Munich, 20 July 2020 by Moritz Haucke.
This article is the second part of our series on "European Healthcare Autonomy". In this series, we shed light on the measures that need to be taken to ensure EU-wide healthcare autonomy from the perspective of various actors from politics, business and the healthcare sector. The second article is dedicated to the question of what Germany and the EU must do to make the pan-European healthcare system crisis-proof in the future.
Globalisation of value chains.
The awarding of discount contracts (especially exclusive contracts) by health insurance funds to pharmaceutical manufacturers has sparked increasing price pressure in recent decades. In order to remain profitable, costs had to be reduced considerably. As a result, many pharmaceutical and medical technology manufacturers relocated parts of their production to non-European countries, especially to China and India.
Especially cost-sensitive manufacturing steps such as the production of active ingredients for medicines were outsourced. This created globalised value chains that led the pharmaceutical and medical technology industries into dependencies. Even if the drug or medical device is manufactured in Germany - without pre-produced active ingredients or parts, the production lines in Germany come to a standstill. The result is a loss of autonomy in system-relevant areas such as healthcare and a dependence on non-European suppliers and subcontractors. If the global supply chains falter, the system faces supply bottlenecks or failures. Every pandemic or political unrest, every economic war or unforeseen events at supply locations with lower standards lead to direct consequences in the German and European health system.
Corona reveals the dependency.
We are familiar with supply bottlenecks in pharmacies and at medical product manufacturers from the past. In recent years, for example, there have been shortages of common painkillers such as ibuprofen.[1].
Often certain manufacturers were not available or the prescribed dosage of active ingredient was not available. Most of the time there were alternatives, and the impact on the patient was bearable.
With Corona, two effects occur: on the one hand, the demand for certain medicines and medical devices increases exponentially. On the other hand, the worldwide supply chains collapse and the supply temporarily approaches zero. And: this time, alternatives do not work. There is no pan-European plan to counteract these two effects in the short term. There is a lack of production capacities to compensate. Converting existing production capacities takes too long and can only be realised economically through massive state subsidies. As a consequence, Federal Finance Minister Scholz has launched a programme to promote the flexible and, in the event of an epidemic, scalable domestic production of important medicines and medical products with a volume of 1 billion euros in order to be able to react at least in the medium term.[2].
The real question, however, is: how little autonomy can a continent like Europe afford in the health system? How few options for action do European governments want to have at their disposal when events such as a global pandemic endanger the health of their citizens. Or in summary: what price are we willing to pay to provide the most cost-effective medicines and medical devices possible in our health system.
Delivery capability and European standards.
Europe has developed high standards in the health sector over decades. These standards are intended to ensure the quality of products and thus the health of patients. The continent has learned its lessons from the scandal of substandard breast implants.[3]. The Medical Device Regulation[4] is the legislative implementation of this European requirement. The European standards on working conditions, occupational safety, workers' rights and wage structures are a result of a long process that is not only about patient safety but also about a European understanding of working conditions. The outsourcing of production steps to less regulated regions also entails a deliberate abandonment of these principles and standards. This is the price that Europe accepts, in addition to the loss of autonomy.
The Corona crisis as a consumer protection crisis.
Particularly in the case of medical products, a problem is revealed that has been smouldering for years. The crisis is also a crisis for consumer protection. Administrations, hospitals and private individuals everywhere need medical devices such as breathing masks, rapid tests or respirators. In some cases, it is difficult to verify whether the certification really complies with European standards. In the worst case, defective medical devices could be on the market for weeks without regulatory authorities or consumers being informed about the defects.
Originally, the new Eudamed database was to go online on 26 May 2020 as a central EU-wide reporting centre for medical devices. With it, registration data and safety incidents would be accessible to the entire population for the first time. However, the process is stalling. At the end of October 2019, the European Commission postponed the launch date to May 2022. The new MDR was also postponed from April 2020 to April 2021 due to fears of supply bottlenecks in the corona crisis.
