Germany: dampened expectation for 2002

Germany has lost its ranking as the leading r&d location for the pharma industry, and there are problems in basic biomedical research, clinical research and approval procedures that need to be overcome in 2002

Clear and long-term reliable parameters are essential for a strong pharmaceutical sector in Germany. It remains to be seen whether the regulatory initiatives of 2001 will hinder rather than promote the remaining reforms of the healthcare structure,' said Cornelia Yzer, head of the VFA - the German Association of Research-based Pharmaceutical Manufacturers.

In a survey about the outlook for 2002, just under 70% of VFA members were expecting an increase in domestic sales, compared with almost 90% in 2000. However, one in five companies forecast a fall in sales; the previous year only 6.5% showed the same degree of pessimism. In contrast to the internal market, more than half of VFA members are predicting that exports will rise during the coming year, while almost two-thirds of companies are expecting prices to fall, and almost half are expecting the decrease to be significant. This compares with 37% and just 6% respectively in 2000.

gloomy outlook

The outlook for employment is similarly gloomy. Cost-saving measures are expected to feed through into the workforce over the next 12 months, said Yzer. Almost a third of companies are likely to cut their workforce - more than twice as many as previously. Only 28% of companies are expecting to take on new employees, compared with a third last time. As if to emphasise this, in a bid to trim operating costs by an additional Euro 400m (US$379m) within the next 18 months, Bayer said that it is to axe around 1,300 pharmaceutical jobs throughout its global operations.

Ironically, there could also be a recruitment shortage of chemists. In the early 1990s there were suggestions of a surfeit of chemists, intensified by the collapse of the former East Germany. In view of the bad press on career opportunities in science, the attractiveness of studying chemistry took a dramatic dive. The result: while nearly 7,000 high school graduates chose to major in chemistry at a German university in 1991, the number dropped to fewer than 3,000 only three years later. Even in 2000, chemistry in Germany had not recovered from this low level: 3,300 high school graduates started a chemistry programme in 2000 - although the numbers appear to be increasing, according to a survey by the German Chemistry Society (GDCh). The GDCh also highlights the problem of dropping numbers of PhDs, which are predicted to fall to 700 in 2005 from 2,200 in 1999. The smaller pool of resources may cause recovery problems, not only for the German industry, but the European industry as a whole.

With their high expenditure on research and development, the research-based pharmaceutical companies strengthened the competitiveness of Germany as a location for the pharmaceutical industry. In 2000, they increased their r&d spending by 5.5% to Euro 3.1bn ($2.94bn). At Euro 208,000 ($197,000) per employee, research and development spending in the pharmaceutical industry was more than 53% higher than the industry average. Almost a fifth of employees in the VFA member companies are employed in r&d.

market authorisations

Furthermore, in 2000, the utilisation of capital and know-how was worthwhile: 27 innovative pharmaceuticals constituting a therapeutic advancement received a marketing authorisation in Germany. The launch of the so-called glitazones marked the first representatives of a new class of substances that directly tackle the cause of Type II diabetes. However, the overall number of market authorisations for new chemical entities in Germany has been declining since 1997. This suggests that Germany is becoming less attractive as a country for initial market authorisation.

Among those substances that received the marketing authorisation in Germany in 2000 were four genetically manufactured ones. With a 25% increase in r&d spending in 2000, the research-based pharmaceutical companies looked to have deepened significantly their commitment to gene technology. Of those chemical entities in pre-clinical and early clinical trials, one in four was based on gene technology. However, the last survey suggests that Germany is losing ground in the biotechnological and genetic research sectors, Yzer claimed.

According to this survey, the number of companies planning to increase their r&d spend in Germany has fallen from 57% to 36%. In contrast, 76% are likely to increase their overseas r&d commitment to these technologies. 'That is particularly ominous as Germany's position in the biotech sector has made significant progress since the 1990s, when Germany was up with the world leaders,' stressed Yzer. 'Politics must not now be allowed to jeopardise this positive development.'

She again called for the EU bio-patent guidelines to be adopted quickly and unreservedly into German law.

Despite limited sales opportunity on the domestic market, the research-based pharmaceutical manufacturers are still pursuing innovations in 2002. There are plans to introduce some 60 new preparations onto the market in the coming year, of which 25 will use new chemical actives and seven will be genomic innovations.

therapeutic possibilities

The focus of the planned launches will be new therapeutic possibilities for major health problems and those with a large patient base. More than half of the innovations will be in the areas of the central nervous system and respiratory tract diseases, infections and skin conditions, including Alzheimer's, schizophrenia, asthma, dermatitis and pain relief. Other areas where new products are planned are bacterial and viral infections, osteoporosis and oncology.

The value of the German pharmacy market increased by 6% to Euro 27bn ($26bn) at retail prices in 2000. About 78% of this consists of prescription pharmaceuticals prescribed by physicians for the treatment of patients. In light of the continuing budgetary pressure, the prescription pharmaceutical market has once again lagged behind the development of the market as a whole during the same period. The trend of prescribing innovative pharmaceuticals, most of which include patented chemical entities, instead of OTC products remains unbroken. However, the financial restrictions with which physicians have to cope are increasingly leading to a rationing of prescription-only pharmaceuticals.

third largest

Once again in 2000, average pharmaceutical prices increased only slightly, and as in previous years they had no appreciable influence on the development of sales. The number of pharmaceuticals subject to reference prices increased again.

Germany remains the world's third-largest pharmaceutical market with sales worth Euro 15.4bn ($14.5bn) at manufacturer's prices in the pharmacy market. But at the same time, the German pharmaceutical market shows below-average growth when compared with other countries. If this development continues, countries such as France, Italy or the UK will jeopardise the Germany's established position as a location for pharmaceutical companies

Another study from the Boston Consulting Group suggested that 'German pharmaceutical research is no better than mediocre.' It continued: 'Germany has lost its ranking as the leading research and development location for the pharmaceutical industry to become middle-of-the-road in international terms.' The study points up major deficits in basic biomedical research, clinical research and approval procedures.

The VFA's newly elected board chairman Bernhard Scheuble, who is also executive chairman at Merck, demanded that research funding be increased. The state funding sum of Euro 3.8bn ($3.6bn) is just not enough, according to Scheuble, and will have to be jacked up by Euro 0.76bn ($0.72bn) a year if the country is to catch up with the world leader in pharmaceutical research, the US. He also said the funding should be assigned on a performance basis and that there should be a focus on major projects.

Scheuble went on to mention that, although Germany is the world's third-largest sales market for medicines, only 10 of the 130 research locations of the 30 top-sales global pharmaceutical players were located in this country. Networking research centres on the American model would be, he said, a good model for Germany too.

Scheuble's predecessor, Patrick Schwarz-Schuette, attacked the health policies of the German government, saying that they were doing nothing in the face of a coming financial collapse.

He claimed the pharmaceutical sector was being 'gutted' to finance cutbacks in the German national health insurance scheme, admitting, however, that the voluntary Euro 205m ($194m) payment made by the industry to the government health insurance scheme at the end of January was better than the threatened sanction of a federal price drop of 4% for 2002 and 2003.

VFA

The VFA consists of 44 companies, which account for around two-thirds of pharmaceutical sales on the German market and more than 80% of exports