The Pharmaceutical Market
The global pharmaceutical market grew slightly in the past year to its current level of USD 808 billion. The USA is still the world’s biggest single market by a substantial margin. The Latin American and Asian markets grew most strongly, while Europe remained stable. China, one of the most dynamic markets, may soon surpass Germany and France to become the world’s third largest market (behind the USA and Japan). Compared with other countries, Germany’s per-capita expenditure is in the average range, although it ranks lower than other European countries in terms of innovation. In 2009, only 4.4 percent of overall pharmaceutical costs were spent on innovations launched on the market in the past 5 years.The Global Pharmaceutical Market
Global pharmaceutical sales more than doubled from 2000 to 2009. The USA, with around 37 percent, is still the world’s biggest single market. Growth in this market, which was above average until the first years of the new millennium, has tended to approximate the moderate dynamic of European markets
in the past three years. Latin American and Asian markets have grown most strongly. Europe’s share of the world market declined in 2009 to 31 percent (from 32 percent in the previous year), due mainly to the euro’s weaker exchange rate against the U.S. dollar. Germany’s global market share also fell very slightly in 2009 from 4.5 to 4.3 percent. In real terms, assuming a constant exchange rate, Germany’s share of the world market decreased from 5.0 to 3.5 percent over the past decade.
Development of the Largest Pharmaceutical Markets
With a volume of around USD 35 billion in 2009, Germany is the third largest market for pharmaceuticals in an international comparison and at the same time one of the markets showing moderate growth. From 2001 to 2009, sales in the German pharmacy market increased by around 30 percent, an average annual increase of 3.4 percent, while the US and Spanish pharmacy markets grew by more than 60 percent in the same period. Growth in the upcoming Asian and Latin American
markets is even stronger. China, one of the most dynamic markets, may soon overtake Germany and France to become the third largest market.
Per-capita Sales of Pharmaceuticals
Germany ranks in the middle of an international comparison of per-capita sales (sales in the pharmacy market at manufacturer prices). Compared with other uropean countries, Germany lies behind France and Switzerland. In non-European industrial nations such as the USA, Japan and Canada, per capita sales are higher than those in Germany.
New Molecular Entities in Germany
Germany ranks lower than other European countries in terms of innovation. In 2009, only 4.4 percent of expenditures in Germany was spent on innovations launched during the previous 5 years. This market share is well below the rates of previous years and pales in comparison to shares in other European countries, which can be as high as 18 percent.
Number of Pharmaceuticals in Germany
The number of pharmaceuticals is declining significantly. The ‘Rote Liste’, a well known German drugs directory, currently lists 8,500 products, many of which are only rarely used. According to evaluations made by statutory health insurers, 90 percent of doctors’ prescriptions are issued for just 2,000 medications. The number of pharmaceuticals available is often represented imprecisely. For example, if not only the individual product, but also every dosage form and concentration is counted separately, a figure of more than 40,000 pharmaceuticals can be reached. However, this method of counting is not customary in other countries and is therefore inappropriate for the purpose of comparison.
From Manufacturers to Patients: Distribution and Financing of Pharmaceuticals in the 2009 Pharmacy Market
In 2009, pharmaceutical companies provided drugs for human use worth EUR 24.7 billion (at manufacturer prices) via pharmacies for outpatient treatment. Adding wholesale and pharmacy mark-ups and sales tax gives a market volume of EUR 42.2 billion at retail prices. 10 percent of this amount was for self-medication, 12 percent for private prescriptions outside of statutory health insurance, and 78 percent for SHI prescriptions. These were financed through copayments by insured patients (5 percent), manufacturer and pharmacy discounts (8.6 percent) and by the health insurance funds themselves (86.4 percent).
Sales and Packages Sold through Pharmacies 2009
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. 4.4Sales in the German pharmacy market increased slightly in 2009, as they did in the previous year. After deducting legally mandated discounts and individual contractual rebates, net sales reached EUR 24.7 billion, 3.7 percent more than in the previous year. However, net sales were actually much lower
due to these discounts. The exact amount of these discounts is currently unknown but is estimated at up to EUR 2 billion. The number of packages sold reached a volume of 1.6 billion in 2009, a decrease of 0.5 percent compared with the previous year. Sales of prescription-only drugs increased slightly
(+0.2 percent), while total sales of pharmacy-only and unrestricted over-the-counter drugs from pharmacies declined (–1.1 percent).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
The market share of pharmaceutical parallel imports in the pharmacy market, less than 2 percent in 1998, increased to almost 11 percent in 2009. This was due in large part to targeted government support. The introduction of a minimum price difference for imported products compared to original products
from 2004 interrupted this development only temporarily. Parallel imports focus mainly on patented innovations, so research-based pharmaceutical companies suffer a considerable loss of sales in the domestic market. Importers generated sales worth EUR 2.66 billion in 2008.
