Restrictions in the Strait of Hormuz have stalled the production of generics – which could have knock-on effects for global health and the Swiss export industry. With the chemical and pharmaceutical sector accounting for 53 per cent of total exports, Switzerland is particularly vulnerable.
The highly globalized pharmaceutical industry is being severely disrupted by the ongoing crisis in the Strait of Hormuz. The situation is reaching its peak, particularly in the production of generic drugs. Patients in lower-income countries are likely to be the first to suffer, but pharmaceutical supply is also deteriorating in Europe. General shifts in the global market could also result from this situation.
Hormuz disruption threatens pharmaceutical supply chains
These effects are attributed to the fact that the Strait of Hormuz is a vital transport route for critical pharmaceutical intermediates derived from oil and gas. These are shipped from the Middle East to China and India, where a large proportion of low-cost generic medicines are produced. Now, these intermediates are in short supply and costs are rising. As a result, Chinese and Indian companies are scaling back production of generics, which account for the majority of daily medicines like paracetamol.
Generic drug supply heavily reliant on India and China
The highly globalized generic drugs market is, in general, fraught with risk. Besides geopolitical crises, even minor changes in costs or demand can force companies out of the market, ultimately destabilizing the healthcare system. This is due to a trend that has gained momentum since the 2000s. Key factors today include intense competition with low margins and a concentration of production in India and China. The traditionally strong petrochemical industry in these countries created favorable conditions for Western pharmaceutical giants to outsource large parts of their production. Today, up to 80 per cent of the active pharmaceutical ingredients (APIs) used in Europe come from China and India.
Structural risks weaken the global pharmaceutical supply chain
Such a structure contributes to a further increase in the risk of physical supply bottlenecks. This remains true even though countermeasures have been taken, such as sourcing oil and gas from Iran or Russia. In certain sectors, higher-quality raw materials are also being used, which increases margins but reduces volumes.
For companies, room for manoeuvre is limited: rising raw material prices and increasing bottlenecks often mean either exiting the market or making costly adjustments. On one hand, pricing conditions are restricted by regulatory authorities in Western countries. On the other hand, only financially strong businesses can shift their focus to brand-name medicines or more expensive generics. Among the biggest losers are alternative generics producers, such as those in Mexico, who also source 75 per cent of their APIs from India and China.
Global drug shortages: supply under increasing pressure
National medical care, particularly in low-income countries, could deteriorate drastically. So-called low-price markets, for example in Africa, are likely to be deprioritized as supply tightens. Recent celebrated progress in access to basic treatments and antibiotics could thus become obsolete.
Europe is not immune, and the impact is already being felt. In early May, Switzerland’s Federal Office of Public Health reported shortages in generic medicines supply. Strong painkillers such as opioids, as well as insulin and antibiotics, are becoming scarce, with supply disruptions even affecting some paracetamol products.
Switzerland’s pharmaceutical exports at risk from global disruptions
The chemical and pharmaceutical industry is driving the Swiss export economy more vigorously than ever before. In 2025, growth in this sector pushed exports to a new record of 152 billion Swiss francs, accounting for 53 per cent of total exports. Our experts warn that this record performance also represents greater vulnerability to global supply chain disruptions. In other words, any upheaval in the petrochemical sector directly threatens more than half of Switzerland’s export revenues.
Sandoz adapts to mitigate global supply chain risks
As one of the world's three largest generics producers, Sandoz illustrates how major pharmaceutical companies are navigating global supply chain risks. The company states that it does not currently expect significant supply chain disruptions or material impacts on its business, citing alternative supply routes established over several years, as well as end-to-end European manufacturing for large parts of its operations. In 2024, Sandoz divested its China business. A new production center for biosimilars in Slovenia is scheduled for 2029, and investments are being made in countries including Austria and Germany.
Sandoz nonetheless acknowledges that a prolonged conflict could have industry-wide impacts on supply and energy costs, potentially requiring price adjustments to offset inflationary pressures and ensure continued patient supply. As the company notes, securing access to essential medicines is not only an operational challenge, but a question of long-term healthcare autonomy and resilience.
