Summary
To the relief of numerous stakeholders, Germany has finally drafted the framework of its far-reaching healthcare reforms that are designed to reduce expenditure, according to BMI's newly published Pharmaceutical & Healthcare Report Q4 2006. Under the plans, a new Health Fund will essentially be a central deposit into which workers, their employers and the government will make contributions. Germany's current healthcare system consists of 252 public health insurance companies and covers almost 90% of the population, with the other 10% able to afford private insurance plans. Accordingly, bureaucracy will be reduced, leading to savings for all Germans. The prospect for drugmakers is less good, which has led BMI to lower its pharmaceutical market forecast for the period 2006-2010. We now see CAGR of 3.01%, with the value of the market reaching US$46.4bn by the end of the forecast period.
In terms of company activity, Q406 was characterised by consolidation. Merck KGaA unveiled a US$13.3bn bid for Swiss biotechnology company Serono in September 2006, to create a new heavyweight player in the European pharmaceuticals sector. The combined entity will be called Merck-Serono and it is likely to have its headquarters at Merck's current base in Darmstadt, Germany. It will be Europe's fifth largest drugmaker behind UK company GlaxoSmithKline, French firm Sanofi-Aventis, Switzerland's Novartis and the newly formed Bayer-Schering of Germany. Meanwhile, German hybrid firm Altana announced later that month that it was to sell its pharmaceuticals division to privately held Danish company Nycomed for EUR4.5bn (US$5.75bn) and concentrate on chemicals.
Offshoring continues to increase, with India becoming more attractive. German drugmakers are increasingly looking to set up both production and R&D operations in India because of a deteriorating domestic business environment. Since India offers a low cost base, skilled workers and is actively encouraging foreign direct investment, BMI believes that many more pharmaceutical companies from Germany will establish facilities on the Indian subcontinent in the next few years.
In the footsteps of its European neighbours, Germany has embarked on a policy of liberalising the sale of over-the-counter (OTC) medicines, particularly online. The first player to begin trading online was Dutch operation DocMorris. The company slashed prices of OTC medicines, sometimes by as much as 30%, and the strategy has been an unbridled success. Sales have been twice what was projected as the public embraced the cheaper approach. Further changes that will benefit consumers are planned. BMI expects the value of the OTC sector to reach US$7.4bn by 2010. Download a PDF or order a print copy and get three quarterly updates.
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