INDUSTRY OVERVIEW

The Pharmaceutical
Industry in Germany

ISSUE 2021/2022
THE PHARMACEUTICAL INDUSTRY IN GERMANY

Germany – Europe’s Largest

Pharmaceutical Market
“Germany is one of the most developed healthcare markets in the world and
a strategic gateway to the EU single market for international companies.”

Prof. Dr. Hagen Pfundner

Management Board, Roche Pharma AG

EUR 46.4 bn 5.1 %

annual revenue growth in the pharmaceutical
pharmaceutical industry revenue in 2019 – market (pharmacies and clinics) over a five-
the biggest pharmaceutical market in Europe year period (CAGR 2014-2019)

12.5 %
of revenue invested in R&D in 2018 – the highest
EUR 83.2 bn
in exports of pharmaceuticals in 2018 – the
rate among all major industry sectors in
world’s leading exporter of medicinal products
Germany

EUR 7.4 bn
R&D investments by pharmaceutical companies
83 m
population drives domestic demand for health-
in Germany in 2018 care products and services

Combining cutting edge-innovation, a long tradition as The country is the largest exporter of medicinal prod-
the “world´s pharmacy” and continuously growing de- ucts and ranks among the top pharmaceutical produc-
mand for healthcare products, Germany is the ideal location ers worldwide. In light of the global need for personalized
for pharmaceutical R&D, production, and sales of medi- medicine, Germany has also evolved into one of the
cines. Driven by trends such as demographic change, a rise main suppliers of novel biopharmaceuticals. Located in
in chronic diseases and an increasing emphasis on preven- the heart of Europe and benefiting from excellent infra-
tion and self-medication, Europe’s biggest pharmaceuti- structure and a highly skilled workforce, the continent’s
cal market is growing faster than the German economy. most populous country offers attractive opportuni-
Germany belongs to the world’s leading clinical trials lo- ties and a favorable investment climate for pharmaceu-
cations and - based on R&D investment and patent appli- tical companies planning to expand internationally.
cation levels - is the leading location for pharmaceutical
innovation in Europe. Building on these competencies,
many German organizations have become key contribu-
tors in the global fight against the Covid-19 pandemic.
The Pharmaceutical Industry
in Numbers
Germany’s industry numbers speak for them- Drug Sales in the German Pharmacy Market
selves and for a secure and successful invest- (including Mail Order) 2019
ment in the country. in EUR billion and million packaging units

Europe’s Biggest Market Prescription-only drugs

Germany constitutes the major European pharma-
Non-prescription drugs
ceutical market and the fourth largest worldwide
after the USA, China and Japan. In 2019, revenues in
the overall pharmaceutical market increased by 5.7 7.0
percent, reaching EUR 46.4 billion (ex-manufacturer
1,504
prices). Approximately 86 percent of revenues were EUR 58.8 million
51.7 billion 752 packages 751
generated in the pharmacy segment, while 14 per-
cent were being made in the clinic segment. During
the same year, drug sales by pharmacies (including
mail-order pharmacies) rose to EUR 58.8 billion (ex-
Note: Revenues are based on ex-pharmacy prices.
pharmacy prices), corresponding to growth of 5.3 Source: IQVIA, BAH 2020
percent. Prescription-only medicines accounted
for 88 percent of these sales. Whereas non-pre-
scription medicines only generated 12 percent of
revenue, they accounted for half of units sold. Leading Pharmaceutical Supplier
Following its tradition as the “world’s pharmacy,”
Strong Industry Base Germany generated production value of EUR 36.1
More than 500 pharmaceutical companies are billion in 2018, making it the leading pharmaceuti-
located in Germany, including domestic corpora- cal manufacturing location in the EU. Located in
tions as well as subsidiaries of international enter- the heart of Europe and embedded into global
prises. These range from big corporates like Bayer, supply chains, the country imported medicines
Boehringer Ingelheim and Merck to small innova- worth EUR 56.9 billion in 2018, equivalent to an
tive biotechnology start-ups. As in other economic increase of 8.1 percent. During the same period,
sectors, SMEs constitute the backbone of the exports of pharmaceuticals grew by 10.3 percent Germany is the
pharmaceutical industry, with around 90 percent reaching EUR 83.2 billion, consolidating Germany’s European Union's
of manufacturers having less than 500 employees. position as the world’s leading supplier of medica- leading pharma
In 2017, 234 of these companies employed fewer tions and the second largest importer. manufacturing
than 20 staff. Overall, the German pharmaceutical and R&D location.
industry has a workforce of 120,000 people (2019). R&D Excellence and Innovation
Germany provides the perfect environment for
the development and production of research-
intensive, high-grade products. In 2018, the
Pharmaceutical Industry Revenue in Germany pharmaceutical industry in Germany invested
in EUR billion almost EUR 7.4 billion in R&D – more than in
any other European country. The German phar-
maceutical sector shows the highest research
intensity across all major German industries –
46.4 about 12.5 percent of revenues were reinvested
41.5
38.0 in R&D in 2018. With 499 clinical trials financed
31.9 34.2
by research-based pharmaceutical companies in
2019, Germany ranks fifth worldwide. Based on
the number of patent applications, the country
is leading in pharmaceutical innovation in Europe.
2011 2013 2015 2017 2019 In 2018, some 584 patents were registered with
Note: Revenues are based on ex-manufacturers prices.
the European Patent Office by the pharmaceuti-
Source: IQVIA 2020 cal industry in Germany.

