The Pharmaceutical Market
Over the past eight years, sales in the global pharmaceutical market have more than doubled. The United States is still in the lead, reaching the highest per-capita sales in the market as well. In Germany, pharmaceutical spending is only about half as high. In Germany, legal regulations still prevent patients from benefiting quickly and sufficiently from pharmaceutical innovations after their marketing authorization: In 2007, only six percent of pharmaceutical expenditures were made for innovative pharmaceuticals launched during the past five years. This brings Germany to the bottom of the table in Europe. The dominant factor in the dynamics of the pharmaceutical market continues to be medical and therapeutic needs: Not only were increases recorded for serious and life-threatening diseases such as cancer, rheumatoid arthritis and multiple sclerosis but also for widespread conditions such as cardiovascular diseases or diabetes as well as in preventive medicine with the first vaccine against one type of cancer, the human papillomavirus (the trigger of cervical cancer).The Global Pharmaceutical Market
From 2000 to 2008, global pharmaceutical sales have more than doubled. With about 37 percent, the United States remains the largest individual market worldwide. Over the past three years, the growth of this market, which always was above average until the first few years of the new millennium, now has more in common with the moderate dynamics of the European markets. The strongest growth was exhibited by the Eastern European, Latin American and Asian markets. In 2008, Europe’s share of the world market grew to 32 percent (2003: 26 percent) primarily due to the strength of the euro against the U.S. dollar. Germany’s share of the global market remained nominally (i.e. at the current USD exchange rate) at about 4.5 percent. This represents a real decrease to 3.5 percent.
Development of the Largest Pharmaceutical Markets
With a volume of about USD 31 billion in 2007, Germany is the third largest market for pharmaceuticals in an international comparison and at the same time one of the markets exhibiting below-average growth. This is due to the cost containment measures of the legislature. From 2001 to 2008, sales in the German pharmacy market increased by about 25 percent, while the U.S. and Spanish pharmacy markets increased by more than 50 percent. In the United Kingdom and France, sales increases were also larger than in Germany.
Per-capita Sales of Pharmaceuticals
With regard to per-capita sales (sales in the pharmacy market at manufacturer prices), Germany ranks in the middle of an international comparison. When comparing European countries, Germany lies behind France and Switzerland. Also in non-European industrial nations such as the USA, Japan and Canada, per-capita sales are higher than in Germany.
New Molecular Entities: A European Comparison
When it comes to enthusiasm for innovation, Germany ranks near the bottom in Europe. In 2007, only 6.0 percent of expenditures in Germany were made for innovative pharmaceuticals launched during the previous five years. As a result, Germany spends less on novel pharmaceuticals than most other European countries, despite the fact that an equally large number of pharmaceuticals receive marketing authorization domestically. However, they are prescribed less frequently or they have lower prices.
Number of Pharmaceuticals in Germany
The number of pharmaceuticals is decreasing over the long term. The well-known German drug directory known as the “Rote Liste“ currently includes 8,778 product listings, including many rarely used pharmaceuticals. Based on evaluations made by statutory health insurance, 90 percent of physicians’ prescriptions are for only 2,000 pharmaceuticals. The number of available pharmaceuticals is often represented imprecisely. For example, if not just the individual product but all of its dosage forms and concentrations are counted separately, one may arrive at numbers of 40,000 pharmaceuticals or more. However, this method of counting is not customary in other countries and is therefore inappropriate for the purpose of comparisons.
From Manufacturer to Patients: Distribution and Financing of Pharmaceuticals in the 2008 Pharmacy Market
In 2008, the pharmaceutical companies provided pharmaceuticals for human consumption worth EUR 23.8 billion (at manufacturer prices) via pharmacies for outpatient treatment. After adding the wholesale and pharmacy mark-ups as well as sales tax, this corresponds to a market volume of EUR 41.0 billion at retail prices. A total of 11 percent of this amount was for selfmedication, 12 percent for private prescriptions outside of statutory health insurance and 77 percent for SHI prescriptions. This latter category was financed through copayments by insured patients (5.4 percent), manufacturer and pharmacy discounts (8.2 percent) and the health insurance funds themselves (86.4 percent).
Sales and Packages Sold through Pharmacies 2008
As during the previous year, sales in the German pharmacy market increased slightly in 2008. After deduction of legally mandated discounts, net sales were EUR 22.5 billion, i.e. 4.4 percent more than the year before. However, actual net sales were even lower due to the discount agreements concluded between the health insurance funds and manufacturers. The companies’ mandatory discounts for the benefit of statutory health insurance funds were about EUR 1.25 billion. The amount of the individual, contractually agreed discounts is unknown. In 2008, the number of packages sold reached a volume of 1.61 billion, which represents a 1.5 percent increase over the previous year. This increase occurred primarily in prescription drugs, whose share grew from 44 to 46 percent. In contrast, sales of over-the-counter drugs from pharmacies decreased.
