Ofichem wants to bring drug production to northern Netherlands

Medicine shortages have been increasing in Europe over the past few decades. For generic medicines, such as painkillers, blood pressure medication, and anti-inflammatories, Europe is nearly entirely dependent on China and India. Generic medicines are copies of brand-name drugs, made once the original patent expires and other manufacturers are free to produce them. These account for approximately 80% of the medicines available at pharmacies. “The Netherlands and Europe must become less dependent on Asia when it comes to the production of these medicines,” says Weite Oldenziel, CEO and owner of medicine developer and manufacturer Ofichem.

A new factory

To achieve this, Ofichem is working with the Northern Netherlands Development Agency (NOM), among others, on an ambitious plan to rebuild pharmaceutical production capacity in the northern Netherlands. The company already produces medicines on a small scale, but to date, this has mainly involved small quantities of innovative medicines. This is done in collaboration with startups or academic centers that develop new medicines. Oldenziel: “The plan to start producing generic medicines in the Netherlands again may be somewhat naive and opportunistic, because there is currently no revenue model for it. But I see the need to look for a solution closer to home, partly because of two nieces with epilepsy and their uncertainty about crucial medicines.”

Gerard Lenstra, program manager for internationalization at NOM and involved in developing the life sciences ecosystem in the northern Netherlands, agrees. "The goal is to be able to produce generic drugs in the Netherlands or Europe in a cheap but still profitable way. One possible solution for this is a modular factory where smaller batches of medicines can also be produced at affordable costs and with a reasonable profit margin," he says. Lenstra expects that in a highly automated modular factory, changeover times and associated cleaning can be organized more efficiently. Without compromising quality and product safety. “This will result in cost savings.”

Opportunities for the North

The plans for a new pharmaceutical factory in the North of the Netherlands are being included in the Nij Begun program. This plan aims to provide a new start for Groningen and North Drenthe after the problems related to the shutdown of the gas extraction. To this end, the region has also applied for the PharmaNL program, part of the National Growth Fund. The aim here is to strengthen pharmaceutical development and production in the Netherlands and Western Europe. Oldenziel: “We see that the government is working to retain medicine production infrastructure in the Netherlands. I think that is an important step in terms of strategic autonomy.”

Unique in the Netherlands

Ofichem is the only Dutch company that produces both raw materials for medicines and the medicines themselves (at two locations). It is also involved in the development and trade of medicines. “This means we are active throughout the entire value chain, giving us a unique position,” says Oldenziel. A pharmacist by training, he obtained a PhD in neurochemistry from the University of Groningen (RUG) and joined the company shortly afterwards, following the sudden death of his father. The Ofichem Group now comprises seven companies. One of these is a manufacturer of generic medicines. In addition, there are three trading firms and two development companies, one for raw materials for medicines and one for medicines themselves. Three years ago, Ofichem acquired a manufacturer of generic medicines in Leiden.

From family business to integrated player

Ofichem started as a small manufacturer of active pharmaceutical ingredients (APIs) and has witnessed much of the global development in this field. “In the beginning, we were a supplier in the pharmaceutical supply chain. We sold the ingredients to companies that ultimately turned them into complete medicines,” says Oldenziel. At the end of the last century, the European API industry ran into trouble. “More and more raw materials were being imported from China, and by the beginning of this century, about 80% of global production came from there. In recent years, this has only increased.”

This had major consequences for API production companies in Europe, including Ofichem. In the meantime, Oldenziel became the company's director and focused increasingly on trading in medicinal raw materials. “We imported the raw materials from China and exported them to the rest of the world. We invested the money we earned from this in modernizing the production company. We made the transition from producing APIs for the generic industry to developing and producing APIs for the innovative industry.”

The vanished ecosystem

Ofichem found a way into the new market, and importing medicines from China led to lower prices. “That was fine in the beginning—several decades ago—because medicines were very expensive. But about ten years ago, we crossed the zero threshold,” Oldenziel recalls. "More and more European companies are closing down or withdrawing products from the market. Twice as many products are being withdrawn from the market as are being introduced. Ultimately, only about five players remain worldwide, and they are all outside Europe. This means that we cannot intervene quickly here in the event of problems, such as geopolitical tensions, a pandemic, or a ship blocking the Suez Canal, as we experienced a few years ago."

Lenstra adds: “The Netherlands is often at the bottom of suppliers' priority lists because we have a policy of always choosing the lowest price. That's why it's often more lucrative for suppliers to deliver to other countries first. In the event of a shortage, the Netherlands is often left at the back of the queue.”

Bringing production back to Europe

Oldenziel sees one solution: bringing part of the production of crucial generic medicines back to Europe. He wants to contribute. The entrepreneur sees that governments have been given food for thought during the COVID period. “France has taken action and has started producing some generic medicines in its own country again. The rest of Europe is talking about it, but little has been done so far,” he says. Oldenziel believes that governments, both at the national and European levels, need to develop a robust policy and a clear vision.

That is easier said than done. Production in Europe is more expensive than in Asia. “In India, factory workers do not always have the right conditions when it comes to healthcare and pensions. Environmental policy will also be different from here in Europe,” he says.

A plan

Nevertheless, Oldenziel does not see the price as a problem. "Of the Netherlands' €108 billion healthcare budget last year, generic medicines — which make up 80% of all dispensed drugs — cost just €600 million. This is therefore 0.5% of the budget. For a few cents more per box, you can also produce in Europe. So, financially speaking, we are talking about negligible amounts in the healthcare budget. At the same time, we are choosing between dependence and greater independence from China and India. Between having or not having access to crucial, life-saving critical medicines. Between having the option to produce ourselves or not. We don't have to make everything ourselves; we just need to strike a balance between purchasing and our own production."

But that cannot be achieved overnight. Oldenziel: “We need to get started with a clear vision and a plan. I would like to contribute to that.” Lenstra also sees opportunities and is pleased to have entrepreneurs like Oldenziel in his region and is keen to provide support from the NOM: “Policymakers can come up with all kinds of ideas, but ultimately it is the entrepreneurs who have to do it.”