Statistics The Pharmaceutical Industry in Germany

Transcription

1 Statistics 2010 The Pharmaceutical Industry in Germany

2 The vfa is the trade association of the research-based pharmaceutical companies in Germany. It represents the interests of 46 globally leading pharmaceutical companies and their more than 100 subsidiaries and affiliated companies in the areas of health, research and economic policy. The vfa member companies make up about two thirds of the German pharmaceutical market and employ approximately 90,000 people in Germany. More than 17,500 are engaged in research and development.

3 2009 The Industry Remained Stable 2010 Politics Prescribes a Crisis Research-based pharmaceutical companies proved to be a stable anchor during the economic crisis in No significant losses were recorded, either in the production of pharmaceutical products or in employment levels. The companies commitment to research and development was in fact again extended. Research-based pharmaceutical companies are investing more in medical progress in Germany than ever before: a total of EUR 5.22 billion. 17,500 of our staff were employed in this area, demonstrating Germany s high potential as a research location. The pharmaceutical industry is thus regarded as Germany s leading innovative industry. 37 new substances were launched on the German market in 2009, the highest number since The new medications enable vital treatments to succeed, treatments for rheumatism and some types of cancer, for example. It is therefore all the more regrettable that politics is hindering the development of this crucial future industry by imposing increasing numbers of new regulations and compulsory measures. Instead of the hoped-for reforms to competition, governmentcontrolled cost containment measures with retroactive price freezes and compulsory discounts extending over several years have been imposed, exposing the industry to considerable location disadvantages in the global competition for investment. It is feared that this will negatively impact the industry in coming years. So although it has so far succeeded in avoiding the crisis thanks to the commitment of its highly-qualified employees and high level of innovative potential, short-sighted political measures have retroactively prescribed a crisis for the pharmaceutical industry.

4 2 Contents The Pharmaceutical Industry and the Economy The Innovative Fields of the Pharmaceutical Industry 5 Production of Pharmaceutical Products in Germany 6 Production in Europe, Japan and the USA 7 Economic Stability 8 Added Value 9 Export Ratio of the Pharmaceutical Companies in Germany 10 Employees of the vfa Member Companies 11 Capital Spending 12 Capital Spending of the vfa Member Companies 13 Price Trends 14 Price Changes: A Comparison 15 Pharmaceutical Prices: A European Comparison 16 Price Structure in Europe 17 The Pharmaceutical Industry and Innovation New Molecular Entities in Germany New Molecular Entities and Their Applications Pharmaceutical Projects by vfa Member Companies Promising Success by Marketing Authorizations for Orphan Drugs in the European Union 22 Development Costs for a New Pharmaceutical 23 R&D Expenditures of the vfa Member Companies 24 Research Intensity: A Comparison 25 R&D Expenditures in Europe, Japan and the USA 26 Patent Applications for Genetically Manufactured Pharmaceuticals 27

5 3 The Pharmaceutical Industry and the Health Care Sector Life Expectancy Trends in Germany 29 Increasing Therapeutic Benefit of Innovative Pharmaceuticals 30 Improved Substances Save Money 31 Health Care Expenditures and National Product 32 Health Care Spending Trends 33 Health Care Spending Trends in Europe, Japan and the USA 34 Pharmaceutical Expenditures in Europe, Japan and the USA 35 The Financing of the Statutory Health Insurance System (SHI) 36 Expenditures in the Statutory Health Insurance System The Pharmaceutical Market The Global Pharmaceutical Market 39 Development of the Largest Pharmaceutical Markets 40 Per-capita Sales of Pharmaceuticals 41 New Molecular Entities in Germany 42 Number of Pharmaceuticals in Germany 43 From Manufacturers to Patients: Distribution and Financing of Pharmaceuticals in the 2009 Pharmacy Market 44 Sales and Packages Sold Through Pharmacies in Parallel Imports 46 Sales of Genetically Manufactured Pharmaceuticals 47 Sales Distribution in the SHI Pharmaceutical Market in Manufacturer Sales in the SHI Pharmaceutical Market Sales Growth: Driven by what Components? 50 Changes in 2009 Sales Based on Health Disorders 51 Reference Prices in the SHI Market 52 Generic Drugs in the SHI Pharmaceutical Market 53 Appendix

6 The Pharmaceutical Industry and the Economy In 2009 as well, research-based pharmaceutical companies have proven to be a stable anchor of the German economy. A slight decline of 2.8 percent in production had little impact on employment levels. In the area of research and development, the number of employees has in fact again increased, and its gross added value proves that the industry is one of the most productive in the German economy. The companies have also maintained the previous year s investment levels despite the crisis and continue to be reliable customers of the domestic capital goods industry. Their export ratio also increased, with 61.4 percent of total sales now earned from exports. In comparison with other industries, pharmaceutical companies are leaders in the areas of product and process innovations.