Parallel Imports
Still less than 1.8 percent in 1998, the market share of pharmaceutical parallel imports in the pharmacy market has increased to 9.0 percent in 2008. This was due in large part to targeted government support. Beginning in 2004, the introduction of a minimum price difference for imported products to the original products has only partially interrupted this development. Parallel imports mainly focus on patented, innovative pharmaceuticals. As a result, research-based pharmaceutical companies suffer considerable sales losses in the domestic market. In 2008, importers generated sales worth EUR 2.14 billion.
Sales of Genetically Manufactured Pharmaceuticals
The share of pharmaceuticals with genetically manufactured substances is constantly increasing: With EUR 4.4 billion in sales in 2008, (at manufacturer prices) it was 16 percent. In 2000, this share was still at 8 percent. About 40 percent of sales fall into applications of metabolism (especially insulins for treating diabetes) and infections (especially vaccines) and insulins. Additional important applications include interferons used for immune disorders, monoclonal antibodies against cancer and EPO (erythropoietin) against anemia.
Sales Distribution in the SHI Pharmaceutical Market 2008
In 2008, gross sales with proprietary medicinal products in the SHI market (at pharmacy retail prices incl. VAT without rebate deduction) were EUR 29.5 billion. Based on the German Contribution Rate Safeguarding Act, the SHI Modernization Act and the Economic Efficiency of Pharmaceutical Care Act, the discounts the pharmaceutical companies as well as wholesalers and retailers must grant to statutory health insurance have been changed several times between 2002 and 2008. In 2006, the mandatory discount was expanded again for manufacturers. Due to the value-added tax increase to 19 percent, the share of taxes included in gross sales increased to 16 percent.
Manufacturers’ Sales in the SHI Pharmaceutical Market
Based on several tightenings of discount regulations, the manufacturer discount more than doubled from 2005 to 2008 and is now around seven percent of gross sales (at manufacturer prices). Net sales in 2008 were EUR 16.86 billion, which represents a 6.2 percent increase over the previous year. Additionally, discounts based on individual agreements between health insurance funds and manufacturers pursuant to Section 130a para. 8 of the German Social Code V must also be taken into account.
2008 Sales Growth: Driven by what Components?
The EUR 1.5 billion sales increase in the SHI market in 2008 was determined by opposing components that either had a sales-increasing or decreasing effect. Consumption (increase in the prescribed daily doses) and innovative pharmaceuticals have created an additional demand of about EUR 1.8 billion and EUR 0.5 billion respectively. In contrast, “technical“ savings, e.g. selection of more cost-effective drugs, including those with active ingredients whose patents expired in 2008, or larger packages, have led to almost EUR 0.53 billion in savings. Savings from further price cuts amounted to EUR 0.33 billion. As during the past three years, the dominant factor in the dynamics of the pharmaceutical market are medical and therapeutic needs.
Changes in 2008 Sales based on Health Disorders
Sales increases were recorded predominantly for the treatment of serious or life-threatening diseases, primarily cancer and – in the case of vaccines, e.g. against human papillomavirus – for the prevention of diseases. In particular, sales decreases were recorded for categories of diseases for which classes of active ingredients are used that could be prescribed more cost-effectively due to expired patents or price reductions.
Reference Prices in the SHI Market
Over the past two years, indirect price regulation based on reference prices has been significantly expanded again. In 2007 and 2008, almost three-fourths of all pharmaceuticals prescribed in Germany were subject to this regulation. As a result, this share is the highest since reference prices were introduced. The sales share of pharmaceuticals subject to reference prices has remained relatively constant due to decreasing reference prices. Effective 2005, new reference price categories may also include patented active ingredients. This involves additional, considerable burdens, especially for the research-based pharmaceutical companies.
Since January 1, 2009, more than 29,000 proprietary medicinal products have been subject to reference prices. As a result, the statutory health insurance funds will probably save more than EUR 4 billion in 2009.
Generic Drugs in the SHI Market
When patents expire, the imitation products of other manufacturers (generic drugs) can also be authorized for marketing alongside the original pharmaceuticals. In Germany, 80 percent of SHI prescriptions – and at 45 percent almost half of all sales in the entire market – are generated in this so-called genericseligible market. During the past 12 years, Germany has evolved into the world’s most generics-friendly country. Often, original products lose almost their entire market share to generic drugs within just a few months after patent expiration. On average, more than 85 percent of all prescriptions and about 80 percent of sales in the generics-eligible market were generated by imitation products in 2008.
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