German pharma's hopes and fears - Pharmaceutical Technology

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German pharma's hopes and fears
Despite being a historically strong performer in the pharmaceutical arena, Germany is now underperforming compared with the growth of other European markets. Are government cost-containment policies to blame or have German pharmaceutical companies themselves contributed to the decline?


Pharmaceutical Technology Europe
Volume 22, Issue 6

New pressures

The government has targeted spending on pharmaceuticals as a means of controlling rising healthcare costs, but companies have argued that this is unfair since the increases are linked to providing citizens with better treatment options. In 2008, pharmaceutical expenses for the statutory health insurance increased by nearly 8%.8 In total, overall expenses for medicines, including vaccines, were predicted to reach €30.5 billion in 2009.8 These calculations were based on a study called the Pharmaceutical Atlas (Arzneimittel-Atlas), which differentiates between different therapeutic indications. The author of the study explained that the additional expenses tied in well with the political goal of providing preventative therapy for citizens; for example, the increased use of vaccines in 2009 was estimated to contribute €490 million in medical spending.8 Similarly, the cost of medicines to manage the complications of chronic conditions also had a heavy impact on spending in 2009. Analyses showed that hypertension accounted for spending increases of €310 million; diabetes for increases of €60 million; immunological disorders for increases of €200 million; and osteoporosis for increases of €60 million. Separately, spending on out-patient treatment for cancer was estimated to increase by €320 million for 2009.8 In light of the study, the VFA criticised what it perceived as the government's rigid approach to healthcare, arguing that increased spending was necessary for therapeutic progress.

Officially, pharmaceutical pricing is unregulated in Germany, but the authorities exert influence over prices through a reference system. Cost containment has been a growing feature of the German market since 2004, with the government's Agenda 2010 platform having the goal of reducing healthcare costs by €20 billion.9 A concern for pharmaceutical companies is that the German health minister, Philipp Rösler, has signalled his intention to change the pricing system in the country further.10 He has stated that drug prices are still too high and that companies will have no choice but to negotiate more favourable prices directly with the country's health insurers. They will also have to submit, at launch, a study demonstrating their drug's benefit to patients. According to media reports the changes are set to be introduced by the end of 2010. The Minister believes that such measures could save the healthcare system approximately €2 billion a year. Even though the move is unpopular with the pharmaceutical industry, market observers expect companies to comply because the alternative is the government imposition of pricing ceilings.

Glimmers of hope

Although Germany's pharmaceutical sector has a gloomy shortterm outlook, its longer term prospects are brighter. A 2008 study by the Hamburg Institute of International Economics found that a weakness in Germany was the high level of regulation and an inconsistent approval system. However, the authors stated that the country appeared to fare worse in surveys than an objective analysis of its strengths and weaknesses warranted.11 The cost cutting approach of the government in the field of healthcare appeared to influence the viewpoints of those surveyed because it created the perception that new drugs were not appreciated in the German healthcare system, that research efforts into innovative therapies would not be rewarded and that patents would not be fully respected. This contrasts with data from the VFA showing that 31 new molecular entities (NMEs) were launched onto the German market in 2008 — a dramatic recovery from the low point of 17 NMEs in 2003. Also, in 2008, Germany's pharmaceutical industry actually increased its total R&D expenditure by nearly 7%.1

The authors of the Hamburg Institute study noted that there have been real efforts to improve Germany's R&D competitiveness through the launch of dedicated research initiatives, tax incentives and the promotion of centres of research excellence; however, pessimistic respondents have cited these features as only serving to prevent Germany from falling further behind its rivals. This negative mood is reflected by the VFA, which believes that the decline in the global economy has had less of an impact on the German pharmaceutical industry than continuing the government's cost containment measures.

Germany's Federal Ministry of Education and Research (BMBF) is currently running a 'Pharmaceuticals Initiative' as part of its high tech R&D strategy. The government has identified biotech research as a promising area for future investment; according to government statistics, products from biotech firms accounted for €4 billion or 15% of the total turnover of the pharmaceuticals industry in Germany in 2007.12 Germany is also often described as having the largest number of biotech companies in Europe, although the sector in the UK has been more successful in launching products onto the market. To support German biotech, a programme called BioChancePlus will provide up to €100 million in funding for small and medium-sized biotech companies, with the aim of improving coordination for drug development from networks of biotech and pharmaceutical companies.

Another important area for Germany is clinical trials — the country is widely recognised as a major European centre for clinical trials. As such the BMBF wants to support translational research that can have a practical benefit in this field and has established the "Competence Networks in Medicine", which will bring together experts in different therapeutic fields to develop novel medical solutions for target diseases. At present, 17 such networks are being funded in the fields of cancer, cardiovascular disease, infectious and inflammatory diseases and neurological and psychiatric diseases. The BMBF also has a specific goal of improving the conditions for clinical research in Germany; for example, the BMBF provides funding for non-commercial clinical trials and for centres to conduct interdisciplinary clinical research.


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