7 Economy 5 The Innovative Fields of the Pharmaceutical Industry Share of companies with successful product and process innovations (2008, in percent) Chemistry/pharmaceuticals Electronics industry Telecommunications Automotive industry Mechanical engineering Rubber/plastics Financial services Furniture/sport. goods/toys/med. tech. Technical/R&D services Media services Metal production/processing Energy/mining/oil Water/waste disposal/recycling Corporate services Total Successful Innovators Only ongoing/discontinued innovation activities Provisional data Source: ZEW 89 percent of companies in the chemical and pharmaceutical industry, i.e. nine out of ten, were innovative in 2008, achieving innovations in products or processes; and most (83 percent) did so successfully. In 6 percent of companies the innovation is not (yet) complete. As in previous years, the chemical and pharmaceutical industry achieved the highest innovation rate of all German industries.

8 6 Economy Production of Pharmaceutical Products in Germany in EUR billion Change over previous year in percent : provisional data; for detailed data, see Appendix, page 55 Source: Federal Statistical Office, vfa Pharmaceutical products worth EUR 26.4 billion were produced in Germany in 2009, a decline of 2.8 percent compared with the previous year. The global financial and economic crisis has therefore also left its mark on the German pharmaceutical industry, although other industries have suffered much heavier impact. Overall industrial production declined by 16 percent. The business activities of pharmaceutical manufacturers are normally influenced much less by the economic situation than by government intervention to regulate the health care sector. This is forecast to again be the case in 2010.

9 Economy 7 Production in Europe, Japan and the USA 1990: EUR 136 billion Other 8% Switzerland 4% United Kingdom 7% 32% USA Italy 8% France 9% Germany 9% 23% Japan 2008: EUR 358 billion Other 14% Ireland 5% 34% USA Italy 6% Switzerland 6% United Kingdom 6% Germany 8% France 10% 11% Japan Japan, UK: 2007 Source: The OECD, EFPIA, Pharmaceutical associations of the European countries, and the vfa In an international comparison, Germany has only barely been able to maintain its position as a production location for pharmaceutical products. Eight percent of overall pharmaceutical production from Europe, Japan and the USA, worth EUR 358 billion in 2008, came from Germany. In 1990 this share was nine percent. Compared with Japan and the USA, countries of the Euro zone have benefited in the past five years from the strength of their currency. Medium-sized European countries such as Ireland, Austria, Belgium and Switzerland (as a non-euro country) have especially expanded their pharmaceutical production.

10 8 Economy Economic Stability Index of orders received, adjusted seasonally, 2005 = Manufacturing industry Chemical industry Pharmaceutical products Source: Federal Statistical Office The supply of pharmaceuticals is a basic human need and is therefore not subject to economic fluctuations as much as other necessities. As a result, the pharmaceutical industry is one of those economic areas that lends continuity to economic development. One of the most important economic indicators, the index of orders received, shows that the economic cycles of recent years, especially 1993 to 1995, 1996 to 1998, 1999 to 2001 and the 2006/07 boom barely impacted the pharmaceutical industry. The current financial and economic crisis has also not hit the pharmaceutical industry very hard.

11 Economy 9 Added Value Net added value per employee in 2007 in EUR 1,000 Pharmaceutical industry Chemical industry¹ 97.0 Electrical engineering² 68.3 Mechanical engineering 68.1 Manufacturing industry (total) 64.1 Construction ¹ incl. pharmaceutical industry ² Office machinery, computing equipment, electrical engineering Source: Federal Statistical Office With a net added value of over EUR 100,000 per employee in 2007, the pharmaceutical industry is among the best performing and most productive industries in Germany.

