Along with automotive industry, electronic goods and manufacturing, German pharmaceutical industry has always been a big part of national economy. As a matter of fact, medical products and services, – to be even more exact packaged pharmaceutical products – is the fastest growing sector. It is also believed to be growing faster than economy of Germany. There are several reasons for that.
Recent past and very present of German pharma industry
First of all, excellent infrastructure is one of the major factors for such a rapid expansion. Of course, it is not it. We can add internal market demand and highly skilled workforce to the success factors. R&D activity of companies working in pharmaceutical industry is being feed resources that no other industry is ready to invest. Share of the revenue that is invested back to R&D activities equals 12-13%.
Two thirds of the revenue of the pharmaceutical industry is generated by sales outside of Germany, or in other words due to the export. Just think about it: exports figures grew by 24% year to year since 2016 and now reached 85 billion Euro. And let’s not forget imports, which amounted to €58 billion in 2020 alone.
All these achievements were possible because of the work of just 510 pharmaceutical companies and its 120,000 employees. Those companies were either founded in Germany like BAYER or have decided to open a subsidiary or a R&D hub here, like Swiss ROCHE did. By the way interesting fact: Switzerland along with US, France and Netherlands is included in TOP 5 lists of both importers and exporters of pharmaceutical goods. Even more interesting fact: 28 billion EUR of export revenue is spread worldwide.
Does it mean that there are more partners out there that German yet to discover? One further question; do they really need to look around, if everything works so good?
Do you have any complaints
At first glance, everything is booming. Statistics show improvements, figures are growing, government continues to support the industry, demand is stable and even increasing. Especially now, when people are trying to prevent being sick by looking for ways to have more healthy life and invest in well-being. This is most likely to be reason for highest acceleration in a sector was demonstrated by vitamins and mineral products – astonishing 6.8% in 2019. In absolute values, it equals to 1.1 billion EUR.
However, the blue sky of German pharmaceutical industry has several clouds on its horizon. According to the EY study, current pandemic and challenges related to it – lack of diversity for suppliers and high dependency on producers of APIs (Active Pharmaceuticals Ingredients), as well as on delivery channels that can fail due to human mistakes, natural causes and/or political situations – are putting at risk this well-established but very fragile balance.
Production sites for API are mainly located in China and India. Story gets even more twisted; 70% of the components that India requires to produce APIs are imported from China. Another sidenote: 26% of all generic pharmaceutical products imported to Europe are from India. How do you like that? And now imagine other delayed sea shipments and calculate financial loss, not to mention damage caused to people whose health is highly dependent on medication.
The same EY report claims that 270 medicaments experienced delivery related issues in 2020, whereas in year 2019 it was 200 of them. And we are not talking vitamins here. Those are remedy that help people to handle cancer, blood pressure, epilepsy and other severe diseases.
Even if pharmaceutical industry will want to change things and look for more suppliers, look for different delivery routes, research and develop other API components to avoid problems in the future it is not that easy and will not happen overnight. Just one small fact; Germany is a very regulated market with its bureaucracy and red tape. It is good and reliable, but it also can cause barriers and slow down change, which is required in highly dynamic world economy.
So, what is now? On one hand there is prosperity and boom, on the other hand there are clearly recognizable risk and need for changes. How do we move on?
Make it work for us
There is no need to say that technology was there to support us during all these years and helped us to accomplish unbelievable goals.
Digital presence for companies is nowadays an absolute rule for successful international trade. Letting your potential partners know what you are doing, selling, looking for is key factor of success. Companies invested in digital transformation can pick their fruit already now. That is why companies that are digitally mature are believed to be 26% more profitable than their competition.
In other words, pharmaceutical industry requires solutions that will provide crises-free logistics, stress-resistant information channels between patients, medics, organizations and industry. Key to that is digitalization.
We have tons of data at our feet. It is there and it is getting gathered every minute and piles up on servers, in clouds and platforms. There are ways to get it, analyse it and use it in one’s favour. There is Artificial Intelligence that should be used to speed up the process and provide companies with useful insights about potential customers, partners and business opportunities.
That’s why digital solutions are going to be increasingly decisive when exploring new markets.
To sum up, German pharmaceutical industry is at its highest point of all time. It can and will grow on. It possesses enough resources to make it possible. However, it is now when industry should think about its future. It is now, when key players shall recognize what future is going to look like for them. It is today when we have to think about our mistakes and try to avoid them in the years to come.
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