Written submission from Sandoz (CHI0041)

10 April 2026

Written submission from Sandoz (CHI0041)

1.            Summary

Antibiotics are indispensable to modern healthcare. Even brief supply disruptions would force UK hospitals to cancel surgeries, halt chemotherapy, delay organ transplants, and cope with rising mortality from treatable infections. Such a shock would quickly cascade into economic and social disruption.

However, the UK depends on highly concentrated global supply chains for the key starting materials that underpin penicillin‑class antibiotics. Production of 6‑APA, the essential starting material for penicillin APIs, is overwhelmingly located in China, while much finished‑dose production is based in India. This creates structural exposure to geopolitical tension, export restrictions, price shocks, and coercive leverage.

Europe’s last major fully integrated penicillin manufacturing network—in Kundl (Austria), Lendava (Slovenia) and Palafolls (Spain)—is capable of meeting 100% of Europe’s demand for the most important oral penicillin medicines, and 50% of Europe’s sterile penicillin needs. Yet this strategically essential capability is under threat because procurement systems reward lowest price rather than resilience or security of supply.

The UK must modernise procurement to safeguard access to essential antibiotics and reduce exposure to adversarial dependency.

1.1           About Sandoz

Sandoz is a global leader in generic and biosimilar medicines, with a portfolio of around 1,300 products designed to expand patient access to essential treatments. In 2024, Sandoz provided over 900 million patient treatments worldwide. By offering affordable generics and pioneering biosimilars, Sandoz helps reduce healthcare expenditure and improve system sustainability, generating more than USD 19 billion in direct savings for US and European health systems in a single year. Its mission is to broaden access while supporting resilient, high‑value healthcare delivery across multiple therapeutic areas.

Sandoz has invested heavily in modernisation, energy efficiency and environmentally advanced production, including major upgrades to reduce CO₂ emissions, waste and resource use. Its capabilities make Sandoz a key contributor to Europe’s secure and sustainable supply of essential medicines.

2.            Sandoz submission: China and the UK economy — antibiotic supply chain security

Question 1

Engagement with China: the prize and the price

China’s state‑supported scale in fermentation, 6‑APA manufacturing and API production has driven global prices of high‑volume penicillin antibiotics to historically low levels. In the short term, this has helped health systems manage medicine budgets.

But the long‑term price has been the erosion of global diversity in supply.

China now controls around 90% of 6‑APA, the critical precursor used to produce penicillin APIs. This dominance mirrors patterns seen in other strategically important materials, such as rare earth elements.[i] Sustained price depression coupled with higher input costs have pushed European and UK producers out of the market.

As a result, only one site in EU/NATO territory—Sandoz Kundl—still performs the crucial 6‑APA fermentation step. With a near‑monopoly outside Europe, China’s control of the penicillin supply chain carries inherent strategic risk. Supply or pricing shocks—whether market‑driven or geopolitical—would immediately threaten public health and critical national infrastructure. 

Because antibiotics enable safe surgery, intensive care, chemotherapy and infection control, any disruption becomes a national security issue, not just a public health problem.

Question 2

Competition: fair and unfair

Older, generic penicillin medicines operate on thin margins and are extremely price‑sensitive. They are therefore highly exposed to market distortions, particularly state‑supported production and price undercutting from China.

This has already produced a drastically narrowed global manufacturing base:

• Europe now has just one major vertically integrated penicillin facility remaining (Kundl).
• All other Western producers rely on either Kundl or China for their penicillin‑class APIs.
• Continued “winner‑takes‑all” tendering incentivises the lowest possible price, rather than resilience, quality or security of supply.

Although Sandoz could meet 100% of Europe’s demand for key oral penicillins, that capability is not commercially sustainable under purely price‑based procurement rules. If Kundl becomes economically unviable, UK and European health systems would lose the only non‑Chinese source of 6‑APA and penicillin APIs, making China the de facto sole producer.

This is a textbook example of strategic vulnerability created by distorted global competition.

What measures could and should the UK Government utilise to support UK firms in creating a level playing field with China?

The UK Government should treat how it sources key antibiotics as an issue of national security and resilience.  The two most impactful actions would be:

1. Procure for resilience, not just price
   Introduce multi‑winner awards with resilience and security of supply via end to end production in the EU as a requirement for some of the tender slots.
2. Anchor trusted capacity
   Back European penicillin capacity via long‑term offtake linked to fair pricing and surge commitments to cushion UK against supply shocks from China

The sector is not asking for subsidy or direct government investment.  It is asking that governments review a strategy of price-only procurement.

Question 3

Supply‑chain security, origin of raw materials, and economic coercion

How vulnerable is the UK to coercion?

