International pharmaceutical giants like Sanofi, Eli Lilly, Daiichi-Sankyo are investing billions of euros in new locations in Germany this year. This sudden boom is not surprising, because the German government had geared its strategy precisely to this.
Sanofi will invest up to 1.5 billion euros in a site in Frankfurt’s Höchst district in the coming years. This French pharmaceutical company already produces insulin for the world market in one plant, and now a more modern plant is to be built there. Not far away in Alzey, the US giant Eli Lilly is building a new factory worth 2.3 billion euros, in which diet pills will be manufactured. And Japan’s second largest pharmaceutical company Daiichi Sankyo is building a factory for manufacturing cancer drugs in Oberpfaffenhofen, Bavaria. The cost of this factory is around one billion euros.
Germany’s targeted approach to revitalizing its pharmaceutical industry is paying off, attracting some of the largest global players. This strategic alignment involves significant financial incentives, streamlined regulatory processes, and a focus on cutting-edge research and development facilities, creating a conducive environment for substantial foreign investments.
The massive investments by Sanofi, Eli Lilly, and Daiichi Sankyo underscore Germany’s attractiveness due to its skilled workforce, advanced infrastructure, and favorable business environment. Sanofi’s new insulin plant will leverage Germany’s expertise in biotechnology, while Eli Lilly and Daiichi Sankyo’s projects will benefit from the country’s robust supply chains and innovation ecosystems, particularly in Frankfurt and Bavaria, regions known for their pharmaceutical and technological prowess.
It is no coincidence that foreign pharmaceutical companies are suddenly investing billions of euros in German locations. Germany has traditionally been a strong market for this industry. Thanks to domestic companies such as Bayer, Merck KGaA, and Boehringer-Ingelheim, pharmaceutical products are Germany’s fifth most important export goods. No country supplies more medicines and other pharmaceutical products than Germany. Foreign companies therefore value Germany’s high level of knowledge and expertise.
Recalling the past: The German pharmaceutical industry has been going downhill for years. As in so many industries, Germany has lost ground and competitiveness. In 2016, for example, Germany conducted the second highest number of clinical trials in the world, but now this country is only in seventh place. Even Spain and Canada now conduct more trials. A wake-up call for politicians last year was Biontech’s decision to test its new cancer vaccine based on mRNA technology in Great Britain. In addition, the federal government passed a law at the end of 2022 that limits profits from new drugs if they cannot demonstrate significant added value compared to conventional therapies. As a result, numerous pharmaceutical companies withdrew new drugs from the market in Germany or did not even try to get them approved. The result: instead of 49 new drugs as in 2022, only 30 new drugs were introduced in Germany in 2023 – accordingly, the companies did not need any more production capacity here.
Criticism leads to national strategy
German politicians took notice of the industry’s frustration, not only because company representatives also complained personally and four companies even filed a constitutional complaint, which has yet to be negotiated. The federal government responded to the protests at the end of last year with a national pharmaceutical strategy. It contains many of the buzzwords that have been frequently used in political discussions recently without having any effect: approval procedures are to be accelerated, bureaucratic hurdles are to be reduced, digitization is to be accelerated, and incentives are to be set for the industry.
What often sounds like empty words has actually worked this time: “The pharmaceutical strategy has changed the perception of this industry in Germany at our corporate headquarters in the USA,” said Kevin Peters, Germany boss of the US giant Merck & Co. (present in Germany as MSD), in an interview with Handelsblatt newspaper in January. The high investment sums are the consequence of this changed perception. However, not all parts of the strategy have been implemented yet. Manufacturers will soon be able to keep prices for new drugs that they negotiate with health insurance companies secret. In addition, a nationwide ethics committee is to be set up to decide on research applications and thus speed up procedures.
The tangible impact of Germany’s national pharmaceutical strategy is evident in the increased investment flows, as highlighted by Merck & Co.’s acknowledgment of the improved perception of Germany’s industry. While significant progress has been made, further implementation of key elements, such as confidential pricing negotiations and the establishment of a national ethics committee, is crucial for sustaining momentum and enhancing the overall efficiency and attractiveness of the pharmaceutical sector.
Positive experiences give hope
The positive experiences from the pharmaceutical industry give hope. Pharmaceutical industry is not the only industry in which the federal government is working on a “national strategy”. For example, the national hydrogen strategy was also adopted in 2023, which is intended to accelerate the development of this industry in Germany. There has also been a national AI strategy since 2018, which was last extended in 2023 and brings in government investments of billions per year. In order to strengthen Germany’s IT infrastructure and services, the national digital strategy by 2030 is also intended to improve the expansion of fiber optics, the digitization of authorities and the use of health data for research.
