Germany: The biggest European market

A strong coun­try in West­ern Europe with a rich his­tory, Ger­many is home to the old­est uni­ver­sal health­care sys­tem, dat­ing back to social legislation from the Bis­marck Repub­lic. In the last 20 years, life expectancy has increased by four years for women and five years for men, reach­ing an aver­age of 80.

Since reunification in 1990, Ger­many has expended con­sid­er­able funds to har­monise pro­duc­tiv­ity and wages across the coun­try, and pros­per­ity has increased on the basis of Ger­man exports, par­tic­u­larly machin­ery, vehi­cles, met­als, chem­i­cals and other goods nec­es­sary in Emerg­ing Mar­kets.

Accord­ing to the World Health Organ­i­za­tion (WHO), Germany’s dis­ease profile reflects its high-income sta­tus: heart dis­ease and stroke are the most com­mon causes of death, fol­lowed by can­cer, par­tic­u­larly of the lung and colon. The gen­eral can­cer mor­tal­ity rate is lower than the EU aver­age, but it is slightly higher for breast can­cer. Com­mu­ni­ca­ble dis­eases account for just 5% of life years lost. Around 24% of the pop­u­la­tion smokes, a rel­a­tively high rate, and the obe­sity rate at 14.7% (found using self-reported weight and height data) is also cause for con­cern. At almost 9%, the rate of dia­betes in the 20+ age group places Ger­many fourth in the world after the US, Canada and Mex­ico.

Nev­er­the­less, Ger­mans place a lot of empha­sis on health, which is evi­dent in the OTC mar­ket, grow­ing at a rate of 2.4%. The OTC mar­ket in Ger­many is worth US $5.39 bil­lion—high com­pared to markets in other West­ern Euro­pean coun­tries.

The Ger­man pop­u­la­tion (approx­i­mately 80 mil­lion people) pay an aver­age of US $110 per year for OTC prod­ucts, which make up 11% of the total health­care mar­ket, in phar­ma­cies. Sixty-two per­cent of phar­ma­ceu­ti­cals pro­duced in Ger­many are exported, mak­ing exports a cru­cial area for the indus­try and vul­ner­a­ble to the fate of Euro­pean cur­ren­cies. The phar­ma­ceu­ti­cal indus­try is just as strong as the country’s econ­omy as a whole.

The German phar­ma­ceu­ti­cal mar­ket size in 2012 amounted to US $49 bil­lion; this, in com­par­i­son to East­ern Europe, is a rel­a­tively gigan­tic mar­ket. With a pro­jected annual mar­ket growth of 2.1% per year until 2018, the phar­ma­ceu­ti­cal indus­try is expected to grow to US $55.51 bil­lion. Fur­ther remark­able is the low share of inter­na­tional prod­ucts in Ger­many: 50%.

The German phar­ma­ceu­ti­cal indus­try employs 105,000 peo­ple. In 2012 more than 903 phar­ma­ceu­ti­cal com­pa­nies were reg­is­tered in Ger­many. (This exclud­es OTC com­pa­nies.) Nev­er­the­less, there is a need for inno­v­a­tive and niche prod­ucts in this coun­try.

Inno­va­tion is a dri­ving force for the suc­cess­ful devel­op­ment of phar­ma­ceu­ti­cal com­pa­nies. Research and devel­op­ment in the phar­ma­ceu­ti­cal indus­try aim to expand the pos­si­bil­i­ties for diag­no­sis and causal and symp­to­matic ther­apy, as well as develop dis­ease pre­ven­tion mea­sures and fill gaps. Drugstores have a big influence in Germany; the chains dm and Ross­man offer many OTC prod­ucts. Since 1999 OTC prod­ucts have been permitted to be sold in drug­stores, but phar­macy chains are still sub­ject to restric­tions.

Ger­many has 21,000 phar­ma­cies, with a citizen-to-pharmacy ratio of 3,900 peo­ple per phar­macy. The mail-order and Inter­net phar­macy mar­kets are also grow­ing dra­mat­i­cally: these sec­tors have increased more than 30% in the last three years. The aver­age growth of mail-order phar­ma­cies is esti­mated at 7% per year, with a mar­ket worth around US $1.9 bil­lion in 2012. What’s more, the country’s ageing pop­u­la­tion will need new and more effective ther­a­pies in the com­ing years, par­tic­u­larly in treat­ments for can­cer, heart dis­ease, Alzheimer’s and osteo­poro­sis.

Despite tough pric­ing and reim­burse­ment con­di­tions, as well as the challenging effects of patent expi­ra­tions, Ger­many remains one of the largest global phar­ma­ceu­ti­cal mar­kets, and that status will con­tinue to increase its rewards. Investors still see Ger­many as a solid propo­si­tion, and for good rea­son: unem­ploy­ment has fallen to a post-reunification low of 5.5%, and the country has a cur­rent account sur­plus of 5% of the GDP.