New EU medicines law aims to bypass India, China on key drugs

The EU will look to boost local production of medicines through state aid and rewards for “made in EU” products, after legislators clinched a deal early Tuesday morning.

After more than 12 hours of talks, the European Parliament and the Council of the EU agreed to introduce public procurement criteria that move away from favoring the cheapest medicines and instead prioritize their security of supply.

Europe’s new law seeks to reduce its dependencies on countries including India and China for critical medicines and their ingredients, to diversify supply chains and incentivize European manufacturing amid growing geopolitical tensions.

This reliance on a handful of countries outside the bloc for medicines caused critical drug shortages in the Covid-19 pandemic — it has long been an issue for the bloc, with any manufacturing hold-ups impacting EU supplies.

“Patients should not have to worry about whether critical medicines such as antibiotics will be available at their pharmacy or hospital,” Neophytos Charalambides, Cyprus’ health minister, said after the deal. “With today’s agreement, we are taking practical action to reduce our vulnerabilities, diversify supply chains and strengthen Europe’s capacity to produce critical medicines and their ingredients closer to home.”

Buy local

Over the past decades, Europe’s medicines supply chains have increasingly moved overseas to countries where products and their ingredients are cheaper to make. The medicines sector has said EU countries’ large and often winner-takes-all tenders that opt for the cheapest drug have contributed to this trend.

The Critical Medicines Act addresses these issues, as well as counter America’s attempts to boost medicines manufacturing there.

“We tried to retain the industry in Europe, I think this is extremely important,” said Tomislav Sokol, the Parliament’s lead negotiator on the file from the center-right European People’s Party.

These changes to procurement rules were among the most controversial measures EU legislators agreed early Tuesday morning, and after more than four hours of talks on this item alone.

The European Parliament had wanted medicines tenders to prioritize critical medicines with at least 50 percent of the product’s value made within the EU. The final compromise gives procuring bodies the option to prioritize EU-made products, with a sliding reward scale for medicines with a greater proportion of production in Europe.

The capitals had opposed a mandatory preference for EU products, since these medicines are expected to come with a significantly higher price tag. And with Europe’s public health systems already under budgetary pressure, higher drug prices will be hard to absorb.

Tiemo Wölken, Parliament’s negotiator with the socialists, told POLITICO after the deal: “Priority should always be given to manufacturers with the highest proportion of production located within the Union.”

Helping hand for home-made drugs

The text also establishes criteria for setting up so-called industrial “strategic projects” in the EU to create, modernize and increase manufacturing capacity for critical medicines. These projects can benefit from national or EU financial support, but they will have to comply with clear obligations, including prioritizing supply to the EU market.

Tiemo Wölken, Parliament’s negotiator with the socialists, told POLITICO after the deal: “Priority should always be given to manufacturers with the highest proportion of production located within the Union.” | Thierry Monasse/Getty Images

In a win for the Parliament, EU legislators also agreed to include orphan medicines — which, unlike most critical medicines, are not cheap off-patent drugs but expensive innovative therapies to treat rare diseases — within the scope of the law. This will make them eligible for state aid as well as joint procurement, making them more affordable and accessible, especially for smaller EU countries.

On stockpiling, the final deal removed the EU’s mandatory redistribution of medicines from one country to another that is experiencing a shortage, as requested by the Parliament. But countries agreed to increase transparency over their contingency stocks.

The law also expands Europe’s rules on joint procurement, allowing countries to band together to purchase medicines, increasing their buying power and expanding access to more patients.

Here, the Council secured a win by removing an article allowing the European Commission to participate in the joint purchasing of medicines — seen as EU overreach by the capitals. However, the Council did agree to lower the threshold of countries required to kickstart joint procurement to the five proposed by the Parliament, as opposed to nine.

Tuesday’s deal is a big win for the Cypriot presidency of the Council of the EU, with many of the Council’s proposals adopted. The final deal, meanwhile, only includes a few of the proposals put forward by the Parliament.

The Cypriot presidency has been under pressure to conclude negotiations on this legislation, spurred by the EU’s drive to be more self-sufficient in the wake of the Covid-19 pandemic and, more recently, amid U.S. trade tensions and the threat of tariffs.

This provisional agreement will now have to be endorsed by health ministers in the Council of the EU and the full European Parliament.