What is the value of being able to manufacture an antibiotic in Europe? The answer seems straightforward as long as the medicine remains available and its price stays affordable. It becomes more complicated when European manufacturing can no longer compete with imports, and short-term savings risk coming at the cost of lost expertise, production facilities and industrial capacity.
This is the situation unfolding in Kundl, in the Austrian region of Tyrol, where Sandoz operates what is described as Europe’s last fully integrated penicillin manufacturing facility. The site covers several stages of the production chain, from industrial fermentation to the manufacture of active pharmaceutical ingredients (APIs) and finished medicinal products.
According to a Reuters investigation published on 21 October 2026, the facility’s economic viability is under pressure from competition with Chinese manufacturers, which can supply antibiotics and APIs at significantly lower prices.
The situation is particularly significant at a time when the European Union is seeking to strengthen its domestic manufacturing capacity through the Critical Medicines Act, the proposed legislation aimed at securing the supply of critical medicines.
From fermentation to finished medicinal products
The Kundl case is particularly significant because of the facility’s industrial structure. Manufacturing penicillins through an integrated production chain requires specialized expertise and facilities that cannot be quickly re-established once they have been decommissioned.
Industrial production begins with fermentation processes that yield the basic molecular compounds. These are followed by isolation, purification and, where necessary, chemical or enzymatic conversion to obtain the active pharmaceutical ingredients (APIs) used in the formulation of medicinal products.
The complexity of this production chain requires investment in industrial biotechnology, processing equipment, quality control systems, energy infrastructure and skilled personnel.
Beta-lactam antibiotics also require specific containment measures and controls to prevent cross-contamination, which affect both facility design and plant operations.
Competitiveness therefore depends on several factors: production capacity, process yields, energy consumption, raw material availability, equipment efficiency and operating costs.
Economies of scale can make a substantial difference, particularly in a market characterized by established products and persistent downward pressure on prices.
For this reason, losing an integrated manufacturing facility would not be equivalent to simply replacing one supplier with another. It would mean giving up a complex manufacturing capability that would be difficult to restore in the short term.
Imports from China continue to rise
The figures illustrate how significantly the geography of Europe’s pharmaceutical supply chains has changed.
According to Eurostat data cited by Reuters, China’s share of European Union imports of penicillins and their derivatives, predominantly in the form of bulk active pharmaceutical ingredients (APIs), rose from 44% in 2019 to 86% in 2025.
Over the same period, Chinese production strengthened its position in international markets, while European exports of the same products steadily declined. According to Reuters, their current value stands at approximately one-fifth of the peak recorded in the early 2000s.
These figures need to be interpreted carefully. The 86% share refers to EU imports within the product categories examined, not to total penicillin consumption across the Union. It therefore does not mean that 86% of the antibiotics used in Europe come from China.
Nevertheless, it is a significant indicator of the geographical concentration of external supplies. For an industrial system dependent on suppliers located in a limited number of regions, the risk lies in its ability to respond to production disruptions, trade restrictions, sudden increases in demand or logistical difficulties.
This vulnerability becomes more pronounced when dependence extends to the upstream stages of manufacturing, as the availability of a formulation and packaging facility does not, in itself, guarantee access to the active pharmaceutical ingredients needed for production.
€200 million invested, but the problem remains
The situation in Kundl demonstrates that industrial investment, while necessary, is not enough on its own to ensure the economic viability of manufacturing operations.
According to Reuters, Sandoz invested approximately €200 million in expanding the facility, including €50 million in public funding. The project, completed in 2023, was intended to strengthen production capacity and improve the plant’s competitiveness.
Three years later, however, the company reports that pricing pressure from imports continues to threaten the economic viability of its operations.
This contradiction deserves attention. On the one hand, public authorities recognize the strategic importance of European manufacturing and provide financial support to help preserve it. On the other, market conditions can make it difficult to recoup investments and sustain operating costs over the long term.
Public funding can support the modernization of manufacturing facilities, but it does not necessarily change the pricing dynamics of the market in which a company must sell its products.
The issue therefore also concerns the predictability of demand and revenues, both essential for planning industrial investments that take several years to implement and recover.
Sandoz calls for an anti-dumping investigation
To address competition from Chinese imports, Sandoz has asked the European Commission to launch an anti-dumping investigation into amoxicillin.
The request reflects the company’s position that imported products are being sold under conditions that undermine the competitiveness of European manufacturing.
Under international trade law, dumping refers to the export of products at prices below their normal value, as determined under the applicable rules. Lower prices alone do not constitute evidence of dumping.
Any investigation would therefore need to establish whether the conditions laid down in EU legislation are met, including potential injury to the Union industry and a causal link to the imports under investigation.
