How the EU Critical Medicines Act impacts the future of generic manufacturing

For decades, European health systems have purchased generic medicines on a simple principle: buy the cheapest available option. That logic helped contain costs, but it also pushed manufacturing steadily eastward, concentrating the production of essential medicines — and their active pharmaceutical ingredients — in a handful of countries outside Europe. Now, with the EU Critical Medicines Act advancing through trilogue negotiations in 2026, policymakers are asking whether the cheapest option is still the safest one.

A 2021 European Commission study warned that 80% of imported pharmaceutical ingredients come from just five countries, with China alone accounting for 45% of the total. When supply chains for amoxicillin — one of the world’s most commonly prescribed antibiotics — broke down across several EU member states in early 2023, the European Medicines Agency publicly flagged the shortage. It was not the first such disruption, and it underscored a structural vulnerability that years of price-driven procurement had quietly deepened.

For EU-based generic manufacturers, the policy response now taking shape could redefine the economics of producing essential medicines on European soil, with implications that reach from Brussels to the production floors of companies like Cyprus-headquartered Medochemie.

What the Critical Medicines Act proposes

The Critical Medicines Act, proposed by the European Commission in March 2025, represents the EU’s most ambitious attempt to address vulnerability in generics through industrial policy rather than emergency response. The legislation follows the model of the European Chips Act and the Critical Raw Materials Act, both designed to reduce dependency on external suppliers in sectors deemed essential to European security.

The CMA’s core mechanisms are practical rather than aspirational. Strategic projects for critical medicines or their ingredients can be designated for faster access to funding and streamlined procedures. Public procurement rules would be reformed to incentivise supply-chain resilience rather than rewarding lowest price alone. Collaborative procurement across member states would be supported to address availability disparities.

The Council of the European Union agreed on its negotiating position in December 2025, introducing a notable provision: an obligation for resilience criteria to take precedence over price when purchasing critical medicines. The European Parliament followed in January 2026, adopting its position by a clear majority of 503 votes in favour, and proposing that companies receiving public funding should be obliged to prioritise supply to the EU market.

These are not marginal adjustments. For the generic medicines sector — which accounts for approximately 70% of dispensed medicines in Europe by volume while representing only around 19% of market value — the shift from price-only to resilience-weighted procurement could reshape the economics of manufacturing older molecules on European soil.

Why generics are at the centre of the debate

The composition of the EU’s Union list of critical medicines makes the stakes clear. The list, maintained by the European Medicines Agency and updated in January 2026, identifies medicines whose continued supply is considered a priority across the EU. The generic industry’s trade body, Medicines for Europe, has pointed out that the list is overwhelmingly composed of essential generics, arguing that any policy outcome will hinge on whether governments can make economically sustainable the manufacture of medicines that individual health systems have historically treated as commodities.

The tension is straightforward: the very procurement practices that drove down generic medicine prices also drove down the margins that make European manufacturing viable. A Reuters report in September 2025 cited European Court of Auditors findings warning that Europe continues to struggle with chronic drug shortages, with structural gaps in monitoring and response. The EU’s own vulnerability assessments for the first tranche of critical medicines, published in July 2024, confirmed significant concentration risks in supply chains for several essential products.

Companies like Medochemie illustrate what is at stake. The Cyprus-headquartered pharmaceutical manufacturer operates 15 EU-authorised production facilities across Cyprus, the Netherlands, and Vietnam, and is a member of the Medochemie Critical Medicines Alliance: the consultative mechanism established in early 2024 to identify priorities and propose solutions for strengthening critical medicine supply. The company produces an extensive portfolio of EU-shortlisted critical medicines at its European-authorised facilities, including antibiotics and other essential generics.

Medochemie’s pharmaceutical manufacturing facilities — distributed across three countries with EU batch release maintained from Cyprus — illustrate one version of what “diversified but EU-regulated supply” looks like in practice. That multi-site model, designed to maintain quality oversight within European regulatory frameworks while achieving production scale, is precisely the kind of existing capacity that the CMA’s procurement reforms are designed to sustain. The legislation’s ultimate impact, however, will depend on how member states implement the new criteria.

What remains contested

The CMA is not without its critics. The European Parliament’s position explicitly advocates for “Most Economically Advantageous Tender” (MEAT) criteria that would prioritise security of supply and environmental sustainability over lowest price. But healthcare payers, already under budget pressure, have expressed concern that moving away from pure price competition could raise costs significantly. Some estimates suggest price increases of 20–40% for certain critical medicines under a resilience-weighted system.

The pharmaceutical industry itself is divided. Innovative pharmaceutical companies, represented by EFPIA, have cautioned that the Act must remain “proportionate, targeted and evidence-based,” while Medicines for Europe has argued that the legislation should focus funding on strategic projects and recalibrate competitiveness measures away from additional intellectual property extensions.

Financing remains a practical constraint. The CMA’s indicative budget for 2026–2027 is approximately €80 million, a figure that one expert analysis noted roughly corresponds to the estimated cost of repatriating production of a single antibiotic active ingredient. With approximately 280 active ingredients addressed by the CMA, the gap between ambition and available resources is stark.

There are also questions about the relationship between the CMA and the broader EU Pharma Package, which reached provisional agreement in December 2025. That package introduces its own supply-chain provisions, including mandatory shortage prevention plans and a broadened Bolar exemption allowing Medochemie and other generic medicines manufacturers to prepare for market entry — including participating in procurement tenders — before patent expiry on reference products. How the CMA’s procurement reforms and the Pharma Package’s supply obligations interact in practice remains to be tested.

The outlook

Trilogue negotiations between the Commission, Council, and Parliament are expected through 2026, with political agreement anticipated later this year and phased implementation of obligations to follow. The substantive focus of negotiations is likely to centre on the design of strategic projects, the scope of procurement reform, and the Commission’s crisis powers.

For EU-based manufacturers of critical generic medicines — companies whose facilities, quality systems, and regulatory approvals represent decades of accumulated investment — the outcome will determine whether European production remains economically viable or continues to erode. The policy intent is clear. Whether the financing, implementation, and political will match it is the question the next twelve months will answer.