3.5 million tons of pharmaceuticals per year are transported by ship, 0.5 million tons per year by air. Although the majority of the drugs were produced in Europe, America and Japan 20 years ago, today, China and India are the leading suppliers. The main reason for this is that pharmaceutical companies were no longer able to make large profits because of too small margins. Producing in a country with low production and labour costs seemed the solution. Unfortunately, this method has been causing problems in recent years, with the current corona crisis as the lowest point.
European dependence on China and India
China supplies most of the raw materials for medicines to India. India produces semi-finished products and exports them to factories worldwide, where the final product is then produced. Some medicines are completely manufactured in India. Europe is dependent on India for semi-finished products for 26% of generic medications. This has already led to problems in the supply of medicines in recent years. In the Netherlands, drug shortages increased and even doubled in 2019.
The impact of corona on drug supply
Due to the corona crisis, this dependence has led to an even bigger problem. Public life in China came to a standstill, raising concerns about drug supplies in the west. Besides, the Indian government curtailed exports of several medicines last March to make up for medicine shortages in its own country. With a population of 1.3 billion people, abundant supply is necessary. This measure also caused problems for Indian exporters, due to fears of fines from customers, high costs for stationary sea containers and customers running away. Under pressure from America, the ban on most of these drugs has been lifted. India only keeps paracetamol and its raw materials to itself.
High transport costs
The next problem arose for the medicines that were eventually allowed to be exported. Medicines often hitch a ride in the hold of passenger flights, but these were grounded during the corona crisis. As a result, companies are forced to pay high rates for cargo flights.
Impact on the Dutch medicine supply
It is clear that the availability of medicines will be jeopardized when the production chain in China and India gets into trouble. The worldwide impact, and therefore also on the Netherlands, is enormous. Dutch pharmacies usually store stock for several months, but a long-term problem could arise. It is, therefore expected that the pharmaceutical supply chain would be revised. For example, plans have already been devised to build up an iron stock to prevent shortages. It is also advocated to develop an efficient system. However, this is easier said than done. Building an iron supply takes one and a half to two years, a reconstruction of the European medicine industry even longer. A second corona wave is therefore viewed with suspicion.