3
 MARKET OPPORTUNITIES

Market Opportunities & Trends

Growing Healthcare Market of overall healthcare spending in Germany (36.9
With 83 million inhabitants, Europe’s most percent in 2015). Chronic lung diseases, cancer
populous country also represents the biggest and diabetes mellitus – being the most common
healthcare market in the region – with expendi- metabolic disorder – are also widespread among
ture continuously rising. This offers interesting the general population. Estimates suggest that
opportunities for international companies operat- around six percent of German adults suffer from
ing in the market. In 2018, health expenditure asthma and almost 10 percent of adults have dia-
in Germany reached a new high of EUR 390.6 betes mellitus (including around 2 million people
billion, corresponding to a per capita spending of with undetected diabetes). The German market
EUR 4,712. Between 2013 and 2018, the country’s offers attractive opportunities for pharmaceutical
healthcare market grew by almost 4.4 percent companies providing innovative drugs and novel,
per year on average. The healthcare sector cur- more customized therapies – also for patients
rently accounts for almost 12 percent of German diagnosed with chronic diseases.
GDP, with the share steadily increasing as annual
growth rates exceed the pace of overall domestic Health Insurance
economic growth. Driven by developments like Mandatory health insurance and different sources
demographic change, the growing prevalence of of financing contribute to solid healthcare provi-
chronic diseases, and the recent Covid-19 out- sion – including access to medicines – in Germany.
break, this upwards trend in annual German health Almost 88 percent of the German population are
Healthcare spend- expenditure is expected to continue, after already insured by one of the more than 100 statutory
ing grew by 4.4 exceeding the EUR 400 billion mark in 2019. health insurance companies, with around 10.5
percent per year percent of the population being privately insured.
between 2013 and Demographic Change In 2018, public and private health insurers covered
2018. One of the main drivers of the healthcare market nearly two thirds of total healthcare spending
is demographic change. Germany, like much of in Germany, accounting for 56.8 and 8.5 percent
Europe, has an aging society. Birth rates remain respectively. The remaining amount was funded
low while life expectancy at birth continues to by private and public households, social long-term
grow – reaching 84 years for women and 79 years care insurance, employers, statutory accident
for men in 2020. Today, approximately half of the insurance and the statutory pension fund. Phar-
German population is older than 45 years of age maceutical spending by statutory health insur-
and about 22 percent are at least 65 years old, ances increased by 4.7 percent in 2019, reaching
making it one of the world’s oldest populations. EUR 41.7 billion, whereby oncological treatments
Forecasts suggest that the share of the ”65 plus” accounted for 42 percent of additional expenses.
generation will increase to about one third of Moreover, costs were driven by growing expenses
the population by 2035. This age group already for pharmaceuticals for stroke prophylaxis and
accounts for around half of overall healthcare antirheumatic drugs amongst others. During the
expenditure in Germany. Moreover, the number same period, the leading indication areas in terms
of people aged 85 or more is expected to rise to of statutory health insurer expenditures were
3.3 million by 2025 – equivalent to four percent antineoplastics, immunosuppressive drugs, anti-
of the population. In 2019, more than 4.2 million diabetics, and anticoagulants.
people in Germany were in need of care. The risk
of illness – and the probability of being affected “Out-of-Pocket” Payments
by several chronic diseases – goes up as age levels Increasingly, patients are also paying for medi-
rise. This leads to greater demand in the domestic cines “out-of-pocket”, mainly for over-the-counter
healthcare sector. medicines and co-payments for prescribed drugs.
This trend is also driven by so-called “switches”,
Chronic Diseases meaning that previous prescription-only medi-
The treatment of the growing number of patients cines gain the non-prescription status. This was
affected by (age-related) chronic and incommuni- the case for 25 treatments between 2007 and the
cable diseases constitutes a major concern of the beginning of 2020. In the light of growing health-
German healthcare system. Together, cardiovascu- care expenses, self-medication and consultation
lar diseases, psychological disorders and musculo- provided by local pharmacies may also relieve
skeletal diseases account for more than one third doctors and health insurers.

