Germany Pharmaceuticals and Healthcare Report Q2 2008

Germany's pharmaceutical market was worth approximately US$48.9bn in 2007, making it the largest in Europe. Unsurprisingly, for such a mature market, growth will be steady rather than spectacular, with drug expenditure reaching a value of US$57.2bn in 2012. This represents a compound annual growth rate (CAGR) of 3.19%.

The biggest change this quarter has been BMI's introduction of forecasts in the medical device market. In 2007, we estimated that the medical equipment market was worth approximately US$13bn and should reach a value of US$15.1bn by 2012. This represents a CAGR of 3%, a slightly lower rate than the pharmaceuticals market. Going forward, growth should be driven primarily by large, top-end medical equipment due to Germany's technological sophistication in this area.

Elsewhere, Germany's drug discount contracts have come under fire from the German Association of Medicines Manufacturers (BAH), which claims that they are anti-competitive and will hurt small and medium-sized enterprises. The mandatory contracts were introduced to lower costs but have met with criticism from the drug industry calling for less regulation. It was expected that the reform would also be a stimulus to competition, but the larger firms have been given an unfair advantage as they have the financial muscle to undercut their rivals.

Germany retains second place in BMI's Business Environment Rankings for the Western European region, just behind Switzerland. The country benefits from a large internal market and a high per capita spend. The local industry is also traditionally strong and technologically advanced. However, a stringent focus of cost-containment is harming innovation and presenting a barrier to foreign direct investment (FDI), according to the research-based manufacturing sector. Many multinationals, such as France's Sanofi-Aventis are actually considering disinvesting in the country due to government pressure.