Employees of the pharmaceutical company Sandoz Global.
KUNDL — Stephanie Jedner is in a white protective suit, surveying production facilities the size of trucks. She walks past one of the giant tanks at the penicillin plant in the Austrian village of Kundl in Tyrol. "This fermentor has a capacity of 200,000 liters," says Jedner, who heads the plant's active ingredient production.
Everything at the Austrian production site of the Swiss pharmaceutical company Sandoz seems to be XXL-sized. In the plants around Jedner, a bacterial culture is grown using sugar, water and various nutrient solutions, from which the antibiotic penicillin is ultimately extracted. Up to 200,000 metric tons of this fermented slurry are produced at the plant each year. This is equivalent to 20 times the weight of the Eiffel Tower in Paris.
But Jedner's problems are also XXL in scale. The costs of cooking this huge soup have increased. Massively, in fact. The price of sugar has risen sharply since the outbreak of the Ukraine war, and the increase in energy prices is even more serious.
For the plant, which consumes as much energy as the city of Innsbruck, Austria, this is becoming a geographic disadvantage, with consequences for Europe as a whole: the Kundl plant is the last full-scale penicillin factory in the Western world.
The German Federal Institute for Drugs and Medical Devices (BfArM) is currently reporting supply shortages for around 500 medicines. Children's fever-reducing medications are particularly affected. But even antibiotics, the drugs that have been the basis of modern medicine, are in short supply.
The thinned-out shelves in pharmacies are the result of a mix of factors: the pandemic has cut supply chains between Europe and Asia, and the Russian invasion of Ukraine has driven up the cost of precursor ingredients.
Added to this are home-grown problems: for decades, politicians in Europe stood idly by as the production of antibiotics moved to Asia. In Germany, the last major active ingredient manufacturer for antibiotics ceased production in Frankfurt-Höchst in 2017. Due to poor margins, the business is not very lucrative.
Central development and production site of the Novartis Group and headquarters of Sandoz GmbH.
Penicillin instead of beer
The factory in Kundl, Austria, is thus the last penicillin production site in the West, where everything from the active ingredient to the ready-to-packaged drug is manufactured in-house. The plant delivers 200 million drug packages per year. One in two boxes of penicillin in Europe comes directly or indirectly from the Kundl plant. How quickly Germany and Europe can once again be fully supplied with penicillin, therefore, is largely decided in this small Tyrolean town.
Head of active ingredient production Stephanie Jedner stops in front of a factory section at the edge of the site during her tour. "This building used to house a beer brewery," explains the doctor of chemistry. Because penicillin was needed more urgently than the alcoholic beverage after World War II, the Austrians converted the brewery's fermentation systems to antibiotics production after 1945.
"We don't manufacture just any products, but medicines that are vital for many patients."
Now, another war is responsible for a bottleneck. In the meantime, it was also no longer possible to package the medicines in Kundl, as paper and cardboard were only available to a limited extent. This is another reason why Sandoz was unable to respond to the increased demand for penicillin.
The problems in Kundl grew into a dilemma over the months. Unlike other industries, antibiotic manufacturers cannot pass on increased production costs to customers. "The drug prices are regulated. So we are stuck with the higher costs," says Jedner.
The Austrian plant's problems have now also reached Germany. To give antibiotic manufacturers a helping hand, German Health Minister Karl Lauterbach (SPD) has temporarily suspended fixed prices for children's antibiotics. Manufacturers can thus charge higher prices until the end of the year. In addition, Lauterbach has drafted a supply bottleneck law to help strengthen the production of active ingredients for medicines in the EU.
"No incentive to invest in production"
In Kundl, they see these initiatives as a first step in the right direction. "For us, this does not mean an increase in margin, but rather covering the increased raw material costs," points out Jedner.
The Federal Association of German Pharmacists, on the other hand, says the plans don't go far enough. For example, the Supply Shortage Act "must definitely be improved" and pharmacies must be given "more freedom to decide on the exchange of substitute preparations," they write. The Pro Generika association also calls for changes: "The law does not provide incentives for companies to invest in the production of antibiotics."
Hannes Wörner has also taken up the fight against supply bottlenecks. Since the beginning of the year, the long-standing Sandoz manager has been in charge of the Kundl plant — a hellish job. The manager has never seen such wild fluctuations in demand for penicillin. "During the pandemic, demand for penicillin products fell by 20%. Since everyone wore masks, infectious diseases hardly spread at all," he says. Now, things are moving even faster, and demand for penicillin has doubled since the pandemic.
"I hope that the value of treatment with antibiotics will now be recognized again."
In the economy, this is called excess demand. Producers of such scarce products are usually happy about this. Wörner, on the other hand, is losing sleep over the shortage. "We don't manufacture just any products, but medicines that are vital for many patients," says the manager.
To supply them with its products, the company has hired 250 additional skilled workers since September last year and drastically increased utilization capacity. Almost all areas of the plant now operate seven days a week, in three shifts a day. "We are running the plant at full capacity," says Wörner.
Because this is still not enough to meet demand, the Kundl factory is currently being expanded. Wörner wants to be able to increase production by 15 to 25% in the upcoming year. This is made possible by the Austrian taxpayer, as the government in Vienna has injected €50 million into the manufacturer.
New expansion
In total, Sandoz is investing €200 million in the capacity expansion. Given China's dependence on antibiotics, the Pro Generika association sees the expansion as a "step of great relevance" that could also be "pioneering for Germany's location policy."
Jedner has reached the end of her tour, and stops in front of a recently constructed building. Inside, the giant soup will soon be processed in a new enzymatic process. This will save as much energy as is equivalent to the consumption of 10,000 households. XXL savings like this should ensure the plant's long-term survival.
Despite all the efforts in Kundl, it is not yet known when penicillin will be available again without restrictions. Manager Wörner expects that the supply bottlenecks can only be reduced "gradually." He has another wish for the current crisis, too: "I hope that the value of treatment with antibiotics will now be recognized again."
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