4 Industry Overview 2021/22  |  gtai.com

Over-the-Counter (OTC) Market
Market Trends Opportunities
Germany’s consumer health market is enjoying Remedies for the respiratory system and pain
constant growth thanks to an increasing focus treatments account for the highest share of
on preventive healthcare and self-medication overall OTC sales via pharmacies (including mail
within German society. Following current health order). In 2019, the vitamins and minerals seg-
and wellness trends and the desire to grow older ment demonstrated the highest growth rate (6.8
in good health, more and more Germans display percent), with revenue exceeding EUR 1.1 billion.
growing health awareness levels and an inter- After double-digit growth in previous years, sales
est in a more active and healthy lifestyle. Many of probiotics for the digestive tract increased by
consumers adopt a prevention-based attitude and seven percent reaching EUR 163 million in 2019. In Germany’s OTC
are willing to invest in their health by spending terms of sales volume, eye medicines (4.9 percent), market grew
money on products supporting personal wellbe- vitamins and mineral nutrients (3.7 percent) as by almost four
ing. Moreover, patients may use OTC medicines well as remedies for the bladder and reproduc- percent to EUR 10.7
to treat relatively minor ailments including colds, tive organs (3.6 percent) recorded the strongest billion in 2019.
sore throats and the like. increase. The segment of OTC phytopharmaceu-
ticals and homeopathic remedies accounted for
Market Segments 31 percent of total non-prescription drug sales by
The German OTC market comprises two major pharmacies. Future forecasts suggest a positive
segments: non-prescription drugs and health market development and expect OTC drug sales
products. Non-prescription drugs include to grow by around three percent per year between
pharmacy-only drugs as well as OTC drugs that 2019 and 2029.
may also be sold outside of pharmacies. Product
groups that are not subject to pharmaceutical
legislation - for example, nutritional supplements, Leading OTC Segments in the Pharmacy Market by Revenue 2019
healing earths and seawater nasal sprays – belong in EUR million
to the health products segment and can be sold
by pharmacies as well as drugstores and super-
Cough and cold remedies,
markets. The average annual growth rate of the respiratory therapeutics 2,103
German OTC market amounts to four percent
for the period 2014 to 2019. In 2019, revenues Analgesics, muscle and
1,393
joint pain treatments
increased by 3.7 percent to almost EUR 10.7 billion.
More than EUR 7.2 billion was generated in the Products for the
1,310
digestive system
non-prescription drugs segment and over EUR 3.4
billion with health products – corresponding to a Vitamins and
1,106
sales volume of 811 million and 744 million pack- minerals
aging units respectively. Although self-medication Skin
905
represents the major share of OTC sales, OTC products
products prescribed by physicians represent a Source: IQVIA 2020
further opportunity.

Competitive Landscape and Distribution OTC Sales in Germany by Distribution Channel 2019
The domestic consumer health landscape is in EUR billion
somewhat fragmented – with many international
and local players. Even market leaders – including
Bayer Vital, GlaxoSmithKline and MCM Kloster- Pharmacies 6.0 1.8
frau – with a broad product portfolio only have
single-digit market shares. Traditional brick-and-
Mail order 1.0 0.5
mortar pharmacies represent the main distribu-   Non-prescription drugs
tion channel for OTC products and enjoy a high   Health products
level of trust among the German population. Mass market 1.1
Almost 75 percent of revenue was generated by
the 19,000 local pharmacies in 2019, followed by Note: Mass market sales include sales by drug stores and supermarkets, among others.
mail-order pharmacies and the mass market. Source: IQVIA, BAH 2020

5
 MARKET OPPORTUNITIES

Biopharmaceuticals
Increasing Market Share biological entities. Gene therapies experienced
The development of biological drugs has led to the fastest increase, with an average growth of
substantial shifts in the pharmaceutical industry over 10 percent per year since 2015. Key areas of
landscape in recent years. Large companies have biologics development are oncology, immunology
moved their focus from small molecule drugs and infectious diseases. In the last three years,
towards the development and production of biopharmaceuticals accounted for more than half
complex biological compounds that are made of all drug approvals in the European Union.
Annual growth in with the help of a variety of organisms. Because
the biologics mar- of their high therapeutic potential, biologics have Biosimilars
ket of more than taken up a considerable share of the pharmaceuti- As innovative biological drug patents expire,
10 percent is more cal market in Germany: From 2015 to 2019, the more pharma companies have the opportunity to
than twice that in biologics market grew by 11.6 percent on average manufacture and commercialize the compound –
the overall pharma annually – more than twice the growth of the a key factor in pharma market dynamics in recent
market. overall pharma market. The total revenue of years. Germany has shown its strength as a world-
biopharmaceuticals in Germany is EUR 12.7 billion class manufacturing location and is now one of
(2019), equivalent to more than a quarter of the the global biopharma production centers. Most of
market for pharmaceuticals. the biologicals recently developed are antibodies
that need to be produced in larger quantities than
Market penetration has been steadily increasing in the first-wave biologics which hit the market in
recent years, but differs according to therapeutic the previous decades. Due to the challenges that
area. Biopharmaceuticals generate 80 percent of this trend creates for the industry, biopharma
immunology sales, whereas the figure is as low manufacturing will continue to be a demand-
as three percent for cardiovascular indications. ing activity that requires suitable expertise and
Biopharmaceutical sales in oncology grew by 23 infrastructure – making Germany a prime location
percent in 2019, but the highest growth rate was in this field. In 2019, pharma companies active in
recorded by anti-infectives with an increase of 40 Germany were developing 20 biosimilar products
percent. in phase III alone. From 2007 to 2019, biosimilars
sales achieved a CAGR of 69 percent.
Development Pipeline
The growing importance of biopharmaceuticals is
also reflected in the development pipeline. As of
2019, companies active in pharma R&D in Germany
were developing 640 biologics in clinical develop-
ment – 82 percent of phase III assets were new

Biopharmaceuticals Sales Share in Germany

Modalities of Biopharmaceuticals Developed in Germany 2019 in EUR billion

63   Phase I   Phase II   Phase III   Biopharmaceuticals

  Other pharmaceuticals 12.7

Gene therapies only account for a small share of pipeline

162 31.4 2019
assets, but their number grows at the fastest rate.