12 10 Economy Export Ratio of the Pharmaceutical Companies in Germany Foreign sales as a percent of total sales : provisional data; for detailed data, see Appendix, page 56 Source: Federal Statistical Office Due to various types of regulations, the domestic pharmaceutical market has lost its significance for German pharmaceutical manufacturers in the long term. In contrast, international sales have become more and more important. The export ratio has increased from around 30 percent in 1995 to over 60 percent. In a ranking of production locations, Germany still ranks fourth after the USA, Japan and France.

13 Economy 11 Employees of the vfa Member Companies Number in thousands Employees (total) R&D employees 2009: provisional data Source: vfa Employee numbers in vfa member companies stabilized again in 2009 after a noticeable decline in In contrast, the number of employees engaged in research and development again increased slightly. This shows Germany s excellent potential as a research location. Research-based pharmaceutical companies rely in particular on the qualified workers they find in Germany.

14 12 Economy Capital Spending as a percent of sales Pharmaceutical industry 4.4 Chemical industry¹ 3.9 Mechanical engineering 3.6 Motor vehicle industry 3.5 Manufacturing industry (total) 3.4 Electrical engineering² ¹ not incl. pharmaceutical industry ² Office machinery, computing equipment, electrical engineering As of 2008 Source: Federal Statistical Office With capital spending at a 4.4 percent share of sales, the pharmaceutical industry is among the industries in Germany with above-average capital spending. This triggers considerable additional production and employment in other industries, as was shown in a study by the German Institute for Economic Research. These indirect production and investment effects increase the industry s added value by roughly another 90 percent. In particular, industry sectors that provide great added value and employment volume, such as research and development services, are pulled along by the pharmaceutical industry. Each job in one of our companies creates another job in another industry.

15 Economy 13 Capital Spending of the vfa Member Companies in EUR billion : provisional data Source: vfa Research-based pharmaceutical companies in the vfa have proven to be a stabilizing factor during the economic crisis. Investments in long-term tangible assets declined only slightly compared with the previous year (from EUR 1.35 to 1.32 billion) while investments in R&D facilities actually increased slightly. The share of investments as a proportion of sales is above the industry average (most current comparative figures for 2008: 3.7 percent compared with 3.4 percent). In the current crisis, research-based pharmaceutical companies have been shown to be reliable customers of the domestic capital goods industry. As a study by the German Institute for Economic Research in Berlin (DIW) has shown, pharmaceutical production creates additional as well as almost equivalently high added value in related industries and service sectors.

16 14 Economy Price Trends 2000 = Private consumption (total) SHI pharmaceuticals For detailed data, see Appendix, page 57 Source: Federal Statistical Office, WIdO Until 2003 prices for pharmaceuticals had barely changed, yet they have significantly decreased over the past seven years. Pharmaceuticals are now 10 percent cheaper than they were in In contrast, consumer goods and services prices overall have increased by over 15 percent since 2000.

17 Economy 15 Price Changes: A Comparison Price increase from 2006 to 2009 in percent SHI pharmaceuticals 2.7 Income subject to SHI contributions per SHI member +3.6 Retail sector +4.6 Private consumption (total) Source: Federal Statistical Office, BMG, WIdO The prices of pharmaceuticals provided to patients insured through statutory health insurance decreased by 2.7 percent over the past three years. In contrast, retail prices increased by 4.6 percent, and prices for private consumption were up 5.3 percent. The income of SHI members that is subject to contributions increased by 3.6 percent.

18 16 Economy Pharmaceutical Prices: A European Comparison Germany = 100 Ireland Belgium Germany 100 United Kingdom 98 Denmark 98 Austria 97 Sweden 91 Netherlands 88 Finland 84 Norway As of 1st half of 2009; currency exchange rates from 2008 Source: Institute for Research in Economics and Business Administration (SNF), Bergen 2010 Pharmaceuticals are no more expensive in Germany than in many other industrialized nations, as was confirmed by a recent study by a Norwegian research institute. The study examined the drug prices of around 200 of the most frequently sold molecular entities in 10 European countries. The results place Germany in the midrange of the countries compared, on par with the United Kingdom, Denmark and Austria.

