The German government introduced a law last year aimed at ensuring a stable and secure supply of medicines. However, few improvements have been seen in the 15 months since the act to combat drug shortages and improve supply (ALBVVG) came into force. This article explores the possible reasons.

Supply Shortage or Supply Crisis?

A supply shortage occurs when a specific medication is not available in sufficient quantities for a certain period. This means that while the drug may currently be unavailable, there are alternative preparations or other suppliers available.

A supply crisis describes a critical situation where the provision of a specific, irreplaceable medication to patients is seriously endangered. This situation arises when no alternative medication is available.

Supply Shortages Remain a Problem

As of October 27, 2024, the German Federal Institute for Drugs and Medical Devices (BfArM) recorded a total of 487 medications experiencing supply shortages in a database. All the reports are based on information from the pharmaceutical industry, representing a snapshot of the situation.

According to David Francas, PhD, professor of data and supply chain analysis at Worms University of Applied Sciences, Worms, Germany, the situation has hardly changed since June 2023, 1 month before the ALBVVG took effect. At best, there is a “separate downward trend since 2023,” but the developments in the fall and winter remain to be seen.

Data analyses from German broadcaster Bayerischer Rundfunk indicate that the situation remains problematic. Over the course of 2023, there were 1426 supply shortages — about 1.5 times as many cases as in the previous year and nearly three times as many as in 2021. The range of shortages includes antibiotics, antidiabetics, standard analgesics, and saline solutions for injections and rinses during surgeries.

Vaccines are not included in these data. The German federal institute for vaccines and biomedical drugs, the Paul-Ehrlich-Institut, lists shortages separately. As of October 2024, the only concerns involved supply of the diphtheria-tetanus-pertussis vaccine from GlaxoSmithKline.

So, what exactly is the problem? Experts, associations, and manufacturers identify five main reasons.

Reason 1: Discount and Fixed Contracts Make Domestic Production Unattractive

First, let’s look at generics. “In Germany, we have driven prices down so much with discounts and fixed amounts that the German market is simply not attractive for many manufacturers. Consequently, more and more of them are withdrawing from the production of certain medications,” explained Ulrike Holzgrabe, PhD, senior professor of pharmaceutical and medicinal chemistry at the Institute for Pharmacy and Food Chemistry, University of Würzburg, Würzburg, Germany.

“We are increasingly approaching a kind of monopoly with some medications. If a manufacturer drops out for any reason — natural disasters near the plant, for example — we already have a problem,” said the expert.

Along with varying production costs for medications in Germany, the EU, or other economic areas, the lower achievable margins lead to production being relocated. According to the German Association of Research-Based Pharmaceutical Companies (vfa), about 68% of all production sites are now located in China and India. In addition to lower labor and energy costs, lower environmental standards often also play a role.

If there is a production failure at one of these few factories, such as in January 2021 when a fire occurred at the world’s largest vaccine manufacturer in India, it can have repercussions for the entire world. Similar consequences arise from accidents at factories producing precursors for pharmaceuticals.

In the past, manufacturers of pharmaceutical packaging were unable to deliver because of the rising cost of raw materials for packaging. This has also contributed to supply shortages for many medications. Major events such as the COVID-19 pandemic, wars, or the ‘Ever Given’ incident in 2021 in the Suez Canal, which blocked international transport routes, have exacerbated the situation.

Overall, “production problems” as an indirect consequence of discounts account for a significant portion of reports on supply shortages, especially in the generics sector, where, according to vfa president Han Steutel, “the cost screw has been turned too far.”

Because of the German Pharmaceutical Market Reorganization Act, the prices reimbursed for new drugs on the German market are significantly lower than in 15 comparable European countries. As a result, parallel exporters are legally encouraged to purchase large quantities of medicines in Germany in order to sell them profitably in other EU countries. This can lead to shortages in Germany.

Reason 2: New Recommendations Including Cost Reimbursement Lead to Increased Short-Term Demand

When demand for a specific medication or vaccine suddenly increases, manufacturers often struggle to ramp up production quickly. “A systematic increase in supply shortages due to rising demand was observed in March 2020 following the WHO’s declaration of a pandemic,” explained Francas. This initially affected all types of analgesics and other pharmaceuticals for symptom control, later extending to masks and vaccines.

By fall 2024, there was a run on the RSV antibody nirsevimab, as reported by Medscape Medical News. Following a new recommendation by the Standing Committee on Vaccination, it is being used for the first time for the immunization of infants in their first year of life at the expense of health insurance companies. Demand for the vaccine caused supply difficulties for the manufacturer Sanofi in September. The active ingredient is now also available in Germany with packaging in other languages in accordance with the ALBVVG.