Trade defence measures could only be introduced in accordance with the applicable procedures.
The issue is also economically sensitive. Measures designed to support European manufacturing could affect procurement prices, while maintaining current market conditions could, according to Sandoz, further undermine the competitiveness of the Kundl facility.
It is also important to distinguish dumping from the broader issue of structural cost differences between manufacturing regions. Even in the absence of unfair trade practices, European production may face an economic disadvantage compared with manufacturers operating under different energy costs, industrial scales and market conditions.
The lowest price does not reflect supply security
For many essential medicines, particularly off-patent antibiotics, price is a determining factor in procurement procedures.
The need to contain healthcare expenditure is understandable. Antibiotics are widely used medicines, and affordability contributes to the sustainability of healthcare systems.
However, unit price alone does not capture the full value of a supply arrangement.
Manufacturing reliability, geographical diversification, the ability to respond to increases in demand and continuity of supply are all factors that may come at a cost but become particularly important during periods of crisis.
For a European manufacturer, maintaining available production capacity, investing in facility upkeep and complying with complex manufacturing requirements entail costs that must be economically sustainable.
When procurement procedures systematically favour the lowest-priced bid, these factors risk being inadequately recognized.
This does not mean that medicines should be sourced exclusively from European manufacturers. A diversified supply chain, including international suppliers, can also provide an important safeguard.
The question is how much domestic manufacturing capacity Europe should seek to preserve and how to assign an economic value to the additional resilience that such capacity can provide.
The Critical Medicines Act faces a real-world test
The Kundl case represents a test for European pharmaceutical industrial policy.
On 12 May 2026, the European Parliament and the Council reached a provisional political agreement on the Critical Medicines Act, proposed by the European Commission in March 2025 to strengthen the availability and security of supply of critical medicines.
The legislation addresses the concentration of supply chains and aims to support European manufacturing of medicines and active pharmaceutical ingredients (APIs) considered strategically important, including antibiotics.
The proposed measures include support for strategic industrial projects, the introduction of resilience criteria in public procurement and stronger joint purchasing arrangements among Member States.
The agreement also provides scope for applying a European preference principle in procurement procedures, subject to conditions that the relevant contracting authorities will be required to meet.
This represents a significant development, as it explicitly establishes security of supply as a factor to be considered in public procurement decisions.
However, it remains to be seen how effectively these measures will improve the economic conditions of supply chains already facing intense competitive pressure.
Funding for new investments, for example, can help expand manufacturing capacity, but it must be accompanied by conditions that enable facilities to remain operational over time.
Similarly, resilience criteria in public procurement will need to be sufficiently concrete and verifiable to ensure that they do not become merely formal requirements with little meaningful influence on supplier selection.
An industrial challenge for Italy as well
The situation in Kundl is directly relevant to the debate on the competitiveness of Italy’s pharmaceutical industry.
Italy has a strong manufacturing base, with established expertise in the production of active pharmaceutical ingredients (APIs), finished medicinal products and contract manufacturing services.
However, the overall strength of the sector does not mean that every therapeutic supply chain is represented within the country or that companies are independent of international suppliers.
Assessing supply chain resilience requires an examination of the entire production process, from raw materials and intermediates to active pharmaceutical ingredients, formulation and packaging.
It is equally important to distinguish the geographical location of manufacturing facilities from the actual availability of alternative production capacity. Two suppliers may operate in different countries while still depending on the same manufacturer for an essential intermediate.
The antibiotics case therefore raises questions that extend well beyond the individual Austrian facility: Which manufacturing capabilities are strategically important to retain in Europe? What economic conditions would make them sustainable? And how much are procurement systems prepared to pay to ensure greater diversification of supply?
The cost of losing industrial manufacturing capacity
No closure of Sandoz’s Kundl facility has been announced to date. The concern centres on its long-term economic viability and the risk that European manufacturing will continue to lose ground to international competitors.
It is precisely this uncertainty that makes the case significant.
The ability to manufacture antibiotics through an integrated production chain is the result of sustained investment, technical knowledge, infrastructure and expertise developed over time. Once these operations are discontinued, restoring them requires resources and time that may not be available during a public health emergency or supply crisis.
Europe therefore faces the challenge of reconciling potentially competing objectives: affordable medicines, sustainable healthcare expenditure, international competition and security of supply.
The Critical Medicines Act seeks to address this balance. Its effectiveness will also depend on whether political recognition of the value of European manufacturing can be translated into sufficiently stable industrial and economic conditions.
For the Kundl facility, and for other pharmaceutical supply chains exposed to international competition, the challenge is already tangible: preserving strategic manufacturing capacity requires decisions to be made before that capacity is lost.
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