19 Economy 17 Pricing Structure in Europe Shares in percent Sweden Portugal Switzerland France Spain Greece Finland Netherlands Austria Italy Denmark Germany Ireland Norway Belgium Manufacturers Wholesalers Pharmacies Taxes and discounts Prescribed or reimbursed pharmaceuticals; Ireland: only oral dosage forms; as of 2007 Sources: EFPIA, Pharmaceutical associations of European countries, vfa With a manufacturer s share of 57 percent of the retail price, Germany is located in the bottom segment of the European ranking. Pharmaceuticals are subject to the full value-added tax rate in Germany. Together with legally mandated manufacturer and pharmacy discounts, the tax rate in Germany amounts to 24 percent of the retail price, making it the highest in Europe. In most other European countries the tax burden on pharmaceuticals is reduced or waived entirely.

20 The Pharmaceutical Industry and Innovation Even in the crisis year of 2009, research-based pharmaceutical companies further increased their investment in research and development in Germany to its current amount of EUR 5.22 billion, or more than EUR 14 million a day! Few other industries are as research-intensive. Around 20 percent of these companies employees work in the area of research and development, many more than the average of R&D-based companies. 37 new substances were launched onto the market, the highest number since 1997, providing for important medical progress, such as improvements in the treatment of rheumatism and some types of cancer. Germany remains a valued research location worldwide: We are number 1 in Europe in terms of the number of clinical trials and are surpassed only by the USA on a global level.

21 Innovation 19 Market Launches of New Molecular Entities in Germany 2009 Number (excluding biosimilars) Source: Pharmazeutische Zeitung, vfa 37 pharmaceuticals based on new NMEs (new substances known internationally as New Molecular Entities) were launched in the German market in 2009 the highest number since Because of the global research process, the number of such substances launched in Germany is closely connected to the international development of pharmaceuticals. Unless they are of merely regional importance, most new NMEs receive marketing authorization as soon as possible in all key countries. This is the only way to balance the costs for research and development of an NME, which globally amount to USD 800 million on average, within its limited patent term.

22 20 Innovation New Molecular Entities and their Applications 2009 Sexual disorders 1 Respiratory diseases 1 Nervous system disorders 2 1 Contraception 7 Cancer Cardiovascular diseases 2 Hematological disorders 4 7 Metabolic diseases Immune disorders 6 6 Infections Source: vfa In 2009 research-based pharmaceutical companies once again facilitated important progress in medicine by creating new drugs, e.g. for the treatment of rheumatism and some types of cancer. For the first time, the five new vaccines launched included one against Japanese encephalitis. These five drugs will be used to treat rare diseases such as phenylketonuria and Muckle-Wells syndrome. Research-based pharmaceutical companies launched a total of 37 new molecular entities this year, the highest number since 1997, as well as another 19 drugs based on existing active ingredients, which are delivered in a new dosage form. In the form of a nasal spray, a powerful pain reliever can now offer relief within just a few minutes and an HIV medication is now available as a drinking solution suitable for administering to children.

23 Innovation 21 Pharmaceutical Projects by vfa Member Companies Promising Success by 2013 Distribution in various medical areas; overall number of projects: 442 Other medical areas¹ 10% Other nervous system disorders 4% Neurodegenerative diseases² 2% 31% Cancer Psychiatric disorders³ 6% Pain 3% Diabetes type 2 4% Osteoporosis 1% Inflammatory diseases 4 10% Chronic obstructive pulmonary disease 2% 13% Cardiovascular diseases 14% Infectious diseases ¹ Each individual project accounts for 1% or less ² Alzheimer s disease, Parkinson s disease ³ Depression, schizophrenia, bipolar disorder, etc. 4 Rheumatoid arthritis, asthma, multiple sclerosis, Crohn s disease, psoriasis, etc. Source: vfa The vfa member companies are working on thousands of drugs. Pharmaceutical projects for medications to treat some 110 diseases have progressed so far that they could lead to marketing authorization by the end of Most of these projects target cancer (31 percent), cardiovascular diseases (13 percent) and infectious diseases (14 percent) but a particularly large number of drugs are also being developed against inflammatory diseases such as rheumatoid arthritis and type 2 diabetes (adult-onset diabetes). A total of 97 percent of the projects are concerned with severe diseases, some of them life-threatening; only three percent address less serious physical disorders such as incontinence or menopausal discomfort.

