materials and primary productions by Asian countries has now become a weapon of lethal competition” he explained Lucio poma, chief economist of Nomisma and scientific coordinator of the study. “For this reason, one of the primary objectives of the new European Pharmaceutical Strategy is to diversify the production and supply chains, promoting productive investments within the Union”.
Multiply the sources of supply
To identify solutions to these problems, Nomisma conducted interviews with companies with different interests and organizations: production-only companies, distribution companies and with mixed businesses; some owned by Italy, other multinationals based in Europe, the United States, India and Israel, but with production or commercial sites in Italy. One of the short-term solutions to overcome the problem of the shortage of active ingredients and pharmaceutical raw materials is to multiply the sources of supply even if it is a difficult operation given the geographical concentration of suppliers in Asian countries. Also on the table is the proposal to extend the duration of the Temporary Framework on state aid, granted to fight the pandemic, well beyond the current limit. “If our country and Europe see pharmaceuticals as a strategic sector that played a crucial role during the pandemic – said the general manager of Egualia, Michele Uda – then the Temporary Framework is only a temporary tool. Its 6 month stretch helps, but this is not the structural tool we need. I hope that there can be a very concrete result with a European project that gives the possibility of accessing non-repayable loans lasting 3-5 years which is the minimum time necessary to bring production back to Italy by removing the limit on aid, now available only for products relevant to Covid “.
The other more radical and structural solution, on the other hand, is to internalize some phases of the chain until an acceptable level of strategic self-sufficiency is reached. Is it a realistic goal? “The prices of the active ingredients vary from a few euros per kilo to thousands of times that value. If the active ingredient has a very high value it will be possible to produce it, under complete competition, even in Italy; for the active ingredients of low unit value the speech is different “, replied Poma. “The minimum efficient size is enormous, as is the asymmetry between Asia and the EU on labor costs. Without state aid to the company or demand control mechanisms, it is unlikely that a company of such size will be able to compete against. the Asian giants “.
A ‘horse cure’
But since the lack of raw materials will be the fundamental node of world production systems at least for the next five years, we cannot give up in the face of the complexity of the solutions, also because every month that passes exposes the production lines of the pharmaceutical sector to an increasing risk of downtime. installations. This is why the companies in the sector interviewed believe that “horse care” is needed to incentivize reshoring for the production in Italy of patent expired pharmaceutical active ingredients: “To start a European competitive pole, it is necessary to act on both supply and demand: direct aid is needed to companies, also in the form of subsidies – in the start-up phase – to fill the gap between production costs and low international prices – explains Nomisma – and part of the public demand must be directed towards drugs that use the active ingredients produced in the EU “.
Bring the other stages of the supply chain back to Italy
But production is only one of the pieces on which to focus internalization efforts. He is convinced of it Giovanni Tria, Economic Advisor to the Minister of Economic Development: “It is evident – he said speaking at the presentation of Raspporto Nomisma – the sharp decrease in the component linked to patents and this makes me think that research in Italy has weakened. This worries me because if research is carried out, patents also increase and this also has a positive impact on the production of generic drugs and the whole issue of reshoring changes perspective. Currently the entire pharmaceutical supply chain is internationalized, starting with research, but Italy must be present in all phases for reasons of national security by reviewing the price formation mechanism and pushing for the concrete implementation of a European plan because the issue of the lack and the need for autonomy concerns all the countries of Europe “.
The report of the Nomisma Observatory also focused on public hospital tenders, bringing to the fore the thorny issue of estimating needs which sees the Italian regions decidedly unprepared. “The issue of the imprecise calculation of needs concerns on average the entire national context – reports the study. In most cases the estimate is made on the basis of the history of previous years, often reconstructed starting from information flows on poorly structured consumption network layer “. The misalignment with respect to the orders actually advanced translates into high damage for companies, further discouraging their participation in tenders, a phenomenon already made serious by tenders based solely on the price reduction, which a few years after the expiry of the patent lead to a progressive thinning of the competition (the number of companies that participate is drastically reduced as well as the lots that have gone deserted).
A national demand forecasting algorithm
How to solve this question? Various proposals arrived from the interviews with the companies involved in the Nomisma Report, including the creation of a forecast algorithm at a national level, usable and customizable by the different regions, capable of systematizing consumption data with the epidemiological profiles of the population. “It would also be useful – adds Poma – to jointly evaluate price factors together with qualitative elements that add measurable value to the offer based on the categories of drugs such as the availability of different dosages or any devices for administration”. Another possible solution is to provide for the obligation to reopen the competitive confrontation between companies upon entry of the first equivalent on the market (as happens with biosimilars), instead of negotiating only with l’originator price alignments at the lowest levels in force. And then two central issues: limiting the load of documents necessary to participate in the tender and setting a minimum ceiling beyond which the contracting authority cannot fall in the request for an actual order to the company.
.