Regulated into scarcity: Why EU pharma rules backfired and how to fix Europe’s drug drought

Breakdowns that lead to shortages can occur at any point in the supply chain — from the production of active pharmaceutical ingredients to retail distribution, areas where legislative and market constraints can further complicate matters.

The founding document of the Critical Medicines Alliance, established by the European Commission in order to analyze vulnerabilities in pharmaceutical manufacturing, explicitly states the need to identify and eliminate weak links in supply chains. Particular attention is paid to medicines of priority importance — those for which dependence on a small number of active ingredient manufacturers makes the market more sensitive to disruptions.

Production and quality control

A 2022 report by the Pharmaceutical Group of the European Union identified the main causes of shortages as “disruptions or suspension of the manufacturing process, the introduction of production quotas at facilities, and unexpected increases in demand for medicines, including pediatric antibiotic formulations.”

Disruptions often occur after inspections reveal deviations from standards. When that happens, companies must pause production, recall finished batches, or shut down specific production lines.

Shortages can also result from the revision of registration dossiers, tighter impurity controls, and updated pharmacovigilance criteria. These changes often require technical upgrades at manufacturing sites, and additional requirements may make the production of low-cost medicines less economically viable.

Availability of pharmaceutical substances

A second source of vulnerability is the production of active pharmaceutical ingredients (APIs), which are manufactured in only a few regions. A disruption at this level automatically affects the availability of the final product across the EU.

The vulnerability of pharmaceutical supply chains at the API stage is noted in a European Commission comment regarding the EU’s dependence on imported medicines and substances. Some drugs and their components are supplied to the EU from third countries because European production capacity is insufficient, and as a result, any disruption to imports can lead to shortages.

Procurement and pricing

Another cause of shortages is government control over drug prices. In most EU countries, medicines are purchased through reference pricing systems and tenders, where the lowest bid wins. For widely used basic medicines, this model leads to sustained margin compression. Over time, some manufacturers exit the segment, and supply becomes concentrated in the hands of a limited number of players.

The pharmaceutical community describes state price regulation — alongside production disruptions — as one of the key causes of medicine shortages. A focus on the lowest price reduces incentives for new suppliers to enter and for companies to build up buffer stocks, and when supply depends on only one or two players, even a local setback quickly becomes a sector-wide problem.

National barriers

Policy discrepancies also play a role. Even if a medicine has received EU-wide marketing authorization, this does not guarantee that it will actually be available for sale in all member states. National markets remain under the authority of local governments, which regulate everything from labeling and packaging requirements to commercial launch. As a result, countries compete for supplies rather than offsetting each other’s shortages.