Dallas, TX -- (SBWIRE) -- 10/08/2010 -- In BMI’s Business Environment Ratings (BER) for Q410, Germany retained its position as the most attractive pharmaceutical market in Western Europe, out of the ten countries surveyed. The ratings criteria serve to reinforce our estimation of the country’s potential owing to its strong emphasis on the regulatory environment. On a global basis, Germany ranks fifth, behind the US, Australia, Canada and Japan. However, the German market – valued at EUR37.84bn (US$53.30bn) – will increasingly be seen as a challenge, especially for innovative drugmakers. The new government is discussing a raft of measures, some of which may signal an end to the free pricing of novel products in the country.
In fact, the above factors, in combination with the pending patent cliff, are expected to result in a negative five-year compound annual growth rate (CAGR) for the German’s pharmaceutical market, namely of -0.99% and -3.33% in local currency and US dollar terms, respectively. While some growth will return over our longer, ten-year forecasts, given the increased use of personalised medicine and biotechnology products, growth will remain subdued, at 0.36% and -0.83%, respectively. On the other hand, the expected development of the generics market will provide opportunities for strong players, with US major Pfizer also potentially entering into the fray, having recently being mentioned in relation to the possible sale of German generics specialists Stada Arzneimittel. Previously, Pfizer had targeted another German generics company – Ratiopharm – which was eventually acquired by Israeli generics giant Teva.
In the meantime, the direction of the proposed healthcare reforms put forward by the new government is far from ensured. In July 2010, the future of the conservative coalition administration under Chancellor Angela Merkel is looking increasingly uncertain. Coalition bickering, falling approval ratings, and the loss of the all-important state of North-Rhine Westphalia in the first of a wave of local elections in May 2010 all suggest that Berlin's ambitious reform agenda is over before it has had a chance to begin. Key tests will be the ability to administer highly controversial budget cuts to the tune of EUR82bn by 2014, while taking a leading role in ensuring the future stability of the eurozone. The proposal to introduce fixed health insurance fees has already been shelved.
In the meantime, the pharmaceutical industry can take comfort in the fact that Germany's economic recovery is in full swing, as the improving domestic consumer climate and strong foreign demand see the industrial sector firing on all cylinders. However, with the economy highly geared towards the export sector, Germany remains vulnerable to cyclical downturns in global demand. In fact, we caution that the anticipated slowdown in US and Chinese economic activity will weigh on Germany's growth outlook into 2011. This suggests to us that trend growth will come in below the currently projected 2.0% real GDP growth rate for this year, which will also have an impact on the availability of public healthcare finances.
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