11.2
  14  4
199
 18
59 22 2018
 5 30.1
29
32 28
mABs Vaccines Other recombinant Gene therapeutics
proteins

Source: vfa, BCG 2020 Source: vfa, BCG 2020

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Pharma Manufacturing
Major Production Location Investment and Trade
Germany is one of the world’s top locations for The investment activity of pharmaceutical com-
pharmaceutical production. In 2018, pharmaceuti- panies in Germany has been experiencing a steady
cal production volume reached EUR 36 billion increase in recent years. Most of the invest-
– equivalent to 18 percent year-on-year growth. ments were aimed at capacity increases, which
According to EFPIA, Germany is the biggest underlines the confidence of the local companies
pharmaceutical manufacturing location within in sustained growth. In the course of the global
the European Union and ranks second in Europe effort to tackle the Covid-19 pandemic, calls for
after Switzerland. In the field of biopharmaceuti- a reinvigoration of small molecule drug and API
cal production, Germany has the second highest manufacturing have been increasingly heard. The
figures worldwide after the USA. Two important economic stimulus package passed in June 2020
factors contributing to this excellent position are dedicates EUR 1 billion to this objective. This
the high-performing industrial infrastructure and measure aims to reduce the dependency on global
the long-standing strength of the local chemical supply chains and is expected to trigger substan-
industry. Between 2010 and 2019, pharmaceutical tial investments in the German pharmaceutical HEALTH MADE IN
manufacturers in Germany recorded an increase production sector in the near future. The strong GERMANY – the
in the gross value added by 17 percent. In 2017, the export orientation of the German pharmaceutical Export Initiative of
gross value added in the pharmaceutical sector industry shows its competitiveness: In 2018, about the German Health-
was over EUR 135 thousand per employee. two thirds of its sales were generated abroad. care Industry:
The export volume of pharmaceuticals has been www.health-made-
Contract Manufacturing Organizations growing continuously since 2012 by 7.4 percent on in-germany.com
Germany is also home to outstanding contract average annually.
manufacturers. International and national clients
can easily obtain any service they require – from
initial product idea to final product – at moderate Pharmaceutical Production in Germany
cost. Boehringer Ingelheim, for example, is the in EUR billion
only company in the world that is active across
the entire biopharmaceutical process chain. This
enables faster timelines and simpler coordination 36.1
of processes worldwide. The Federal Ministry for 30.6
29.6 29.2
Economic Affairs and Energy’s “Health Made in
Germany” initiative can help along with GTAI to
identify possible partners. Its “German Biomanu-
facturing Guide” provides a comprehensive over-
view of biomanufacturing companies currently
active in Germany. 2015 2016 2017 2018

Source: BPI 2019

High Production Standards
Germany is an ideal production location for
research-intensive, high-grade products. It places
a high value on technology; this stemming from Export of Pharmaceuticals from Germany
the country’s long history of developing and man- in EUR billion
ufacturing high-quality pharmaceutical products.
The country’s particular strength lies in producing
complex products where containment and sterile 83.2
environments are critical. Hundreds of thousands 75.4
70.6
69.7
of highly skilled employees in medical-technical,
pharmaceutical-technical and engineering back-
grounds enable companies to utilize efficient and
complex production processes. Contractual agree-
ments are secure and foreign pat­ent holders are
equally well protected as Germans. 2015 2016 2017 2018

