Germany: Pharmaceuticals Page 1 of 12 Germany: Pharmaceuticals Anette Salama Date 07/2010 Summary Germany is the worlds third largest pharmaceutical market, behind the United States and Japan. Its economy depends heavily on exports and was therefore hit hard by the global downturn. According to the Economist intelligence Unit (EIU), Germanys economy showed early signs of recovery in 2009. Although pharmaceutical market growth has slowed in recent years as a consequence of government cost-containment measures, the countrys pharmaceutical expenditures in the past years continued to grow. According to analysts, the market for pharmaceutical products is expected to increase with an average annual growth rate of 3.5% until 2013. Due to an ageing population (20% of the population is 65 and older) and the associated increase in demand for elderly care, demand for pharmaceuticals is likely to further increase over the coming years. Cost containment, reference pricing, manufacturers rebates and consolidation among pharmacies and insurances remain hot topics in this industry. Major supplier countries to Germany are Ireland, the United States, Switzerland, France, the United Kingdom, and Italy. Germany has roughly 878 pharmaceutical manufacturers and an additional 402 biotechnology firms specializing in the development of pharmaceuticals. 93% of German pharmaceutical manufacturers have less than 500 employees. The German pharmaceutical market is very competitive and price-oriented. The exclusion of non-prescription drugs from reimbursement, the expansion of mail order supplies and multiple ownerships continue to further encourage competition. In Germany, trade fairs play an extraordinarily large role in product marketing. U.S. companies wishing to penetrate the German market often make their first approach at major trade fairs. For U.S. manufacturers and exporters wishing to sell in Germany (and in Europe) it is important to exhibit at one of Germanys major international fairs. Exhibiting at fairs can bring direct sales, but more significantly, it can be one of the least expensive ways to test the markets receptivity for pharmaceutical products. U.S. companies may want to consider attending the following show: Expopharm, October 7-10, 2010, Munich, Germany - http:/www.expopharm.de The U.S. Commercial Service in Germany provides counseling, market research, and other support services to U.S. exhibitors before, during and after these shows. Please let us know how we may be of assistance to your business objectives, whether or not specifically related to this trade fair. Market Overview The supply of pharmaceuticals is a basic human need, and therefore not subject to economic fluctuations as much as other necessities. As a result, the pharmaceutical industry is one of those economic areas that lends continuity to economic development. Over the past eight years, sales in the global pharmaceutical market have more than doubled. Even in times of crisis, the pharmaceutical Let us help you export. export.gov The U.S. Commercial Service Your global business partner. 800-USA-TRADE Germany: Pharmaceuticals Page 2 of 12 industry is relatively stable. This is due to the significant innovative power of the pharmaceutical companies and the medical needs of society. The United States is still leading the pharmaceutical sector worldwide, reaching the highest per-capita sales in the market. Germany, in comparison only spends about half as much on pharmaceuticals. This is mainly due to the fact that in Germany, legal regulations still prevent patients from benefiting quickly and sufficiently from pharmaceutical innovations after they receive authorization for marketing: In 2007, only 6% of pharmaceutical expenditures were made for innovative pharmaceuticals launched during the past five years. Table: German Pharmaceuticals Market 2007- 2010 (USD million) 200720082009 2010 (e) Total Market Size 24,97616,55132,666 40,898Total Local Production 38,51534,10739,905 40,599Total Exports 56,66761,90069,945 74,595 Total Imports 48,12044,34352,214 54,354 Imports from the U.S. 8,7268,46310,491 11,499Let us help you export. export.gov The U.S. Commercial Service Your global business partner. 800-USA-TRADE On an international level, Germany has only barely been able to maintain its position as a production location for pharmaceutical products. 8% of the overall pharmaceutical production from Europe, Japan, and the United States, worth EUR 352 billion in 2007, came from Germany. In comparison, in 1990, this share stood at 9%. However in spite of this lack of market share growth, compared to Japan and the United States, the countries of the Euro zone have benefited from the strength of their currency over the past five years. Especially medium-sized European countries such as Ireland, Austria, Belgium, and Switzerland (as a