The weak point: Why pharmaceutical security belongs at the heart of European defence

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Every day we see examples of China and the United States using trade dependencies to advance political and economic interests. So far, public debate has focused mainly on raw materials and critical technologies such as rare earths and semiconductors. But another area is just as vital: pharmaceutical ingredients.

In spring 2025, 11 EU health ministers warned in an open letter that Europe's dependence on Chinese medicines was the weak point in Europe's defence. The ministers warned that even routine surgery could become risky and that, without enough antibiotics, Europe's healthcare systems could come under severe strain. Initial attention to the letter was short-lived, but the challenge remains acute. The EU must preserve its remaining production capacity, strengthen cooperation with third countries to diversify supply, and increase its role in global pharma innovation.

Stress test: Medicine supply in the EU is at high risk

At first glance, Europe's dependence on Chinese pharmaceuticals might appear rather unproblematic. This is because a significant share of downstream manufacturing - such as formulation, where pharmaceutical ingredients are processed into finished medical products, and packaging - takes place in Europe. However, a closer look at supply chains reveals a high level of dependency.

The authors conducted a stress test on 56 active pharmaceutical ingredients - the core substances in medicines - all classified as essential for healthcare. Among the products considered were painkillers, antibiotics, diabetes medications, and biosimilars, for which dependencies on China were frequently identified. This is particularly true for generics, or off-patent drugs, which account for about 80% of the EU's medicine supply. The stress test estimates supply risk based on how many manufacturers or production sites exist for each active ingredient. Fewer than half of the substances examined (26) are considered low risk. For more than one third (20), the share of Chinese suppliers and production sites is so large that a disruption in supply from China would have severe consequences. Particularly critical are the strong dependencies in antibiotics.

The analysis of the entire value chain shows that Europe's dependence on China is even more pronounced at the precursor stage, i.e. for the chemical inputs needed to produce active pharmaceutical ingredients. This can be illustrated by the antidiabetic metformin and the antibiotics amoxicillin and cefpodoxime. At the active pharmaceutical ingredient production stage, these three medicines show a medium to high risk (with 33%, 20%, and 13%, respectively, of production located in China). When the key precursor products in each case are taken into account, the capacity risk rises sharply: to 83% for metformin, to 71% for amoxicillin, and to 94% for cefpodoxime. These often-overlooked dependencies along the value chain imply that even when Europe imports pharmaceuticals from other locations, such as India, the EU remains ultimately dependent on Chinese supplies of precursors.

China's industrial policy

China's strength in pharmaceuticals is no accident. It is the result of decades of industrial policy built on two pillars: generous state support and a largely protected domestic market. A conservative review of listed firms shows that, on average, every Chinese pharmaceutical company receives more than €3 million a year in support for production capacity and research and development, with the real figure likely much higher. Additional programmes, such as the 'Special Program for Significant New Drug Development', mobilised about €2.8 billion between 2008 and 2020. Tax incentives, including R&D rebates of up to 175%, have further accelerated growth.

Market access restrictions have been just as important. China's public procurement policy systematically favours local producers: in the first nine bidding rounds, 96% of successful bids went to domestic generic manufacturers. Until recently, foreign pharmaceutical firms had to form joint ventures with Chinese partners to produce locally. This let Beijing control its domestic market while providing Chinese firms with a protected environment in which to develop into globally competitive players.

China's ambitions go further. Beijing aims to become a leader in innovative pharmaceutical research, particularly in biotechnology and biopharmaceuticals. Since 2013, patent filings of Chinese pharma companies have risen by 440%, while they have fallen by 10% in Germany. At the same time, the value of Chinese drug licensing deals rose from about USD 52 billion in 2024 to USD 157 billion in 2025. Five of the 10 largest licensing deals in 2025 already involved Chinese companies.

How should Europe react?

So far, China has not systematically used its dominant position in global generic drug production as a geopolitical weapon. One reason may be the reputational cost of restricting pharmaceutical exports. Still, warning signs are emerging. In 2025, the biotech firm Illumina became the first in its sector to be placed on China's sanctions list. Chinese state media had already reminded the US in 2020 that much of its supply of antibiotics and fever medication came from China and warned of the implications of a potential Chinese export halt. Chinese policymakers clearly understand the leverage pharmaceutical supply chain dependencies offer.

Europe must respond to this changing reality in three key areas: preserve existing pharmaceutical production in Europe and prevent further offshoring; diversify imports of generic ingredients and precursors by expanding production capacity outside China; and strengthen Europe's own innovation base.

The EU's proposed Critical Medicines Act is a step in the right direction because it begins to treat pharmaceutical resilience as a strategic objective. But the next step must be defined more clearly. Since Europe would struggle to replace a loss of Chinese supply in the short term and cannot rapidly build new generic capacity, the first priority should be to prevent existing production in Europe from disappearing. That means using public procurement and health legislation to reward resilience, creating long-term market-based incentives for critical production capacity, and aligning environmental, pharmaceutical and industrial rules so that they do not unintentionally drive manufacturing out of Europe.

Diversification, meanwhile, cannot rely on reshoring alone. The EU should coordinate action at Union level to exploit economies of scale, expand targeted production in Europe, and build investment partnerships with third countries to secure alternative sources of active ingredients and precursors, including through Global Gateway.

On innovation, Europe should build on its remaining strengths in biopharma by supporting research and process innovation across the pharmaceutical value chain, while introducing EU-wide rules for sensitive biotech cooperation and health data transfers with China rather than ending cooperation outright.

Given that the health of EU citizens is at stake, Europe cannot ignore the risk but has to act.

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