Source: BPI 2019

7
 R&D FRAMEWORK

Research Excellence
Research Landscape industry sectors in Germany. Approximately 18,600
Over 30 biotechnology clusters contribute sub- researchers work in pharmaceutical and biotech-
stantially to the advancement of pharmaceutical nology companies in Germany. Overall, investment
innovation by bundling scientific expertise as well in innovation in the German pharmaceutical
as connecting academic and industrial players industry amounts to one fifth of sales. A substan-
in the field of drug development. In addition to tial share of pharma innovation in Germany is
the over 400 universities in Germany, numerous contributed by over 600 dedicated biotechnology
specialized research institutes – including the companies that invested over EUR 1.1 billion in
Fraunhofer Society, the Max-Planck-Society, the research and development in 2017. In the course of
Helmholtz Centres and the Leibniz Association – the global effort to develop vaccines and thera-
conduct world-class fundamental and applied peutics to tackle the Covid-19 pandemic, German
scientific research. In total, there are over 1,000 pharmaceutical and biotechnology companies
publicly financed research institutions and more have shown their strength: As of July 2020, there
than 500 pharmaceutical companies in Germany, were over 40 products in development. Some of
creating an innovation ecosystem that enjoys the research achievements made international
global acclaim. headlines, such as CureVac’s cooperation with
There are over Tesla for the production of an RNA vaccine and
1,000 publicly The Federal Ministry for Education and Research the fast-track designation for BioNTech’s vaccine
financed research has proclaimed the next ten years as the “National jointly developed with Pfizer.
institutions and decade against cancer” and correspondingly
more than 500 launched initiatives to prioritize oncology research Clinical Research
pharmaceutical over the coming years. The federal "High-tech Thanks to its high population, Germany is an
companies in Strategy 2025" also identifies infectious diseases attractive study location – particularly for orphan
Germany. as a focal point of activity over the next years. diseases and other indications where participant
recruitment is challenging. Main hotspots for
Innovation Ecosystem clinical research are major cities like Berlin and
In order to foster the translation of research out- metropolitan areas along the Rhine, Neckar, and
comes into successful products, the Go-BIO pro- Ruhr rivers. With 499 clinical studies initiated by
gram supports biotechnology start-ups in bringing the pharmaceutical industry in 2019, Germany
their inventions to market. Since 2005, 58 newly ranks among the five leading locations world-
established biotech companies have received wide – directly behind the USA, China, Spain and
support to grow into sustainable businesses. The the UK. The most important indication areas, in
Life Science Incubator (LSI) in Bonn and Dresden terms of the number of clinical studies, are oncol-
also helps scientists to bridge the critical gap ogy and inflammatory diseases – like asthma,
between a good idea and the proof of concept, Morbus Crohn and multiple sclerosis – followed
making further financing opportunities available. by cardiovascular and infectious diseases as well
Moreover, the LSI supports academics with out- as diabetes.
standing business ideas by providing them with
the entrepreneurship expertise required for their
value proposition to take off.

Over 15 start-up centers specifically dedicated to Number of Industry-sponsored Clinical

fostering emerging biotech/life science companies Studies 2019
can be found all over Germany. They provide lab
infrastructure and a supportive environment
2,352 Germany counts amongst the world's leading
for biotech entrepreneurs to bring their ideas to industry-sponsored clinical study locations.
market.

Industry Research
The pharmaceutical industry is known for its high 600 519 516 499 463
R&D intensity – and Germany is no exception. In
2018, around 12.5 percent of revenues were rein- USA China Spain UK Germany Canada
vested in R&D – the highest rate among all major Source: vfa 2020

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 Pharmaceutical Research
Landscape in Germany
Germany’s 16 federal states provide excellent incubators and local agencies that bundle
conditions for pharmaceutical research and biotech organizations in a single geographical
development. Across the country, research region – interact to create a world-leading
and development centers and biotechnology infrastructure for clinical trials.
clusters – made up of technology parks,

7.6

Schleswig-Holstein

R&D Locations : 1
7.5
Clinical Studies : 113 Mecklenburg Western-
Pomerania
Hamburg
Biotech Clusters: 1
R&D Locations: 1
Clinical Studies : 157
Bremen Biotech Clusters: 1 Berlin
Biotech Clusters: 1 R&D Locations: 6
Clinical Studies : 259
Niedersachsen
Biotech Clusters: 1
Clinical Studies : 133
Biotech Clusters: 1

Saxony-Anhalt Brandenburg

North Rhine-Westphalia Clinical Studies : 27 Biotech Clusters: 1

Biotech Clusters: 1
R&D Locations : 8
Clinical Studies : 401
Biotech Clusters: 5
Hessen Thuringia Saxony

R&D Locations : 7 Clinical Studies : 35 Clinical Studies : 200

Clinical Studies : 151 Biotech Clusters: 2 Biotech Clusters: 2
Biotech Clusters: 2
Rhineland-Palatinate

R&D Locations : 5
Clinical Studies : 78 For more information about
→
Biotech Clusters: 1 Germany's pharmaceutical
industry landscape please see
our interactive online map.
Saarland Bavaria

R&D Locations : 5 R&D Locations : 13

Clinical Studies : 78 Clinical Studies : 266
Biotech Clusters: 1 Baden-Württemberg Biotech Clusters: 4

R&D Locations : 5
Clinical Studies : 328
Biotech Clusters: 5

Note: R&D locations refer to vfa members.

