Given Germany's historical strength in the pharmaceutical sector, companies are concerned at the recent decline in the strength of the market. The high profile cost-containment policies of the government have caused many companies to re-evaluate their approach to investing in the market — this was particularly the case in 2003 when 82.1% of pharmaceutical companies reported to the VFA that they would be cutting jobs.2 The survey showed that 53.6% of companies expected sales to slump, with another 7.1% of respondents stating that sales were set to stagnate. This negative mood was linked to the finding that half the companies surveyed expected to decrease R&D spending with a quarter freezing spending at 2002 levels. This alarmed the VFA, which had already noted the increase in R&D investment in other European countries, as well as in developing economies, such as China and India. Since then, the VFA has lobbied very strongly against government policies that it believes will further damage the sector.Others, however, have argued that German pharmaceutical companies have themselves contributed to the decline by not keeping up with the times and making the right investments in R&D.3 Critics argue that while some international companies used aggressive strategies involving mergers and acquisitions to deal with the rising expense of developing and marketing new drugs, German companies failed to adapt. Hoechst was once a prominent German pharmaceutical company, but its incorporation into Rhone-Poulenc and then Aventis diluted its link to the country. By the time it became part of Sanofi Aventis, the company was considered to have "disappeared".3
Bayer remains a famous German pharmaceutical company, but it is no longer viewed as the innovative force it once was. In 1980 the company was ranked second in the world, but by 1999 it had fallen to 16th place in rankings, with the company considered to lack critical mass in R&D and marketing, particularly in the important US market,4 and cost cutting further dented the company's ability to improve its product strategy. In addition, the company's approach to partnerships was considered inflexible in light of the management's desire to maintain a 50% stake in such ventures.
What really damaged Bayer, however, was the 2001 Lipobay (cerivastatin) controversy. Bayer had forecast eventual annual sales of $2.5 billion for the product, but reported deaths due to rhabdomyolysis led to its rapid withdrawal from the market. The company handled the matter badly, with there being a public outcry in Germany when shareholders were informed of the situation before patients and doctors.5 The company has been forced to restructure and despite its merger with Schering AG, there is still occasional speculation in industry media that it might be a target for acquisition by a larger foreign rival.6,7