24 22 Innovation Marketing Authorizations for Orphan Drugs in the European Union Number European Orphan Drug Regulation effective from 2000 onward ¹ ¹ expected marketing authorizations (as of July 2010) Source: vfa Since the start of 2000, companies have been able to apply for Orphan Drug status for a drug being developed in Europe if it is for treating a disease affecting no more than one in 2,000 EU citizens. With this status comes lower marketing authorization fees, free scientific consulting and exclusive marketing rights, usually for ten years. Whereas on average only one drug for treating a rare disease (Orphan Drug) received marketing authorization every year before the regulation came into force, the figure is now much higher. A total of 60 Orphan Drugs have now received marketing authorization in the EU and over 700 more are being developed (as of July 2010). The Orphan Drug Regulation is therefore a good example of how meaningful political regulatory activity can boost pharmaceutical research in areas society deems important.

25 Innovation 23 Development Costs for a New Pharmaceutical in USD million Sources: Di Masi J.et al., Tufts University (1991); Office of Technology Assessment (1993); Myers and Howe (1997); Office of Health Economics & Lehman Brothers (1999); Tufts University (2001) In 2001, an average of USD 800 million was required for the research and development of a new drug with a new molecular entity. More than half of these costs are spent on clinical development, especially the logistically expensive, multinational phase-iii studies. The requirements involved in proving a new drug s safety, efficacy, tolerability and quality during the marketing authorization process have increased steadily. A further reason for the high increase in costs lies in the growing complexity of the diseases treated. Examples include multiple sclerosis and Parkinson s disease, for which researchers must take into account many physical processes simultaneously to identify possibilities for risk-free pharmaceutical therapy.

26 24 Innovation R&D Expenditures of vfa Member Companies in EUR billion R&D expenditures Share of human resources costs 2009: provisional data Source: vfa Research-based pharmaceutical companies in Germany again intensified and expanded their research and development (R&D) activities involving new pharmaceuticals in R&D expenditure increased to EUR 5.2 billion, which corresponds to over EUR 14 million a day. As a result, not just volume but also research intensity increased, despite the global financial and economic crisis. At 4.4 percent, R&D expenditure grew more strongly than sales (3.6 percent). A higher proportion of sales, 13.7 percent, was invested in R&D activities than in the previous year. Although pharmaceutical products make up only 2.4 percent of the German industry s sales, research-based pharmaceutical companies contributed more than 10 percent of R&D spending in 2009.

27 Innovation 25 Research Intensity: A Comparison Share of R&D expenditures in sales in percent 14% vfa companies 4% companies conducting R&D (total) Share of R&D employees in overall employees in percent 20% vfa companies 8% companies conducting R&D (total) Source: Stifterverband für die deutsche Wissenschaft (2007), vfa (2009) The research and development of new drugs is highly cost and labor intensive. The research intensity of vfa member companies continued to grow in A higher share of sales, 13.7 percent, was invested in R&D activities than in the previous year (13.6 percent). The proportion of R&D employees of all vfa company employees increased to 20 percent (from 19.7 percent in the previous year), which means one in five employees now works in this area. The R&D intensity of vfa companies thus remains much higher than that of other companies conducting R&D in Germany overall, which achieve a sales rate of 3.9 percent and an employee rate of 7.9 percent (2007, most recent available data).

28 26 Innovation R&D Expenditures in Europe, Japan and the USA in USD billion Shares (2008) Japan 14% Europe excl. Germany 37% 41% USA 8% Germany : provisional data Source: EFPIA, PhRMA, vfa The R&D expenditure of pharmaceutical companies in Europe, Japan and the USA increased to almost USD 90 billion in Calculated in local currency, R&D expenditures in the USA and Japan have risen more strongly than in Europe. 40 percent of global R&D outlays continue to be made in the USA.

29 Innovation 27 Patent Applications for Genetically Manufactured Pharmaceuticals 2000: 1,615 patents Other 18% Japan 5% United Kingdom 5% 55% USA France 6% Germany 11% 2009: 1,028 patents Other 28% 37% USA United Kingdom 4% France 6% Germany 11% 14% Japan Published patent applications effective in Germany, IPC main classification and sub-classification (A61K); For detailed data, see Appendix, page 57 Source: German Patent Office 10,289 patents were registered for pharmaceuticals in Germany in ,028 applications (10 percent) were for genetically manufactured drugs. At the outset of the millennium, the proportion of these applications was 20 percent. Patent applications from the USA in particular have decreased. Patent applications from Germany have declined in absolute figures (2000: 183 applications, 2009: 111), but have been able to maintain their share of the total number. The number of patent applications from Japan and countries such as Switzerland, Sweden and Canada has grown considerably.

