Germany is an attractive location for the pharmaceutical industry. But according to IW expert Kirchhoff, the industry is still coming under increasing pressure. Without a decisive change of course, Germany risks being left behind in global competition, she says in an interview with ntv.de.
ntv.de: Federal Minister of Economics Robert Habeck is currently on a two-day pharmaceutical trip to Hesse, Lower Saxony and Saxony-Anhalt. The Green politician wants to get an idea of the challenges facing the industry. How is the pharmaceutical industry doing in this country?
Jasmina Kirchhoff: The various crises of the past few years have of course not left the pharmaceutical industry unscathed. However, we are observing that the industry is developing significantly more strongly in Germany than many other industries. On the one hand, this is due to the highly innovative business area of this key industry. On the other hand, the pharmaceutical industry is less susceptible to economic fluctuations.
How important is the pharmaceutical industry for Germany?
Jasmina Kirchhoff is project manager for the pharmaceutical location Germany at the Institute of German Economy.
The pharmaceutical industry, as a cutting-edge technology sector, is particularly important for the necessary transformation of the economy. Not only is it highly innovative and requires a lot of investment, but it also has high productivity. It is precisely these types of industries that are needed, especially against the backdrop of demographic change, in order to remain internationally competitive as a business location in the future.
While many industries are struggling with Germany as a location, the US pharmaceutical company Eli Lilly is building a new plant in Rhineland-Palatinate. What attracted the pharmaceutical giant to Germany?
Germany offers many advantages, otherwise a number of pharmaceutical companies would not have been researching, developing and producing here, some of them for decades. Germany impresses companies with its expertise in highly innovative research and production processes. Especially in biopharmaceuticals, Germany, along with the USA, is still very, very well positioned worldwide. Germany can do pharmaceuticals – and the companies know it. It’s not just our specialists who are highly trained. The research institutions in this country also have a good reputation abroad. In addition, Germany has important supplier industries. Pharmaceutical companies need advance chemical inputs, strong mechanical engineering and strong plant engineering. This is another way that Germany can still score points despite the problems that these sectors are currently having.
In contrast to chip companies, Eli Lilly is building the site without any subsidies. Is the pharmaceutical industry a bright spot in the current location debate?
It doesn’t surprise me that Germany is still perceived as a strong pharmaceutical location. But it is clear what will be important in the future: The pharmaceutical industry does not need subsidies, but rather a framework under which companies can research, develop and produce well. The companies’ current investment decisions have not been made ad hoc. Pharmaceutical companies in particular operate with very long investment, development and production cycles. Politicians have now recognized how important it is to keep the pharmaceutical industry in Germany.
The DAX group Merck is investing more than 300 million euros in a new research center in Darmstadt. How important are projects like this?
Projects like this are extremely important and exactly what we need here at this location right now. Because we have to keep in mind: In recent years, many countries have recognized how important their own strong local drug development is – because it not only maintains prosperity, but also security of supply. They position themselves accordingly. In addition to the USA, the world’s leading research location, China is becoming increasingly stronger. But countries like South Korea, Spain and France are also catching up. The German pharmaceutical industry has lost ground. It’s not just our research activities that are developing mediocrely compared to other countries. The situation is similar with the development of patent applications. Germany has also been falling behind other countries as a location for clinical studies for years. If we want medical innovations to continue to come from Germany in the future, we must consistently pursue and implement the path chosen by politicians to strengthen the German pharmaceutical location.
In the past, pharmaceutical production in China and India has increasingly been concentrated in a few manufacturing sites. How dangerous is the resulting dependency?
The concentration on a few locations is discussed primarily in the generic area, i.e. in the case of copycat drugs that no longer have patent protection. These are often standard medicines such as children’s cough syrup or antibiotics, which we have repeatedly lacked in the past. The so-called Medicine Supply Bottleneck Combating and Supply Improvement Act was a first step towards strengthening the supply of generic medicines again. But one has to be very clear: the law did not cause companies to come running back in droves.
How come?
For many companies it is still not worthwhile to produce in Germany. The law focuses on children’s medicines and antibiotics and therefore only a small proportion of generics. In addition, relocation would take years and be expensive. Under the current conditions, this is not worthwhile for the companies in question. Instead of concentrating on how the production of off-patent generics can be brought back to Germany, the goal should be to ensure that more manufacturers are producing on the global market again – of course also in Germany and Europe – and strengthening the innovative pharmaceutical location.
And that wouldn’t be a problem for security of supply?
Supply chains become more robust through diversification in the global market. And if we manage to create framework conditions under which it will continue to be worthwhile to produce both innovative and generic medicines in the future, that would of course have a decisive advantage: if we set the right conditions for the innovative pharmaceutical companies at the location, there will be no danger that in the future we will be left behind from abroad when it comes to innovative medicines and will also become dependent here. Innovative drug manufacturers could also continue to produce in Germany after losing their patent protection. In this way, we are strengthening the generic medicines of the future and are independent from foreign countries.
The federal government decided on a new pharmaceutical strategy at the end of last year. Among other things, faster approval procedures and less bureaucratic approvals are intended to strengthen drug research in Germany. Is that enough?
These are important points for the pharmaceutical industry in Germany that should be addressed here, and the strategy is therefore an important and correct signal to the economy. Politicians have recognized how important the pharmaceutical industry is as cutting-edge technology for Germany. The strategy is not yet a real game changer, but it can become one. As a package of measures, the strategy has so far been essentially based on what is already common practice in other countries.
Can Germany still catch up with other countries?
The pharmaceutical strategy helps ensure that we do not continue to fall behind in international competition. We can be at the top again if not only the measures contained therein are implemented quickly and reliably, but other existing barriers to pharmaceutical research are also reduced. At the moment, the plans are still subject to funding restrictions, and not all of the measures have already been specifically formulated.
Juliane Kipper spoke to Jasmina Krichhoff