The German Pharmaceutical Market

The work of pharmaceutical companies in Germany has been greatly hampered in recent years due to legislative measures. Several steps of tightening discount regulations have caused legally mandated manufacturer discounts to triple since 2005. In addition, discounts have increased substantially in recent years based on individual agreements. Overall, the manufacturer receives only about half of the selling price of a drug. While all other sectors of statutory health insurers reported increased spending last year, expenditures for pharmaceuticals actually decreased. The main driver behind spending on pharmaceuticals is not the price, which has actually been decreasing for years, but an increase in consumption resulting from an aging society and the availability of new, improved pharmaceutical treatments for severe and life-threatening diseases.

A third of SHI expenditures, EUR 62.5 billion of a total of EUR 190 billion, is spent on hospital treatment. Together, expenditures on care by doctors (EUR 34.5 billion; 18 percent) and for pharmaceuticals (EUR 31 billion; 17 percent) make up another third, with EUR 9.6 billion spent on administrative costs. Increases in mandatory manufacturer discounts resulted in a 2.2 percent decrease in expenditures for pharmaceuticals in 2012 compared to 2010.

The local pharmacy is still the most important source for pharmaceuticals. On average, three-quarters of the cost is covered by statutory health insurers.

Legally mandated discounts have risen from nearly EUR 1 billion in 2008/2009 to over EUR 2.6 billion in 2012. These volumes are predicted to continue rising in 2013. In 2012, additional, contractual discounts accounted for almost EUR 2.1 billion, marking an increase of around EUR 370 million over totals from the previous year. Discount agreements are also being concluded in increasing numbers for patented innovations.

Up until 2003, prices for pharmaceuticals barely changed, after which they have significantly decreased. Pharmaceuticals are now more than 13.5 percent cheaper than they were in 2000. In contrast, overall prices for consumer goods and services have increased by almost 20 percent since 2000.

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 – 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 87.2 percent of prescriptions and 75.3 percent of sales in the generics-eligible market were generated by imitation products in 2012.

In recent years, indirect price regulation based on reference prices has continued to expand significantly. In 2011 and 2012, around 78 percent of all pharmaceuticals prescribed in Germany were subject to this regulation. This share is the highest since reference prices were introduced. However, the share of pharmaceutical sales subject to reference prices has decreased overall due to the persistent reductions in reference prices. On January 1, 2013, 4 new reference-price groups were established for around 1,300 pharmaceutical products. A total of around 34,000 pharmaceutical products are now subject to regulations. As a result, the statutory health insurance funds saved around EUR 5.5 billion in 2012.

The Pharmaceutical Industry in Germany

Germany: The Perfect Location for Research, Production and Sales - a publication by GERMANY TRADE & INVEST and vfa
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