Part IV of a four part series
As part of our series covering payments and overarchingly focusing on how Europe is pushing to improve its autonomy from a transatlantic relationship that has become less predictable and more politically contingent, we now focus on the pharmaceutical sector.
In March 2025 the European Commission first proposed the Critical Medicines Act (CMA), and on 20th January the EU Parliament endorsed the policy by 503 votes in favour, versus 57 against and 108 abstentions.
The Critical Medicines Act is not a protectionist turn. It is an attempt to reduce exposure to single points of failure in a supply chain that has become increasingly politicised.
Resilience
The CMA aims to improve Europe’s pharmaceutical resilience by re-shoring the manufacture of Active Pharmaceutical Ingredients (APIs), essential drugs such as insulin and antibiotics, and critical medicines. An exploratory EU study published in 2025 found that 50% of critical medicine shortages suffered by EU nations could be traced back to manufacturing issues that were considerably amplified by an almost total reliance on API supplies from India and China. Whilst the CMA would significantly improve Europe’s “health sovereignty” and ensure that European healthcare systems are considerably less vulnerable to geopolitical shocks, there are a variety of concerns and challenges that surround it.
The Covid-19 pandemic highlighted the fragility of healthcare systems’ supply chains, especially when it came to access to both medicines and crucial medical supplies. One need only look at the UK’s struggles (and scandals) to secure supplies of Personal Protective Equipment (PPE) during the pandemic to imagine the scale of the challenge Europe-wide.
To that end, ahead of proposing the CMA, the EU introduced the Pharma Act (Pharma Package) in December 2025 with the aims of accelerating medicine authorization, fostering pharmaceutical innovation, improving access, and addressing shortages. Coupled with the CMA, we can see then that the EU is getting serious about considerably bolstering the resilience of all its 27 member states.
It is important to note that the CMA, and the Pharma Package are not a direct response to the considerable changes that Europe’s relationship with the USA has undergone since President Trump took office in January 2025. That said, with Europe becoming increasingly wary of the USA’s transition to an unreliable and unpredictable transatlantic partner, motivation to pursue pharmaceutical resilience, and indeed wider healthcare system resilience, and further autonomy from the USA, has only risen – as the overwhelming majority of votes in the EU Parliament testify.
Challenges
However, as above, there are some concerning challenges surrounding these initiatives. Firstly, there are valid concerns that the increasing pursuit of “health sovereignty”, not only by the EU but by numerous other wealthy/ advanced states and regions, will lead to reduced supply and access to key medicines and ingredients for less advanced nations, the global south as a whole, and even challenge the growth of pharmaceutical sector development in developing regions such as Africa.
More, the regionalization of the pharmaceutical production and supply could add yet another layer of geopolitical complexity in an era of increasing Realist competition between states and blocs. Fearing being locked out of the discovery, production, and supply of new medicines, nations such as India and China may choose to ringfence their own industries, barring North American and European companies from access to/ acquisition of research and discoveries, leading to considerable medicines/ health inequities as differing nations and blocs make independent progress and production that is inaccessible to other nations.
This, in turn, either leads to a global pharmaceutical arms race as nations compete to achieve advancement over one another, or indeed the reverse; a global reduction in pharmaceutical advancement as research, discoveries and innovations become increasingly siloed inside national/ bloc protectionist systems.
Pharma’s View?
For pharmaceutical companies, the push for resilience creates a direct collision between strategic policy goals and commercial reality.
Globalisation offered these companies the potential to manufacture medicines in low-cost jurisdictions and sell in higher-cost jurisdictions, maximizing margins. Now, with these efforts to re-/ on-shore API and medicines production, these companies will be forced to expend considerable capital constructing production facilities in high cost jurisdictions in advanced economies, and pay higher costs for production whilst selling into markets such as the EU bloc that coordinate purchasing power and stock management to drive down medicine prices – meaning lower margins for the pharmaceutical companies.
Yes, the EU is considering support for “strategic projects” in the form of fast-tracking permits and state aid for CAPEX, but this doesn’t alter the fact that the overall CAPEX cost to build in Switzerland is higher than that required in Bangladesh, and that the enduring OPEX cost during production will be persistently higher.
Importantly too, pharmaceutical companies have already spent considerable sums constructing manufacturing capacity in low-cost jurisdictions. What happens to those facilities now? Do they continue to operate, but with their production servicing a reduced number of markets and with the markets that they still serve only providing lower margins due to them not being advanced economies?
And what of production facilities in the USA? Do they now only serve the US market which, whilst advanced and higher margin, is nonetheless considerably smaller than the global market that those facilities once supplied? Again, the pharmaceutical companies face considerable underutilization of manufacturing plants that cost considerable sums to build in the first place and considerable sums to operate.
Add to this that the pharmaceutical industry is already facing considerable challenge on two fronts. First, President Trump’s push to reduce medicine prices in the USA, at the expense of other economies (especially European), is reducing revenues in the USA and not necessarily improving revenues in Europe. Indeed, numerous advanced European economies are pursuing “cost containment” policies regards purchasing medicines for national health systems (such as Belgium’s proposed 17.3% healthcare budget cap for medicines) which threaten drug makers’ profits, not least at a time when national budgets are increasingly being diverted towards defence. Indeed, as above, as European pharmaceutical resilience is increasingly realised it looks set to reduce revenues in Europe as well – meaning lower profits both in Europe and in the USA overall.
Second is the upcoming Patent Cliff, due to arrive in 2027/ 2028, when roughly USD180 Billion in annual revenue is threatened by patent protections expiring on certain key, and lucrative drugs, allowing generic versions of these drugs to be produced in third countries such as Bangladesh.
Conclusion
From the perspective of individual nations and economic blocs the idea of improving health sovereignty, of which pharmaceutical resilience is a necessary part, makes complete sense. The trouble is, it makes considerably less sense when viewed from either a commercial perspective or from a global medical advancement and resilience perspective. The silo-isation of research and manufacturing, of both APIs and end-products, is likely to lead to reduced medicines access in less advanced economies, reduced pace of research and development as nations more closely husband their pharmaceutical industries, and increased divergence in healthcare standards across numerous disease/ ailment areas and across the planet. More, it threatens to undermine the profitability of the pharmaceutical industry as a whole, which will only exacerbate the research and development pace reduction described above, as companies will have less profits that can be ploughed back into research or used to acquire new drugs from geographies that were previously more permissive of research sharing, or drug patent acquisition.