BMI View: Germany, one of the largest single pharmaceutical markets in Europe and the wider OECD, will continue to exhibit high and rising underlying demand for branded pharmaceuticals generated by an ageing population with an increasing burden of chronic non-communicable conditions . However, drugmakers will experience continued deterioration in previously exceptional potential rewards as fierce price competition is intensified by additional restrictions on reimbursement and increasingly costly regulation. In addition , the German economy, driven by the European and global export of high value-added manufactured goods, will remain particularly vulnerable to unexpected external shocks; a notable source of long-term risk to multinationals. However, the pharmaceutical industry's contribution to Germany's positive balance of trade and global influence will sustain strong resistance to developments that might further reduce the country's future competitiveness as a global hub for the industry.
Headline Expenditure Projections
Pharmaceuticals: from EUR39.95bn (USD53.53bn) in 2014 to EUR39.83bn (USD43.81bn) in 2015; -0.3% in local currency terms and -18.2% in US dollar terms. Forecast revised from Q215
Healthcare: from EUR317.55bn (USD425.52bn) in 2014 to EUR326.19bn (USD586.81bn) in 2015; +2.7% in local currency terms and -15.7% in US dollar terms. Forecast revised downwards from Q215
In BMI's Q315 Western European Risk/Reward Index, Germany follows two consecutive quarters of decline with a further score of 69.2, down from a Q215 score of 72.4 out of 100. Weighed down by a deteriorating rewards score, Germany is ranked as the 4th most attractive pharmaceutical and healthcare market out of 15 in the region, relinquishing 3rd place to France. While an above average risks score is illustrative of the country's favourable operating environment, potential industry rewards are capped by increasingly burdensome reimbursement and pricing regulation and the potential for a sharp economic correction to Germany's dependence on the export of high value manufactured goods.
Key Trends and Developments
As reported by the national statistics office in April 2015,while facing a low birth rate and rapidly ageing population, Germany recorded a fourth consecutive year of population growth in 2014, largely due to immigration, which grew from 80.8mn at the start of the year to 81.1mn by the end. This resulted in the highest positive net migration since the early 1990s with at least 470,000 more people coming to Germany in 2014 than those leaving. The country also opened its labour market at the start of 2014 to citizens from Bulgaria and Romania, which both joined the EU in 2007.
In March 2015 Germany's upper house of parliament, The Bundesrat, approved the over-the-counter (OTC) sale of the 'morning-after' pill. Following the approval, the pill was made available without prescription in German pharmacies from the middle of March 2015. However, the house recommended a ban on the drug being sold through mail-order companies to ensure that those buying the drug receive dependable standards and qualified advice.
In April 2015, Germany announced the mobilisation of funds worth EUR16mn (USD17.19mn) to support improvement in Cameroon's healthcare system, according to Chancellor Angela Merkel's personal representative for Africa, Gunter Nooke. The plan was announced during a meeting with President Paul Biya on April 16. The financial support will also help to improve lives of Central African refugees and Cameroonians displaced by the insurgency caused by Boko Haram, noted the German envoy. Nooke promised additional support from Europe, particularly from Germany, in the fight against the rebels.
BMI Economic View
The German public debt load will continue to fall, from a peak of 80% of GDP in 2010 to 64% in 2019. Improving momentum for both corporate and household activity, and the fall in both the euro and oil prices, has led us to raise our real GDP growth forecasts for Germany in 2015 and 2016. Nonetheless, German structural economic imbalances continue to point to slower growth over the longer-term forecast period to 2019.
BMI Political View
Despite an increasingly vocal international backlash, Germany is unlikely to change its hard stance towards eurozone debtor states or its non-interventionist stance towards the conflict in eastern Ukraine. While this will increase resentment towards Germany on the international stage, both of these policies remain relatively popular among the German population and therefore we do not anticipate any significant uptick in protests against the government.