30 The Pharmaceutical Industry and the Health Care Sector Germany spent a much larger share of gross domestic product on health care in 2009 than in previous years. The reason for this is not an explosion in costs, but an approximately 5 percent decrease in gross domestic product compared with the previous year. Health care costs also increased slightly overall. The amount spent by SHI on pharmaceuticals increased by 5.2 percent, and expenditures on hospital treatment by 6.4 percent and on doctors services by 6.6 percent. Just 4 percent of total SHI expenditures, EUR billion, went to manufacturers of patented pharmaceuticals in 2009.

31 Health Care System 29 Life Expectancy Trends in Germany in years 2006/ / / / / Women Men Source: Federal Statistical Office Thanks in part to new pharmaceuticals, average life expectancy in Germany increased by four years for women and five years for men over the past 20 years. For example, several drugs specifically targeting tumors have helped to make the average lifespan much longer for many patients diagnosed with cancer and to prevent a relapse in many cases, particularly in cases of breast, colon and renal cancer and some types of leukemia and lymphoma. Disease prevention has also improved, due to new vaccines against rotaviruses, pneumococci and meningococci. Doctors can now better protect patients with diabetes or high blood pressure from life-threatening secondary diseases. It is also thanks to such medications that increasing numbers of rare diseases can be better treated or treated at all.

32 30 Health Care System Increasing Therapeutic Benefit of Innovative Pharmaceuticals Share of new molecular entities rated as an innovative pharmaceutical or significant therapeutic improvement (in percent) Source: Arzneimittelverordnungs-Report 2009, Fricke Of the 122 molecular entities that received marketing authorization in Germany for the first time over the last four years, 90 (74 percent) were rated as innovations or therapeutically relevant improvements even by critical experts. The share of new molecular entities that can be considered innovative in this respect has continuously increased over the past 19 years.

33 Health Care System 31 Improved Substances Save Money Costs of patented products per daily dose in the 2008 SHI market in EUR Pharmaceuticals with novel active ingredient/therapeutic principle 7.25 Pharmaceuticals with improved qualities of known therapeutic principles Pharmaceuticals with small differences to previously released active ingredients % 42% Source: Arzneimittelverordnungs-Report 2009 Active ingredients whose molecular structure resembles substances that have already been released often yield various therapeutic benefits, such as improved pharmacokinetics or fewer side effects. This is why many of these products are on the World Health Organization s essential drug list, while the original product is not listed. Molecular variations also promote price competition between the patented substances of a given substance class. The latest data from the Arzneiverordnungs-Report in 2009 (p. 170) show that drugs with a novel active ingredient or therapeutic principle cost on average EUR 7.25 per daily dose, while substances associated with improved pharmacological qualities of previously known therapeutic principles cost 42 percent less on average, thus offering a greater benefit at a lower price.

34 32 Health Care System Health Care Expenditures and National Product Share of gross domestic product in percent Health care spending in total 8 6 SHI service expenditures 4 2 Pharmaceutical expenditures : provisional estimate; for detailed data, see Appendix, page 58 Source: Federal Statistical Office, vfa The global financial and economic crisis left its mark on the national economy in Although final figures are not yet available, a much higher share of gross domestic product will have been spent on health care than in previous years. The reason is not an explosion of costs, but rather a decline in gross domestic product, which fell by around 5 percent in In contrast, health care expenses for both statutory health insurers and private consumers increased moderately, as they have in previous years. Since these expenditures also stabilize domestic demand, they have contributed significantly to cushioning the impact of the crisis on the national economy.

35 Health Care System 33 Health Care Spending Trends Increased expenditures 1992 to 2008 in percent Office-based doctor s care 59.6 Health care spending in total 66.7 Pharmaceuticals 70.1 Administration 72.9 Prevention/ health protection Nursing care/ therapeutic services Other medical needs Source: Federal Statistical Office This long-term comparison between 1992 and 2008 (last available data) shows that costs incurred in the pharmaceutical sector have increased only slightly more than overall health care costs.