Major international analyses—including OECD assessments and multiple independent studies in 2025—have repeatedly warned that Europe’s dependence on concentrated antibiotic production hubs in China and India is a structural supply‑chain vulnerability. [ii]

Given China’s near‑monopoly on 6‑APA, antibiotic supply could feasibly become a tool of economic coercion or hybrid warfare, particularly during periods of diplomatic tension. European health leaders have already referred to this dependence as an “Achilles heel” for both healthcare and defence resilience.

The UK is especially exposed because:

• Its last domestic penicillin API facility closed in 2025.
• The UK holds antibiotic reserves to manage demand surges but has no strategic agreement guaranteeing access to European production during global shocks.
• UK procurement still focuses primarily on lowest price, not security of supply or origin of critical inputs.

If the Kundl‑Lendava‑Palafolls network were to close, the UK, EU and NATO would be dependent on China for the backbone of their antibiotic supply.

Where is the dependence greatest?

Dependence is most severe in the amoxicillin/6‑APA chain:

• ~90% of global 6‑APA comes from China.
• India’s penicillin production relies heavily on Chinese intermediates, meaning UK reliance on Indian finished doses is indirect reliance on China.
• Only one facility in EU/Nato territory (Kundl) can produce 6‑APA at scale.
• The UK has no remaining domestic capability for 6‑APA or penicillin APIs.

Given antibiotics’ foundational role in the health system, this concentration poses a disproportionate national security risk.

What are UK/EU businesses and governments doing—and is it working?

• UK: The last manufacturing site in the UK that could produce the API needed for penicillin closed in 2025
• UK: The UK has improved transparency and shortage management (DaSH portal; SSPs), but lacks explicit value based procurement that prioritises resilience and security of supply in tenders.
• UK: The UK holds reserves of antibiotics to manage peaks in demand (e.g. recent meningitis outbreak), but has no strategic agreement to meet a surge in demand of EU manufactured product in the event of a supply chain shock from China
• Germany: Introduced an element of value based procurement by portioning up tenders into three slots, with one slot being eligible only to medicines that have the EU as place of origin for the active API ingredient
• India: introduced Minimum Import Prices in 2026 to prevent subsidised Chinese dumping and protect its domestic penicillin sector.

Question 6

Control of strategic technologies

To protect the UK from lack of control of strategic technologies does not necessarily mean that the UK should look to reshoring or subsidy.  The Government can ensure sufficient control of strategic technologies through smart procurement.

The government needs to:

1. Procure for resilience, not just price
   Introduce multi‑winner awards with resilience and security of supply via end to end production in the EU as a requirement for some of the tender slots.
2. Anchor trusted capacity
   Back European penicillin capacity via long‑term offtake linked to fair pricing and surge commitments to cushion UK against supply shocks from China

Question 8

International comparators and alignment

International developments show that other major economies have already begun to treat antibiotic supply chains as a matter of strategic resilience, not simply a healthcare procurement issue. These actions demonstrate the range of tools available—and highlight that the UK risks falling behind.

Germany
Germany has taken the clearest steps within Europe to integrate value‑based procurement into antibiotics purchasing. Its 2023 reform introduced tender structures with dedicated EU‑origin API slots—ensuring that at least part of national demand is met by manufacturers sourcing their active ingredient or key starting materials from within the EU. This approach explicitly rewards resilience and helps maintain strategically important manufacturing capacity within Europe.

European Union (EU) – Critical Medicines Act (CMA)
At EU level, the proposed Critical Medicines Act aims to strengthen the bloc’s autonomy in essential medicines by promoting regionalised production, minimum volume commitments and procurement criteria that reflect resilience rather than price alone. Though still evolving, the policy direction is clear: Europe is seeking to retain and modernise existing manufacturing capacity, especially for critical antibiotic starting materials such as 6‑APA. The UK currently lacks equivalent mechanisms. [iii]

India
India has moved decisively to protect domestic antibiotic production. In 2026 it introduced Minimum Import Prices (MIP) for penicillin‑class intermediates including 6‑APA, safeguarding its producers from sustained below‑cost Chinese exports. This explicitly recognises antibiotic production as a strategic capability rather than a purely commercial activity. India’s action increases pressure on Europe and the UK: as India shields its market, excess subsidised Chinese volumes are likely to be redirected toward unprotected markets such as the EU and UK, further distorting competition.

To remain aligned with international best practice and avoid becoming an outlier in vulnerability, the UK should:

• Integrate resilience criteria into procurement, similar to Germany’s tender reforms.
• Monitor and respond to global protections, such as India’s MIP, which reshape competition and increase the UK’s exposure.
• Treat antibiotic supply chains as part of the UK’s economic security architecture, consistent with OECD recommendations.

6              Sandoz submission to Business and Trade Select Committee: China and the UK economy

              Business use only