Germany – Taking Right Steps Towards Pharma Drugs Reshoring

As part of its endeavors to throttle the pharma sector domestically, the German government has gone ahead with the adoption of a strategy paper in December 2023, which identified three major areas that need to be strengthened.

The objectives include unbureaucratic nods when it comes to clinical trials along with the medicinal products. Second, seamless access when it comes to health data as far as research purposes are concerned, and lastly, incentives so as to set up more manufacturing facilities across the country.

Going the German Way

The fact is that Germany is a prominent force in the worldwide pharma market and also home to some of the leading companies like Boehringer Ingelheim, Merck Group, and Bayer. The country is indeed strong when it comes to innovative, patented medications, however it is slightly weak when it comes to the generics market since even Europe has fallen prey to low profit margins in this segment.

The fact is that generics are indeed pivotal for public healthcare as they go on to cover more than 80% of the basic medication needs, such as many antibiotics. Bork Bretthauer, CEO of Pro Generika, which happens to be a German nonprofit that regularly commissions scientific studies into health policy and the pharma sector, opines that Germany needs to have a distinct drug pricing system. He says that massive factories in Europe are not the criteria here, but they have to be subsidized permanently, and that the Europeans should be willing to pay much higher drug prices.

How Germany will impact global dominance

Apparently, China will not need to give a big punch to Europe; just stopping the antibiotics supplies can very well do the trick.

The success of generic drugmakers happens to depend upon low prices, which itself means that the supply chains happen to be complex, thereby making it clear as to how many companies happen to be involved in which countries. China did identify, as early as the 1980s, how important antibiotic production was. Besides China, even India has emerged as a major supplier lately.

The German parliament in the summer of 2023 went ahead adopted legislation that was aimed at incentivizing the German pharma sector so as to reshore production, or, to say, stop to an extent, locating abroad with higher drug costs. This law was also due to a shortage of drugs as well as supply hindrances that had cropped-up during COVID-19 as well as the Russia-Ukraine war. It is indeed a prominent healthcare policy change since the country has looked to keep public health expenditures as low as possible until 2023.

It is well to be noted that previously, drugmakers were forced to offer statutory health insurance companies their drugs at prices that were capped. Hence, because of this, the prices were fixed for almost 80% of medications, generic drugs included, which meant that only the most cost-effective drug companies could go on to make profits. In the sphere of new legislation, drug tenders from insurance companies for certain active ingredients as well as off-patent medications should go on to award contracts to a European firm.

The professor for pharmaceutical and medicinal chemistry, Würzburg University in southern Germany, Ulrike Holzgrab, opines that this legislation happens to be a step in the right direction; however, he is also apprehensive that this will come to nothing since there is no European production left, especially when talking of the generics sector.

Jasmina Kirchhoff from the German Economic Institute, based in Cologne, Germany, believes that the law has at least helped in making sure that production is prevented from moving abroad.