36 34 Health Care System Health Care Spending in Europe, Japan and the USA as percent of GDP USA France Switzerland Germany Italy Spain United 8.4 Kingdom 6.6 Japan : Japan, Switzerland estimated; United Kingdom: different methodology Source: OECD In an international comparison, Germany (after the USA, Switzerland and France) spends the fourth-largest proportion of its gross domestic product on health care services. In contrast to these other countries, Germany s share has barely increased over the past ten years.

37 Health Care System 35 Pharmaceutical Expenditures in Europe, Japan and the USA as percent of total health care expenditures Spain Japan Italy France Germany USA Switzerland : Japan, Switzerland estimated Source: OECD Levels of pharmaceutical costs in Germany, which spends 15.1 percent of total health care expenditures on medications, remain well below those of most European countries and Japan.

38 36 Health Care System The Financing of the Statutory Health Insurance System (SHI) Employee wages as percent of GDP SHI contribution rate in percent Since 1 July 2009 a standard contribution rate of 14.9 percent has applied; for detailed data, see Appendix, page 59 Source: Federal Statistical Office, BMG For years, statutory health insurers (SHI) have been faced with the problem of increasing expenditures and decreasing revenues. One important reason for the striking increase in SHI contribution rates is the weaker growth in employee wages, which form the most important basis for financing SHI. Between 1992 and 2007, employee wages as a share of gross domestic product (GDP) decreased from almost 60 to less than 49 percent. Only in 2009 did income from business and investments fall more steeply than employee wages, leading to an increase in the share of GDP for these wages. Average SHI contribution rates increased over the same period from 12.7 to over 15 percent.

39 Health Care System 37 Expenditures in the Statutory Health Insurance System 2009 in EUR billion (percent) Administrative costs etc. 6% Other services 21% 33% Hospital care Remedies and medical devices 6% Pharmaceuticals 18% 16% Office-based doctor s care Changes over 2008 in percent Total service expenditures 6.3 Hospital care 6.4 Office-based doctor s care 6.6 Pharmaceuticals 5.2 Remedies/medical devices 5.7 Other services 1.1 Administrative costs, etc. 5.8 Provisional data; for detailed data, see Appendix, page 60 Source: BMG A third of SHI expenditures, EUR 56.1 billion of a total of EUR billion, is spent on hospital treatment. Together, expenditures on care by doctors (EUR 27.8 billion; 16 percent) and pharmaceuticals (EUR 30.7 billion; 18 percent) make up another third, with EUR 9 billion (6 percent) spent on administrative costs. Due to the increase in value-added tax, effective from 1/1/2007, expenditures in some service areas (notably pharmaceuticals) showed an above-average increase. Spending on preventive medicine was also much higher. Just four percent of overall SHI expenditures (EUR 6.7 billion) went to the manufacturers of patented pharmaceuticals.

40 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.

41 Pharmaceutical Market 39 The Global Pharmaceutical Market in USD billion Shares (2009) Other 21% % USA Japan 11% Europe 31% Sales at manufacturer prices in the pharmacy market Source: IMS Health, vfa Global pharmaceutical sales more than doubled from 2000 to 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.

42 40 Pharmaceutical Market Development of the Largest Pharmaceutical Markets 2001 = Spain USA United Kingdom Germany France Japan Italy Sales increases adjusted for exchange rate fluctuations; sales in Germany adjusted for manufacturer discounts from 2003 onward Source: IMS Health, vfa 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.

43 Pharmaceutical Market 41 Per Capita Sales of Pharmaceuticals 2009 in USD (adjusted for purchasing power) USA 687 Japan 556 Canada 426 Switzerland 370 France 349 Germany 337 Spain 301 Italy 214 United Kingdom Sales in the pharmacy market at manufacturer prices; Switzerland 2008 Source: IMS Health, OECD, vfa Germany ranks in the middle of an international comparison of per-capita sales (sales in the pharmacy market at manufacturer prices). Compared with other European 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.

44 42 Pharmaceutical Market New Molecular Entities in Germany Market share of new molecular entities launched in the past five years in percent Source: InsightHealth, vfa 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.

