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.
