Big pharma warns Germany’s attempts to curb drug prices will backfire
Government says higher mandatory discounts for insurers will save €12bn by 2030
Europe’s biggest drugmakers have warned that Germany’s attempts to curb healthcare costs will undermine one of the country’s few remaining globally competitive industries and cede further ground to the US and China.
The comments from executives at groups such as Merck KGaA and Boehringer Ingelheim come after lawmakers approved plans to save billions of euros through measures including hiking compulsory discounts on some drugs for the statutory health insurance system that serves most of the nation’s workers.
The German groups, together with peers across Europe, say the plans will deter investment in the country, the world’s top exporter of pharmaceutical products, just as a global race to attract research, manufacturing is accelerating.
Chancellor Friedrich Merz’s desire to cut mounting deficits in Germany’s health insurance system could hurt drugmakers at a time when the Trump administration is seeking to ensure prices charged in the US are comparable with those in other developed nations.
The industry is “increasingly viewed primarily as a cost factor within the healthcare system”, said Kai Beckmann, chief executive of Merck, which has invested €2.5bn at its Darmstadt headquarters over the past decade. “Given the deteriorating framework conditions, it is becoming increasingly difficult to justify such investments over the long term.”
The health ministry argues the cuts are necessary to close a projected financing gap of €19bn next year while avoiding a sharp increase in health insurance contributions. Alongside higher rebates, the government wants to limit growth in hospital costs, raise patient co-payments and restrict services covered by insurance.
Germany’s health ministry has estimated that doubling the mandatory manufacturer rebate on patented medicines from 7 per cent to 15.5 per cent will save health insurers about €12bn by 2030.
But drugmakers say any savings from the measures will be modest and come at the cost of weaker investment and innovation, threatening a sector that is home to some of the world’s largest pharmaceutical companies including Bayer, Stada and BioNTech.
The warnings come as Germany’s traditional industrial strengths are already under pressure. Its carmakers and chemical groups are cutting tens of thousands of jobs as they contend with high domestic costs, weak global demand and intensifying competition from Chinese rivals.
Germany’s pharmaceutical exports reached a record €116.4bn last year, accounting for 7.4 per cent of the nation’s sales abroad and generating a trade surplus of almost €43bn, about one-fifth of Germany’s total.
While groups including Sanofi, Roche, Daiichi Sankyo and Vetter Pharma announced plans to invest more than €4bn in Germany in the past three years, some indicators suggest the country’s competitive position is weakening.
Private companies conducted and funded 568 trials in Germany last year, down from 641 a decade ago, according to industry body the Verband Forschender Arzneimittelhersteller (VFA). Once the world’s largest location for such trials after the US, Germany has slipped to fifth position behind China, Spain and Australia.
Companies are also promoting fewer products in Europe’s largest economy, suggesting a lack of confidence that they will command high enough prices to justify the costs of development.
Consultancy Charles River Associates said 175, or a third, of 526 new medicines approved by the US Food and Drug Administration between 2016 and 2025 were not marketed in Germany.
VFA president Han Steutel said government policies were “weakening Germany’s competitiveness” just as investment decisions were being made “in direct competition with the US, China and other European locations”.
Washington’s proposed “most favoured nation” pricing policy, introduced last year to lower US prescription drug prices, could discourage companies from launching drugs in markets such as Germany where medication is cheaper.
US prices were on average three times higher than Germany’s in 2022, while healthcare spending accounted for 17.6 per cent of US GDP last year, compared with 12.7 per cent in Germany.
Médard Schoenmaeckers, Germany head of Boehringer Ingelheim, said the company had been “surprised” by the legislation and would cancel some planned investments. The decision also reflected broader uncertainty over Europe’s policy direction, he said.
Boehringer said in June, ahead of the legislation, it was cancelling about €900mn in planned investments for Germany through 2030. Schoenmaeckers said the decision reflected “the absence of long-term framework conditions”.
“We need to invest more in the US and into China where we see a rapid development of innovation,” he said. “We need to see innovation valued, or we don’t see those investments coming back to Germany or Europe.”
In June, US-based Eli Lilly said it was halving a planned €2.3bn investment in a new weight-loss and diabetes drug manufacturing site in Alzey.
Swiss group Roche, which says it has created 1,800 jobs in Germany and invested approximately €3.8bn since 2020, said it was placing “all future investment decisions” in Germany on hold.
The company told the FT that the new law “imposes a substantial burden on Germany’s research-based pharmaceutical industry and sends a negative signal to companies seeking to invest”.
Benoit Creveau, managing director of Daiichi Sankyo Germany, said while the Japanese drugmaker would press ahead with plans to invest €1bn in its Pfaffenhofen production and development, it was questionable if it would make the same decision under Germany’s “current framework”.
BioNTech, one of Germany’s biggest biotechnology success stories, said extending proposed savings for insurers to preventive medicines and vaccines sent “a signal that prevention, including vaccines, is becoming less important”.
Like many of its peers, BioNTech chose to list on the Nasdaq in 2019 rather than Frankfurt because of the deeper pool of specialist investors.
It relies on US dealmaking to fund growth — BioNTech’s landmark 2025 collaboration with Bristol Myers Squibb is worth up to $11.1bn — while increasingly turning to China for new medicines. It plans to close three out of four German sites that were used to supply Covid-19 vaccines outside the US.
BioNTech’s founders, physicians Uğur Şahin and Özlem Türeci, are planning to leave the company this year and establish an independent business developing the next generation of mRNA technologies. They have not decided if their new venture will be based in Germany.
The country “is not competitive as a production hub any more,” said Peter Goldschmidt, chief executive of generic drugmaker Stada. “You can’t have the lowest tenders and the highest costs.”