Germany’s economic future seems more uncertain than ever before – the keywords are well known, the effect obvious: we are experiencing a loss of prosperity. But even in the face of such extreme challenges, there are opportunities for our innovative economy.
The often-discussed dependencies – one-sided energy supply, overstretched global supply chains, exaggerated integration with China – can also be overcome if growth markets can be successfully tapped.
As understandable as the political reflex is to want to compensate for the population’s real loss of prosperity, the economically relevant question is: Who, if not the companies in Germany, should master the upcoming challenges in order to ensure future prosperity? Because this will hardly succeed with proven technologies and business models, rather innovative solutions are required.
The pharmaceutical industry based in Germany, for example, shows how this can be achieved. Its companies occupy leading positions in global competition in key technologies – for example in the area of mRNA-based vaccines against Sars-CoV-2. Drug manufacturers find location conditions in Germany that enable them to develop and produce innovative, complex active ingredients and drugs.
On average, pharmaceutical companies spend a ninth of their turnover on their own research and development – not including research contracts with third parties. On average, they work for more than ten years on the development of a new drug in order to then launch it on the German anchor market – still uncertain under what sales conditions – and all this in the hope of being able to open up market opportunities in global competition.
If the healthcare markets promise high growth opportunities in a growing world population and in aging industrial societies, then high-quality jobs and high added value will arise at a prosperous location for the pharmaceutical industry. But competition is increasing, particularly in promising therapeutic areas such as gene and cell therapy – there are currently 230 developers of gene and cell therapies in Europe, 651 in North America and 236 in China.
That is why a clever industrial policy with free movement of goods and reliable, investment and innovation-friendly conditions is needed for drug manufacturers too. Walter Eucken’s reference to the interdependence of orders applies more than ever. Ironically, with the Statutory Health Insurance Financial Stabilization Act, Germany as a pharmaceutical location threatens to be permanently weakened; the political intention to strengthen the industry, which was often declared in the course of the COVID pandemic, is being countered.
And the hope that the industry would want to participate in the financing of the demographically rising health expenditure will not be fulfilled either. If anything, the contributors are only temporarily relieved.
Whether retrospective reimbursement when an innovative drug is launched, lowering the sales threshold for orphan drugs, introduction of an additional combination discount or new requirements for negotiating the final reimbursement amount as part of the Drug Market Reorganization Act – the planned interventions not only worsen the entrepreneurial perspectives when new drugs are introduced in Germany Market.
It is crucial for companies to bring their innovative medicines that have been researched, developed and tested in clinical trials in Germany onto the German market. However, if the market launch conditions deteriorate significantly, companies will question their investments in Germany and relocate to countries with similarly good research and production conditions. Then emigration is the last step in a fateful development. But this is exactly what is threatening now.
With regard to the security of supply for German patients, it could be objected that innovative medicines can just as easily be imported. But not only the much-cited delivery bottlenecks for generics show that this can only succeed if there is sufficient willingness to pay. In fact, studies show that reimbursement prices for medicines in Germany are mostly below the European average. Anyone who hopes that when there is a shortage of supply, the necessary medicines would be sold to Germany first, fails to recognize that this can only be expected if there is a higher willingness to pay.
Conversely, it turns out to be a shoe: The investments made by innovative sectors at the location help to secure employment and income opportunities – this applies to the economy as a whole, as well as to the industrial healthcare industry and specifically to the companies in the research-based pharmaceutical industry. Only a high level of employment and a favorable income trend create the conditions for mastering the demographic challenges in the contribution-financed social security systems.
Jasmina Kirchhoff is project manager at the research center for pharmaceuticals in Germany, and Michael Hüther is director at the German Economic Institute (IW).
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