Europe’s ability to manufacture its own essential antibiotics is under growing pressure as inexpensive Chinese products challenge the continent’s last major facility capable of producing penicillin through the entire manufacturing process. The Sandoz plant in Kundl, Austria, has become a focal point in the debate over pharmaceutical independence, industrial competitiveness and the risks of relying on foreign suppliers for critical medicines.

Chinese manufacturers can produce penicillin and its ingredients at significantly lower costs, benefiting European healthcare systems seeking to control spending. But the price competition threatens the long-term viability of the Austrian factory, which also produces key active pharmaceutical ingredients.

Following the closure or relocation of other European facilities, Kundl has assumed greater strategic importance. Sandoz is now seeking European Union action over what it considers unfair Chinese pricing practices. The company argues that the plant cannot remain commercially viable without stronger support from governments and policymakers.

Site manager Stephanie Jedner warned that shutting down the facility would leave Europe “would be fully dependent” on China for this essential production capability.

China’s growing influence over antibiotic supplies

Penicillin, discovered by Alexander Fleming in 1928, remains a crucial treatment for serious bacterial infections. Yet Europe increasingly relies on overseas manufacturing for the ingredients used in its antibiotic supply.

Eurostat figures show that China’s share of European Union imports of penicillins and related products climbed from 44% in 2019 to 86% in 2025. Over the same broader period, European exports of these products fell substantially from their early-2000s highs.

The shift reflects China’s broader expansion into advanced manufacturing, including industries once strongly associated with European producers. Growing trade imbalances between China and the EU have intensified pressure on European leaders to protect domestic companies and preserve strategically important industrial capacity.

In evidence submitted to British lawmakers, Sandoz argued that maintaining European production would be difficult without higher prices for penicillin. The company also warned that concentrated control over antibiotic ingredients could create strategic vulnerabilities comparable to Europe’s dependence on China for critical minerals.

Sandoz cautioned that “Antibiotic supply could feasibly become a tool of economic ​coercion or hybrid warfare, particularly during periods of diplomatic tension,” highlighting concerns that pharmaceutical supplies could become entangled in geopolitical disputes.

Could medicines become a bargaining chip?

China’s position as a leading supplier of pharmaceutical ingredients has raised concerns among European security and trade specialists. Sandoz estimates that as much as 90% of global antibiotic active ingredients are produced outside Europe, primarily in China or in India using Chinese chemicals.

Tim Rühlig, a China analyst at the European Union Institute for Security Studies, said China’s influence over these supplies deserves serious attention because its economic strength could provide leverage in disputes with other countries.

Any attempt to restrict pharmaceutical exports could damage China’s reputation as a dependable supplier. However, concerns have persisted since the COVID-19 pandemic, when Chinese economist Daokui Li suggested that access to active pharmaceutical ingredients could become part of trade negotiations.

A US official based in China also told Reuters, speaking anonymously, that Chinese representatives had raised the possibility of suspending exports of certain pharmaceutical ingredients in retaliation for trade-related actions.

China’s foreign ministry said disagreements with the European Union should be addressed through negotiations and consultation. Responding to questions from Reuters, it stated, “China consistently opposes all forms of trade protectionism,” while defending the country’s approach to international commerce.

European pharmaceutical experts warn that losing domestic production capacity could leave the region exposed during another pandemic, an international conflict or a major disruption to global supply chains.

“It would seriously compromise Europe’s ability to cope with a health crisis,” said Bostjan Ceh, a business development executive at Slovenia-based pharmaceutical research and development company Labena.

The vulnerability became particularly apparent after the pandemic, when European governments began reconsidering their dependence on Asian medical suppliers. In 2022, shortages of amoxicillin emerged across Europe amid a surge in respiratory infections.

The European Commission subsequently approved €28.3 million in support for the Kundl facility’s expansion in 2023. The project increased production capacity by 20%, following an earlier investment of €200 million that included €50 million in public funding.

High European production costs undermine competitiveness

At the Kundl factory, employees use fermentation processes to manufacture penicillin from cultivated mould. The complex industrial operation requires substantial energy and a skilled workforce.

Sandoz manufacturing executive Cecile Stolz demonstrated the biological process used to produce the antibiotic, tracing its origins to Fleming’s discovery. Although Europe once played a leading role in penicillin production, China’s industrial development has dramatically changed the competitive landscape.

Rühlig attributed China’s advantage to a combination of lower labour costs, government subsidies, less restrictive environmental requirements and investment by international pharmaceutical companies seeking cheaper production.

The Austrian facility employs more than 2,000 people, but its energy requirements create a substantial cost disadvantage. International Energy Agency data indicate that electricity prices for energy-intensive industries in the EU averaged nearly 50% above Chinese levels in 2025.

Jedner said the factory consumes an amount of energy comparable to the nearby city of Innsbruck, which has more than 130,000 residents. The site operates alongside businesses associated with former Sandoz parent company Novartis and chemical producer BASF.

Despite rising energy expenses, European penicillin prices have remained stagnant or declined, making it increasingly difficult for the Austrian operation to compete with lower-cost imports.

Sandoz seeks EU action against alleged dumping

Sandoz says European purchasing policies compound the problem by prioritizing the lowest-priced medicines rather than considering the importance of maintaining multiple reliable sources of supply.

The company argues that Chinese manufacturers are selling active pharmaceutical ingredients below their production costs, supported by government subsidies. In March, Sandoz submitted a complaint to the European Commission requesting an investigation into China’s position in the antibiotic market.

EU trade officials, European policymakers and China specialists told Reuters that an anti-dumping investigation could begin soon, although the timing remained uncertain because of a backlog of cases.

European duties on Chinese products are considered a possible outcome as Brussels takes a tougher position on trade practices. Of 23 ongoing EU investigations involving anti-dumping or subsidies, only three did not identify China as a sole or joint target, according to the reporting.

The European Commission declined to comment on the case.

Tariffs are not the only option available to European policymakers. Trade Commissioner Maros Sefcovic recently announced an arrangement with Beijing intended to limit exports of Chinese hybrid vehicles without imposing additional tariffs, illustrating the EU’s willingness to pursue negotiated solutions.

China maintains that its industrial subsidies comply with World Trade Organization rules and argues that protectionist policies can damage international supply chains.

Sandoz warns that cheap medicines carry hidden risks

Sandoz CEO Richard Saynor argues that the economic value of essential medicines should be reflected more adequately in their prices. He says manufacturers operating in Europe face an unsustainable situation when production costs rise but selling prices remain under pressure.

“I find it upsetting that we sell a pack of antibiotics more cheaply than a packet of Ricola in Switzerland or a Mars Bar in the UK,” he told Reuters. “We take a lot of these things for granted – ​and we take them for granted until they’re no longer around.”

The dispute highlights a difficult policy choice for Europe: inexpensive imports can help governments manage healthcare budgets, but excessive dependence on a limited number of foreign suppliers could create serious problems during a supply crisis.

For Kundl, the outcome could determine whether Europe retains an important part of its pharmaceutical manufacturing infrastructure or becomes even more dependent on Asian production.

The wider debate is about more than the price of antibiotics. It concerns whether Europe is willing to pay enough to maintain domestic manufacturing capacity for medicines that could become indispensable during a future emergency.