Source: Germany Trade & Invest research, vfa 2020
9
 INVESTMENT CLIMATE

Business Location Germany

Europe’s Economic Hub of intellectual property protection and protection
Germany is the largest market in Europe. It is home from organized crime. The German legal system
to 16 percent of the EU’s population and consti- counts as one of the world’s most efficient and
tutes 21 percent of Europe's GDP (EU-28). After independent.
ten years of GDP growth and the recent economic
slowdown caused by the Covid-19 pandemic, cur- Business-friendly Tax Conditions
rent forecasts expect a swift recovery of the Ger- Germany offers one of the most competitive tax
man economy and positive GDP growth rates for systems of the big industrialized countries. The
2021 and subsequent years. The country’s economy average overall tax burden for corporations is just
is both highly industrialized and diversified – with below 30 percent. Significantly lower rates are
equal focus placed on services and production. available in certain German municipalities – up to
seven percentage points less – with the overall cor-
Top Investment Location porate tax burden as low as 22.8 percent in some
Germany has a welcoming attitude towards areas. Moreover, Germany provides an extensive
foreign direct investment (FDI). Europe´s largest network of double taxation agreements (DTAs)
market creates a large and stable customer base ensuring that double taxation is ruled out, for
Germany is one for investors. Germany's integration into the example, when dividends are transferred from a
of the world’s world economy allows companies to gain and German subsidiary company to the foreign parent
favorite invest- share knowledge, products and employees within company.
ment locations. a global network. With EUR 848 billion of FDI
stocks in 2019, Germany is a major destination World-class Infrastructure
of FDI flows. With state-of-the-art transportation networks
(road, rail, sea, and inland waterways) as well as
Sound and Secure Legal Framework a dense network of national and international
The legal framework for FDI in Germany favors the airports, Germany provides easy access to domestic
principle of freedom of foreign trade and payment. and international markets. Germany’s infrastruc-
According to the World Economic Forum, Germany ture excellence is confirmed by a number of recent
is one of the world’s best locations in terms of studies including the Swiss IMD’s World Competi-
planning and operating security. The country is tiveness Yearbook and various investor surveys
also one of the world’s leading nations in terms conducted by organizations like the World Eco-
nomic Forum (WEF) and Ernst & Young. The 2018
Logistics Performance Index of the World Bank
Quality of Infrastructure 2018 ranked Germany first worldwide for its logistic
proficiency, singling out Germany’s quality of trade
Rank Country and transport infrastructure. Accumulated in this
score for Germany are high marks for the quality of
1 Germany roads and air transport, excellent railroads and port
infrastructure, as well as its outstanding electricity
2 Japan
and water supply. As a truly global logistics hub,
3 Sweden more goods pass through Germany than any other
country in Europe.
4 Netherlands

Competitive Labor Costs

5 Austria
High productivity rates and steady wage levels
6 Singapore make Germany an attractive investment location.
Between 2009 and 2018 wages have risen in most
7 USA
European countries (EU-28), with the growth rate
8 UK averaging 2.23 percent per year. While some coun-
tries – particularly those in Eastern Europe – expe-
9 Switzerland rienced an annual increase of about 4 to 5 percent,
10 United Arab Emirates
Germany recorded one of the lowest labor cost
growth rates (2.18 percent) in the manufacturing
Source: World Bank 2018 sector within the EU. Highly flexible working prac-

10 Industry Overview 2021/22  |  gtai.com

tices such as fixed-term contracts, shift systems, Workforce in Germany by Level of Professional Education 2017
and 24/7 operating permits enhance Germany’s percent of total workforce
global competitiveness as a suitable investment
location for internationally active businesses.
Vocational college
Highly Skilled and Motivated Workforce graduates 10%
Germany’s excellent workforce is decisive to the
country’s high productivity rates. It comprises
over 44.6 million people – making it the largest Unskilled 18% Skilled craftsmen
European labor pool. More than 80 percent of the (dual education
apprentices) 50%
German workforce has received formal vocational
training or is in possession of an academic degree.
German labor flexibility is reflected in one of the University
highest employee motivation levels – exceeding graduates 22%
those of most leading industrialized nations. Ger-
mans also lose significantly less days per annum
to strike action than employees in other European Source: Federal Statistical Office 2019
nations.

Dual Education System

In order to secure the economy’s demand for highly with industry and the government, the German
qualified personnel and to meet industry needs, Chambers of Industry and Commerce (IHKs) and
Germany developed a dual system in vocational the German Confederation of Skilled Crafts (ZDH)
training – unique in combining the benefits of ensure that exacting standards are adhered to,
classroom-based and on-the-job training over a guaranteeing the quality of training provided
period of three years. In close cooperation across Germany.

Pharmaceutical Associations
ups. The members benefit from a wide range of services
BAH – German Medicines Manufacturers' Association and support. Current topics are discussed in more than
The BAH represents the interests of about 400 member 50 working groups. By providing information to decision-
companies, which create about 80,000 jobs in Germany. makers at federal, state, and EU level, the BPI helps to
Globally operating medicines manufacturers are as shape the social and legal framework conditions of the
involved in the manifold activities of the association as industry.
the broadly represented medium-sized businesses. BAH → www.bpi.de
member companies produce nearly 80 percent of the pre-
scription-free medicines sold in German pharmacies and vfa – German Association of Research-Based
almost two thirds of the prescription medicines as well Pharmaceutical Companies
as a major part of the substance-based medical devices. The vfa is the trade organization of research-based phar-
BAH advocates for secure and responsible self-medication maceutical companies in Germany. The forty-five member
through professional medical and pharmaceutical advice. companies of the vfa are among the leading research-
→ www.bah-bonn.de based pharmaceutical companies worldwide. They guar-
antee therapeutic progress in pharmaceuticals and ensure
BPI – German Pharmaceutical Industry Association high-quality pharmaceutical therapy. Together with their
With 70 years of experience in drug research, develop- more than 100 subsidiaries and affiliated companies, they
ment, authorisation, manufacturing and marketing, employ nearly 80,000 people in Germany. More than
BPI represents the pharmaceutical industry with all its 18,000 of their employees work in the field of research
variety. The about 270 member companies comprise the and development of pharmaceuticals.
whole spectrum of the pharmaceutical industry, ranging → www.vfa.de
from multinational corporations to SMEs and start-