Sales of Genetically Manufactured Pharmaceuticals
Pharmaceuticals with genetically manufactured substances (biopharmaceuticals) generated sales of EUR 4.7 billion (total sales in pharmacies and hospitals at manufacturer prices). The increase in the sales rates of biopharmaceuticals has slowed in recent years, from 12 percent in 2006 and 28 percent in 2007 to over 9 percent in 2008 and 5 percent in 2009. The proportion of biopharmaceuticals in the total pharmaceutical market remained stable in 2009 at 16 percent. Biopharmaceuticals for treating metabolic diseases and immunological agents each make up around a quarter of biopharmaceutical sales, followed by cancer and CNS drugs, with shares of 16 percent and 14 percent respectively. Anti-infectives and hematological products each make up shares of approx. 7 percent.
Sales Distribution in the SHI Pharmaceutical Market 2009
Gross sales of proprietary medical products in the SHI market (at pharmacy retail prices incl. VAT without rebate deductions) were worth EUR 30.9 billion in 2009. Through the Contribution Rate Safeguarding Act, the SHI Modernization Act and the Economic Optimization of Pharmaceutical Care Act, the discounts
that pharmaceutical manufacturers, wholesalers and retailers must grant to statutory health insurers have been changed several times between 2002 and 2008. To this must be added rebates from contracts outlined in Section 130a par. 8 of Germany’s Social Security Code (SGB). The increase in value-added tax to 19 percent from 1/1/2007 also raised the share of tax in gross sales to 16 percent.
Manufacturers’ Sales in the SHI Pharmaceutical Market
Several tightenings of discount regulations have caused legally mandated manufacturer discounts to more than double since 2005. Discounts, which have increased substantially in recent years, based on individual agreements between health insurance funds and manufacturers pursuant to Section 130a par. 8 of Germany’s Social Security Code, must also be taken into account. The total of these discounts is now estimated at over EUR 1.8 billion (almost 10 percent of gross
sales at manufacturer prices). Net sales in 2009 were EUR 17.3 billion, an increase of just 2.8 percent compared with the previous year.
2009 Sales Growth: Driven by what Components?
The EUR 1.3 billion sales increase in the SHI market in 2009 was driven by opposing components whose effect was partly to increase and partly to decrease sales. Consumption (increase in prescribed daily doses) and innovative pharmaceuticals have created an additional demand of around EUR 1.1 and EUR 0.4 billion respectively. In contrast, “technical” savings, e.g. the selection of more cost-effective drugs, including those with active ingredients whose patents expired in 2009, or larger packages, have resulted in total savings of EUR 0.4 billion. Increased prices boosted sales by EUR 0.2 billion. As in the past four years, the dominant factors in the dynamics of the pharmaceutical market are medical and therapeutic needs.
Changes in 2009 Sales based on Health Disorders
Sales increases were recorded mainly for the treatment of serious and chronic diseases, especially mental illness and rheumatic and cardiovascular diseases. Decreasing sales were recorded for categories of diseases for which classes of active ingredients used could be prescribed more costeffectively
due to expired patents or price reductions. To this must be added a normalization in the usage frequency of two vaccines, which underwent increased demand in
2008 due to vaccination recommendations.
Reference Prices in the SHI Market
Over the past three years, indirect price regulation based on reference prices has continued to be expanded significantly. In 2009, around three quarters of all pharmaceuticals prescribed in Germany were subject to this regulation. This share is the highest since reference prices were introduced. The share of pharmaceutical sales subject to reference prices is declining due to reductions in reference prices. Since 2005, new categories of reference prices can also
include patented active ingredients. This imposes a considerable additional burden, especially on research-based pharmaceutical manufacturers. Since January 1st, 2010, over 30,000 proprietary medical products have been subject to reference prices. As a result, the statutory health insurance funds should save at least EUR 4.3 billion in 2010.
Generic Drugs in the SHI Market
When patents expire, the imitation products of other manufacturers (generic drugs) can be authorized for marketing alongside the original pharmaceuticals. In Germany, 80 percent of SHI prescriptions, at 45 percent almost half of total market sales, are generated in this so-called ‘generics-eligible market’. Over the past twelve years, Germany has evolved into the world’s most generics-friendly country. Original products often lose almost their entire market share to generic drugs within a few months after a patent expires. An average of over 85 percent of prescriptions and around 77 percent of sales in the genericseligible market were generated by imitation products in 2009.
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