45 Pharmaceutical Market 43 Number of Pharmaceuticals in Germany in USD billion Shares (2010) 9,615 8,933 8,500 Homeopathics 8% Pharmaceuticals from botanical sources 8% 4% Other 80% Chemically defined pharmaceuticals Source: Rote Liste 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.

46 44 Pharmaceutical Market From Manufacturers to Patients: Distribution and Financing of Pharmaceuticals in the 2009 Pharmacy Market in EUR billion Manufacturer sales (at manufacturer prices) Trade mark-ups Sales tax 6.7 Pharmacy market at retail prices Self-medication with OTC drugs Private prescriptions SHI prescriptions 33.1 Insured patients copayments 1.6 Manufacturers and trade discounts Expenditures of the health insurance funds Distribution Financing Simplified representation of the most important cash and service flows (with approximate values) Source: vfa 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).

47 Pharmaceutical Market 45 Sales and Packages Sold through Pharmacies in 2009 Sales: EUR 24.7 billion (+3.7% over the previous year) unrestricted over-thecounter drugs 6% pharmacy-only drugs 12% 82% prescription drugs Packages: 1.6 billion ( 0.5% over the previous year) unrestricted over-thecounter drugs 12% 46% prescription drugs pharmacy-only drugs 42% Sales at pharmaceutical manufacturer prices (discounts not taken into account) Source: InsightHealth, vfa Sales 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).

48 46 Pharmaceutical Market Parallel Imports Market share in percent Growth rates (in percent) Parallel imports Overall market Sales at pharmaceutical manufacturer prices; for detailed data, see Appendix, page 59 Sources: IMS Health, InsightHealth, vfa The market share of pharmaceutical parallel imports in the pharmacy market, less than 2 percent in 1998, increased to almost 11 percent in 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.

49 Pharmaceutical Market 47 Sales of Genetically Manufactured Pharmaceuticals Share of biopharmaceuticals in the total German pharmaceutical market (2009) 16% Biopharmaceuticals Chemical and other active ingredients 84% Sales¹ of biopharmaceuticals in Germany in EUR million (2009) Total sales 4,673 Metabolism 1,204 Immunology 1,124 Oncology 753 CNS 659 Infections 362 Hematology² 350 Other³ 221 ¹ Total sales at pharmaceutical manufacturer prices ² Excl. hematological oncology ³ Incl. gastroenterology, dermatology, urology, etc. Source: IMS, BCG analysis 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 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.

50 48 Pharmaceutical Market Sales Distribution in the SHI Pharmaceutical Market in % Tax 9.2% Discounts and rebates Manufacturers 56.1% 15.2% Pharmacies 3.5% Wholesale Sales at pharmacy retail prices Sources: InsightHealth, BMG, vfa 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 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 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.

51 Pharmaceutical Market 49 Manufacturer Sales in the SHI Pharmaceutical Market in EUR billion at manufacturer prices Net sales Manufacturer discount Source: InsightHealth, vfa Several tightenings of discount regulations have caused legally mandated manufacturer discounts to more than double since 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.

52 50 Pharmaceutical Market 2009 Sales Growth: Driven by what Components? Changes in sales in EUR billion Overall +1.3 Consumption +1.1 Innovation +0.4 Technical Savings 0.4 Price Source: IGES 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.

53 Pharmaceutical Market 51 Changes in 2009 Sales Based on Health Disorders Changes in sales in EUR million Rheumatoid Arthritis¹ Neuroleptic drugs, antipsychotics Cardiovascular diseases² Multiple sclerosis Asthma, COPD Cancer Painkillers HIV infections Diabetes tests Non-insulin-dependent diabetes mellitus +62 Tick-borne encephalitis (vaccine) Acid-related disorders Human papillomavirus (vaccine) ¹ and other immune system disorders ² drugs affecting the renin-angiotensin system Disorders of more than +/ EUR 60 million Source: IGES 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.

54 52 Pharmaceutical Market Reference Prices in the SHI Market Shares in percent Prescriptions Sales 2000: as of July 1st; 2007, 2008: annual averages; 2009: January to November Source: SHI, vfa 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.

55 Pharmaceutical Market 53 Generic Drugs in the SHI Market Shares in the market eligible for generic drugs (in percent) Prescriptions Sales For detailed data, see Appendix, page 60 Source: Arzneiverordnungs-Report 2009 (up to 2008); projections: vfa (2009) 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.