11
 INVESTMENT CLIMATE

Financing & Incentives

in Germany
Attractive Incentive Programs Project Financing by Bank Loans
Incentives programs in Germany are available Debt financing is a central financing resource
through different public funding instruments and and the classic supplement to equity financing
for different funding purposes. The individual in Germany. It is available to companies with a
funding requirements may, for example, result from continuous cash flow. Loans can be provided to
investment projects, research and development finance long-term investments, working capital
activities, personnel recruitment, working capital and operational costs (R&D, personnel) and for
needs or other specific purposes. The different bridging temporary financial gaps. Besides offers
incentives instruments including grants, loans and from commercial banks, investors can access pub-
guarantees are generally available for all funding licly subsidized loan programs in Germany. These
purposes and can ordinarily be combined; thus programs usually offer loans at attractive interest
matching the different business activity needs at rates in combination with repayment-free start-
different development stages of the company. up years, particularly for small and medium-sized
Please visit companies. These loans are provided by the KfW
our website for Project Financing by Private Equity federal development bank and also by regional
more incentives Technologically innovative start-ups in particular development banks.
information: have to rely solely on financing through equity
www.gtai.com/ such as venture capital (VC). In Germany, appro- Investment and R&D Incentives
incentives priate VC partners can be found through the When it comes to setting up production and
Bundesverband Deutscher Kapitalbeteiligungs- service facilities, investors can count on a number
gesellschaften e.V. (BVK – German Private Equity of different public funding programs. These
and Venture Capital Association). Special confer- programs complement investment project financ-
ences and events like the German Equity Forum ing. Most important are cash incentives provided
provide another opportunity for young enter- in the form of non-repayable grants applicable
prises to come into direct contact with potential to co-finance investment-related expenditures
VC partners. Public institutions such as develop- such as new buildings, equipment and machinery.
ment banks (publicly owned and organized banks R&D project funding is made available through a
which exist at the national and state level) and number of different incentives programs targeted
public VC companies may also offer partnership at reducing the operating costs of R&D projects.
programs at this development stage. Programs operate at the regional, national, and
European level and are wholly independent from
investment incentives. At the national level, all
Incentives in Germany R&D project funding has been concentrated in
the High-Tech Strategy to push the development
of cutting-edge technologies. Substantial annual
Funding purposes funding budgets are available for diverse R&D
projects.

Working Research & Specific

Investments
Capital Development Purposes
Personnel Labor-related Incentives
After the location-based investment has been
initiated or realized, companies can receive fur-
ther subsidies for building up a workforce or the
Financing supported by any of the
following public funding instruments implementation of R&D projects. Labor-related
(combinations of instruments usually possible) incentives play a significant role in reducing the
operational costs incurred by new businesses.
Public funding instruments
The range of programs offered can be classified
into three main groups: programs focusing on
recruitment support, training support, and wage
Equity Mezzanine
Grants Loans Guarantees subsidies respectively. Labor-related incentives
Capital Capital
play a significant role in reducing the operational
costs incurred by new businesses.