The combination of increased demand and production failures is another reason for supply difficulties. For instance, in 2012, a flu vaccine was temporarily withdrawn from the market due to concerning flocculation. The long production lead time for vaccines meant that other companies could not step in to meet the supply shortfall.

Reason 3: New Off-Label and Lifestyle Applications

The antidiabetic drug semaglutide, marketed as Ozempic, faces shortages driven by its off-label use as a weight loss treatment. The later approval of Wegovy as a treatment for obesity added to the soaring demand for semaglutide.

The medication is commercially so successful that it is even worthwhile for criminals to produce counterfeits, with the first versions circulating by the end of 2023.

Currently, Ozempic is listed as experiencing “delivery delays due to a demand that has risen more than expected” on the BfArM portal. This was initially reported until the end of November. However, the active ingredient is likely to be scarce until January 2025.

According to the manufacturer, Ozempic should initially only be prescribed for its indicated use in type 2 diabetes. “Any other application, including weight regulation, constitutes an off-label use and jeopardizes the availability of Ozempic for people with type 2 diabetes,” according to Novo Nordisk.

Reason 4: Stricter Manufacturing Regulations

New manufacturing regulations, along with economic considerations, are another contributor to supply difficulties. As of fall 2024, sterile saline solution became difficult to obtain.

“The supply problems are rooted in the tightening of requirements for the sterile manufacturing of medications,” explained a spokesperson for the Bundesverband der Pharmazeutischen Industrie. “This tightening leads to a decrease in the number of contract manufacturers and fillers as many of the previous contractors cannot implement the necessary restructuring measures due to cost reasons.”

Since August 2023, stricter rules have been in effect in the EU under the so-called Good Manufacturing Practice guidelines for the production of sterile medications. For example, filters must now be changed more frequently, adding an additional cost. The current shortage is also attributed to damage at a key facility in North Carolina caused by Hurricane Helene.

Earlier this year, shortages occurred at suppliers of glass bottles. Due to the high global interconnectivity in supply chains, this had worldwide repercussions.

Reason 5: Manufacturers Withdraw From the Market

Often, purely economic considerations lie behind supply and supply shortages. “The high cost pressure from fixed amounts, price moratoriums, and discount contracts leads pharmaceutical companies to withdraw from Germany and Europe, with some even exiting the market entirely,” stated a report from the German Economic Institute.

In particular, generic manufacturers have exited the market in recent years. Other companies have merged or been acquired, leading to increasing oligopolization.

Due to fixed amounts, price moratoriums, and discount contracts, alongside rising costs for labor, energy, and raw materials, the pharmaceutical industry is under significant cost pressure. In a 2023 survey, 30% of generic manufacturers indicated that they expect to remove between 10% and 50% of medications from their portfolio in the coming 12 months. Seventy percent said they would likely no longer offer up to 10%. Candidates for removal include several antibiotics, the opioid oxycodone, the antidepressant venlafaxine, the channel blocker ivabradine, and the blood pressure medication bisoprolol.

Problems Known, Solutions Distant

There is now also a political acknowledgment that the price screw has been turned too far for important generic medications, said Francas. “From an industrial economics perspective, low prices result in less buffer in stock or capacity. The connection between low price levels and poorer availability of medications is now also empirically proven.”

While only about 500 of the approximately 100,000 approved medications are typically affected by supply problems, experts say that only in a few cases is there a real shortage. However, they fear that the situation will worsen and that measures taken so far by the German Federal Ministry of Health have been ineffective.

There needs to be more production in Germany, Holzgrabe argued, questioning comparatively strict regulations on production. “In Germany, for example, as a manufacturer, you are only allowed to produce a single antibiotic in one facility, not multiple. This is different in China.”

Franca added that it makes sense to “not only focus on diversification and the inclusion of European capacities in tenders for health insurance contracts for antibiotics but also for other groups of medications.”

More Companies to Leave Germany?

Meanwhile, generic drug manufacturers fear more trouble from a wastewater directive that forms part of the EU pharmaceutical package. By 2045, a fourth filtration stage is to be mandated in cities with at least 150,000 inhabitants to remove residues of medications and cosmetics. Manufacturers of pharmaceuticals and cosmetics are expected to contribute 80% to the costs of building and operating this extra stage of purification.

Many experts fear that the additional billions in costs could lead to “a tsunami of shortages” as the production of many “irreplaceable medications” could become so unprofitable that they would have to be removed from the market. The latter was stated by Andreas Burkhardt, general manager in Germany of the Israeli pharmaceutical company Teva Pharmaceuticals, in a letter to Germany’s Health Minister Karl Lauterbach.

This story was translated from Medscape’s German edition using several editorial tools, including AI, as part of the process. Human editors reviewed this content before publication.