A uniform reporting system helps in times like the Corona crisis. Even before the crisis, there were too few notified bodies to test medical devices according to the new MDR. This poses major challenges, especially for SMEs. It is up to the EU to solve these problems promptly in order to create uniform standards for consumers within Europe.
Bringing production back to Europe.
When it comes to medicines, it must no longer be just about the price. Quality and availability must play an overriding role. Incentives are necessary to encourage manufacturers to relocate their production back to the EU.
Relocating production would bring the advantage of geographical proximity. Processes could be documented more quickly and controlled more easily. Quality would increase. Shorter transport routes would ensure short delivery times and thus increase availability.
A European production chain would also simplify quality controls, both by national bodies and by the European Medicines Agency (EMA), and increase the quality of medicines. The same effect also applies to working conditions and environmental protection. The higher European standards only take effect on our continent and not in the Far East.
Reform the health system.
Currently it works like this: A manufacturer concludes a contract with health insurance companies, which agrees that all insured persons of this health insurance company will only receive the medicine of this one manufacturer. In return, the pharmaceutical company grants the health insurance company a large discount. About 80% of the medicines sold in Germany are affected.
On the one hand, these contracts have led to lower prices for patients, but on the other hand, dependence on this particular manufacturer is growing. For other manufacturers, production is no longer worthwhile. If the exclusive contract holder experiences supply bottlenecks, no other manufacturer can step in at short notice, as it takes months to ramp up production.
The solution is: exclusive contracts with only one manufacturer must be banned.
The Federal Association of the Pharmaceutical Industry (Bundesverband der Pharmazeutischen Industrie e.V.) proposes that at least three suppliers be awarded a rebate contract and that among them there must also be at least one manufacturer that produces in Germany or Europe.[5]. According to Progenerika, this would mean that no more producers would move out of Europe.[6]. The company has to decide whether availability and quality are more important than price.
Using the crisis as an opportunity.
A pan-European solution is needed to ensure the supply of medicines and medical devices to the population in times of crisis. This would also reduce the likelihood of supply shortages in "normal" times. Locally based manufacturing could strengthen existing clusters and even create new ones. Innovative research would be promoted and highly qualified jobs would be created.
The problem is now high on the agenda of business and politics. In their proposal of 18 May 2020 for a European "reconstruction fund" after the Corona crisis, German Chancellor Angela Merkel and French President Emmanuel Macron explicitly spoke of the need for Europe to reduce its dependency on the outside, especially in the health sector.[7].
The question arises: can the process be reversed at all, and if so, how?
From the point of view of patients and the chronically ill, it is to be hoped that the opportunity for increased European cooperation will be seized in order to avoid supply bottlenecks in the future and to ensure the supply of the population.
- [1]https://www.deutschlandfunk.de/lieferengpaesse-bei-arzneimitteln-schmerzmittel-sind.709.de.html?dram:article_id=463236
- [2]https://www.bundesfinanzministerium.de/Content/DE/Standardartikel/Themen/Schlaglichter/Konjunkturpaket/2020-06-03-eckpunktepapier.pdf?__blob=publicationFile&v=8
- [3]https://www.spiegel.de/wissenschaft/medizin/pip-anwalt-gefaehrliche-brustimplantate-waren-nicht-genehmigt-a-806043.html
- [4]https://de.wikipedia.org/wiki/Verordnung_(EU)_2017/745_%C3%BCber_Medical_Devices
- [5]https://www.bpi.de/de/nachrichten/detail/arzneimittelproduktion-im-lichte-der-lieferengpaesse
- [6] https://www.progenerika.de/lieferengpaesse-pro-generika/
- [7]https://www.bundeskanzlerin.de/bkin-de/aktuelles/pressekonferenz-von-bundeskanzlerin-merkel-und-dem-franzoesischen-praesidenten-emmanuel-macron-1753844
