by Rebecca Sienel
The German market is strong and connected worldwide.
Germany used to be known as the „pharmacy of the world.“ Now only a glorifying myth, this paraphrase nevertheless sheds light on the great importance of the pharmaceutical industry. Drug development involves a complicated process. From the chemical characterization of active ingredients, through clinical trials and approval procedures, to the production and distribution of drugs, pharmaceutical companies work together with various partners, both at home and abroad. As a result, industrial sites have long been networking worldwide, and trade network is closely interwoven. National sites benefit from this global cooperation. Nevertheless, the strong existing economic collaboration can be improved, especially at the interface with health care and in times of health crises.
Germany is a strong, globally competitive partner in the pharmaceutical location. If you look at this in numbers, Germany had 510 pharmaceutical companies and 670 biotechnology companies in 2019. Pharmaceutical production in this context amounted to 31.1 billion euros. Pharmaceutical products were imported for 58 billion euros and exported for 82.8 billion euros. Switzerland, the USA, and the Netherlands are critical suppliers and customers. In Europe, Germany is the pharmaceutical market with the highest turnover, ahead of France, Italy, and Great Britain. In addition, China supplies 7% of the intermediate inputs for the pharmaceutical industry in Germany. For the time being, the German pharmaceutical industry is doing well globally. Nevertheless, measures should be developed to prepare for increasing competition.
German Pharma Companies
The pharmaceutical industry is also one of the solid economic sectors in Germany in terms of high-quality jobs, and it is therefore impossible to imagine the industry without it. For example, Bayer AG is the only German company among the top ten pharmaceutical companies worldwide. Furthermore, BioNTech and CureVac, which received their attention through the Corona pandemic, show how strong small and medium-sized companies can be in their innovative performance. In addition, the pharmaceutical industry in Germany makes an above-average contribution to research and development.
Active pharmaceutical ingredients API
Low-priced medicines (generics) and intermediates are the main imports to Germany from China and other Asian countries. Europe is losing ground compared to Asia in the case of „active pharmaceutical ingredients“ (APIs, i.e., the pharmacologically active components of a drug). The essential pharmaceutical industry for exports in Asia is concentrated in relatively few companies and a few regions. This concentration and regional clustering can easily disrupt supply chains in times of crisis. One example of this is India’s temporary supply freeze for paracetamol in 2020, which led to bottlenecks in German pharmacies.
China is the API supplier for German Pharma.
The pharmaceutical industry will continue to gain importance in Asian countries – South Korea, Singapore, China – API and precursors. China’s largest markets for these products are India, the USA, Brazil, Germany, Japan, and the Netherlands. Whether Europe can keep up in this race is questionable. Growing dependencies could be the result in the future. Germany’s Dependence on China is exceptionally high in a few product areas: „vitamins and caffeine, heparin, cortisone, certain antibiotics (tetracyclines, chloramphenicol), some heterocyclic compounds (benzothiazole, barbituric acid, phenazone, lactones) and amines (aminophenols, lysine). Imports of these pharmaceutical products to Germany have more than doubled since 2010.
Room for improvement in the German Pharma sector
Nevertheless, pharmaceutical production in Europe needs to be improved to prevent possible supply bottlenecks. The Corona pandemic revealed the vulnerability of Germany’s global supply chains. Therefore, concrete measures for greater autonomy of the EU in ensuring the supply of medicines within the circle of member states need to be taken. The risk can be countered with greater independence and better multinational networking. Of particular importance are ensuring the quality of active ingredients, greater transparency and diversification of supply chains, and European cooperation in expanding the production of active ingredients for critical medicines. In summary, the following approaches help to significantly improve health care in crises and secure supply chains in Germany.
The basic materials should also be equipped with a buffer, an adequate inventory that allows bridging in the supply chain to avoid bottlenecks. This is similar to the pharmaceutical supply chains, which have a large buffer that can partially cushion delivery delays, particularly advantageous in the current Corona situation. Better design of more globally diverse supply networks can promote reliable and crisis-resistant supply chains. The pharmaceutical industry has a high potential for innovation and value creation. Investment promotion, bureaucracy reduction, less regulatory intervention, and more efficient processes can help to promote and strengthen clinical research and biotechnology.