Europe’s drug supply dependence, a factory in Austria tells the story

A factory that built Europe’s penicillin economy

A small abandoned brewery in Tyrol became one of the most important industrial sites in European medicine. In 1946, Kundl was converted into Austria’s first penicillin production plant, and by 1951 Sandoz said the site could meet 40% of domestic demand from its own output. What began as a postwar manufacturing breakthrough did more than save lives. It helped anchor Europe’s recovery by showing that essential drugs could be made at scale on the continent.

The site’s history reaches even deeper. Sandoz traces Kundl back to a brewery on the Schloss Hocholtingen estate dating to 1658, a reminder that industrial continuity in medicine can grow out of the most unlikely foundations. Today, the same location is being used to make a different argument: if Europe lets such plants disappear, it may not be able to recreate them later.

How Europe lost control of a critical supply chain

Kundl’s story matters because antibiotics are not just another pharmaceutical category. They are a basic input into modern health systems, and the economics around them have long pushed production away from Western Europe. As free-market logic and cost pressure spread through the industry, much of the manufacturing shifted to Asia, where labor and production costs are lower but supply chains can be more fragile.

That trade-off was easy to ignore when medicines were flowing normally. It became harder to dismiss during the COVID-19 pandemic, when shortages exposed how thin the buffers had become. It surfaced again during shortages of pediatric antibiotics three winters ago, when families and hospitals were forced to confront the consequences of concentrated production, lean inventories, and dependence on overseas suppliers.

Europe’s dependence is especially stark in antibiotics because so much of the market is made up of older, off-patent drugs. These medicines are essential, but because they are not protected by patents or exclusivity, they compete in generic markets where price pressure is relentless. A 2024 Nature policy paper focused on off-patent antibiotics and argued that they are vulnerable precisely because generic production makes them easy to source, but also easy to underprice out of existence.

Why Kundl has become a strategic asset

Sandoz now describes Kundl as the hub of Europe’s last fully vertically integrated penicillin production network. In practical terms, that means the company controls the chain from active ingredient to finished product, rather than relying on a patchwork of outside suppliers. Richard Saynor, Sandoz’s chief executive, has warned that this is the last major vertically integrated antibiotics center in Western Europe, and that if the plant disappears, it is gone forever.

That warning is not just corporate rhetoric. Sandoz says Kundl is the largest remaining vertically integrated production network for antibiotics on the continent, and that the site serves patients in more than 100 countries. In a supply-chain security context, this is the kind of asset governments usually say they want until the bill arrives. The economics of keeping it open are harder than the politics of praising it.

Europe’s policy response is moving, but slowly

Brussels has begun to treat medicine supply as a resilience issue, not just a market issue. In October 2023, the European Commission said recent critical shortages, including certain antibiotics the previous winter, showed the need for coordinated action across the bloc. It then said it would set up a Critical Medicines Alliance in early 2024 to bring together national and EU authorities, industry, and civil society.

The Commission has also said it wants to diversify supply and modernize the production of critical medicines. That matters because the question is no longer whether Europe needs more secure drug supply chains. The real question is what kind of policy mix can actually deliver them. Diversification can reduce dependence on any one region, but it does not by itself solve the price gap that pushed production overseas in the first place.

That is why economists and health experts keep returning to procurement and reimbursement. If governments want strategic autonomy in medicines, they may need to pay more for older antibiotics so production remains viable inside Europe. That is a politically difficult answer, especially in health systems built around cost containment, but it may be the only one that matches the strategic rhetoric.

What the Kundl expansion says about reshoring

Sandoz has not stood still. In March 2024, the company said it opened a new production facility in Kundl, following a new active-ingredient facility that came on stream in November 2023. Sandoz said the combined investment was about €200 million, with roughly €150 million going into the active-ingredient site and about €50 million into the 2024 extension.

The company said the expanded Kundl site can now produce 240 million packages a year. That is a 20% increase over 2023 output and more than double the 2021 level. Sandoz also said automation improvements would allow one billion more penicillin tablets and double output of a key pediatric formulation. Those are not symbolic gestures. They show that when scale, automation, and industrial know-how align, Europe can still produce medicines competitively in some categories.

But Kundl also exposes the limits of reshoring. The site is exceptional because it already possessed a long industrial base, specialized expertise, and the ability to expand incrementally. That makes it far easier to defend than to replicate. Rebuilding similar capacity across Europe would require long-term contracts, public incentives, and a willingness to accept higher prices for drugs that are medically essential but commercially unattractive.

The larger test for Europe’s drug sovereignty

A 2025 Sandoz-sponsored report sharpened the policy argument by again describing Kundl as the hub of Europe’s last fully vertically integrated penicillin network and calling for European sovereignty in antibiotic manufacturing, along with more region-specific partnerships. That language reflects the direction of travel in Brussels, where resilience, diversification, and industrial policy now sit closer together than they once did.

Still, the Kundl case suggests that Europe cannot secure medicine supply through slogans alone. The continent can preserve a few strategic plants, support local capacity in critical drugs, and diversify supply chains where possible. What it cannot do is expect decades of offshoring to be reversed quickly, cheaply, or without direct public support.

Kundl is therefore not just a factory story. It is a test of whether Europe is willing to treat antibiotics as infrastructure, not a bargain-bin commodity. If the answer is yes, policymakers will have to pay for resilience in a system built to reward the lowest price. If the answer is no, the continent will keep discovering that the cheapest supply chain is often the least secure one.