12 Industry Overview 2021/22  |  gtai.com

SUCCESS STORIES

Germany – A World-Class
Pharmaceutical Location
Roche – Covering the Complete Value Chain at four locations in Germany, with half located in
Founded in 1896, the Swiss-based Roche Group is the Berlin-Brandenburg region and the other half
active in over 100 countries and employs about in Baden-Württemberg. Germany’s position as
98,000 people worldwide in 2019. With more than a world-leading pharmaceutical production site
30 research and development (R&D) locations with a highly qualified workforce and synergies
worldwide, Roche continues to explore better and with other industries – including the mechanical
sustainable ways to prevent, diagnose and treat engineering sector – provides a major location
diseases. Roche has four strategically important advantage to Takeda. The two production sites in
sites in Germany – Grenzach-Wyhlen, Ludwigsburg, Singen and Oranienburg play an important role in
Mannheim, and Penzberg – which reflect the entire the company’s global manufacturing and supply
value chain of the Roche Group from R&D to pro- network. Almost 2,000 people are employed at
duction and patient care. the two production facilities producing high-qual-
ity pharmaceuticals for more than 100 countries
Between 2015 and 2017, Roche invested around worldwide.
EUR 600 million in its Penzberg biotechnology site
to meet growing global demand for active phar-
maceutical ingredients and diagnostic tests. With
“Germany is a world-class location for pharmaceu-
more than 5,000 employees the site is the com-
pany’s largest biotech research, development and tical production. Our products can only be made
production center worldwide. In May 2020, Roche as part of a sophisticated production process that
Chairman Christoph Franz announced additional guarantees the highest level of quality. Germany
investments of more than EUR 400 million in Penz-
berg to produce antibody tests for the new corona-
provides us with this as well as a highly trained
virus and further R&D activities. The group is also workforce and excellent infrastructure.”
investing in new business areas including digital Heidrun Irschik-Hadjieff
health solutions. In 2020, Roche established its RoX General Manager Takeda Pharma Vertrieb GmbH & Co. KG,
Health offshoot in Berlin to provide financial and Spokesperson & Member of the Management Board Takeda GmbH
regulatory support to innovative healthcare start-
ups. Germany plays an important strategic role for
Roche in both innovation and market terms, with
the country driving many of the group’s innova- Takeda has invested more than EUR 200 million
tions and playing a leading role in European market in its German production facilities in recent years,
harmonization in a post-Brexit landscape. increasing output of its Oranienburg site by 50
percent in 2017. The state of Brandenburg provided
Roche’s strong presence in Germany provides the funding of EUR 23 million on top of Takeda’s own
group with access to a strong healthcare market, investment of EUR 100 million in Oranienburg. More
an innovative R&D landscape as well as significant than six billion tablets and capsules are produced at
opportunities and benefits within the European the facility annually – with 98 percent of production
single market. Germany also constitutes the Roche destined for export markets. In 2019, the company
legal entity for all EU pharma licenses. also opened its first worldwide dengue vaccine
production in Singen. Takeda’s commercial organiza-
Takeda – Providing a Production Advantage tion in Berlin employs around 500 people. The Berlin
Takeda is a global biopharmaceutical company location allows Takeda to network with all impor-
headquartered in Japan. Specializing in rare dis- tant health economy stakeholders – from industry
eases, gastroenterology, oncology, neuroscience, associations and patient organizations to health
plasma-derived therapies and vaccines, Takeda is insurance companies and health policymakers. The
the largest pharmaceutical company in Japan and German capital region counts as one of Europe’s
one of the world’s top 10 pharmaceutical compa- most important healthcare industry locations,
nies by revenue. Established in Osaka in 1781, the boasting a unique concentration of university and
company has been active in Germany since 1981. non-university research institutions, clinics and
Takeda currently employs around 2,500 people life science companies.

13
 OUR SERVICES

Germany Trade & Invest

Helps You
Germany Trade & Invest’s teams of industry ex- Our team of consultants is at hand to provide you
perts will assist you in setting up your operations with the relevant background information on Ger-
in Germany. We support your project management many’s tax and legal system, industry regulations,
activities from the earliest stages of your expan- and the domestic labor market. Germany Trade &
sion strategy. Invest’s experts help you create the appropriate
financial package for your investment and put you
We provide you with all of the industry informa- in contact with suitable financial partners. Our
tion you need – covering everything from key incentives specialists provide you with detailed
markets and related supply and application sec- information about available incentives, support
tors to the R&D landscape. Foreign companies you with the application process, and arrange
profit from our rich experience in identifying the contacts with local economic development corpo-
business locations which best meet their specific rations.
investment criteria. We help turn your require-
ments into concrete investment site proposals; All of our investor-related services are treated
providing consulting services to ensure you make with the utmost confidentiality and provided
the right location decision. We coordinate site free of charge.
visits, meetings with potential partners, universi-
ties, and other institutes active in the industry.

Our support services for your investment project

Strategy Evaluation Decision & Investment

Project management assistance

Business opportunity Project partner Joint project manage- Coordination and sup-
Market entry
analysis and market identification and ment with regional port of negotiations
strategy support
research contact development agency with local authorities

Location consulting/Site evaluation

Identification of
Cost factor Site Site visit Final site
project-specific
analysis preselection organization decision support
location factors

Support services

Facts on incorporation Market intelligence Financing & incentives Information on visa Contact to financial
and taxation and statistics consultancy options and labor law partners

14 Industry Overview 2021/22  |  gtai.com

CONTACT

Investor Consulting
Julia Albrecht is responsible Dr. Gregor Kemper is the
for the pharmaceutical and project manager responsible
consumer health industry for the biotechnology and
in Germany Trade & Invest’s biopharmaceutical industry
Chemicals & Healthcare team. in Germany Trade & Invest’s
Julia joined GTAI in 2016, investor consulting divi-
and has already successfully sion. With chemistry and
supported numerous invest- pharmacy degrees as well
ment projects of international healthcare companies as consulting experience in the pharmaceutical
expanding to Germany. She has gained extensive industry, he helps companies plan their opera-
international academic and work experience in the tions in Germany and make well-informed ex-
US, Denmark, Spain and Chile and has a master’s pansion decissions.
degree from Copenhagen Business School.

For questions on how to establish your business in Contact us at our headquarters in Berlin:
Germany please contact Julia Albrecht Germany Trade & Invest
[email protected] or Dr. Gregor Kemper Friedrichstraße 60
[email protected]. 10117 Berlin
Germany
For more information about the pharmaceutical T +49 30 200 099-555
industry in Germany, please visit our website: F +49 30 200 099-999
www.gtai.com/pharma

Imprint
Picture Credits
Cover: gettyImages/PhotoAlto/Sigrid Olsson
Publisher Page 15: Julia Albrecht/Illing & Vossbeck Fotografie
Germany Trade and Invest Gregor Kemper/Illing & Vossbeck Fotografie
Gesellschaft für Außenwirtschaft
und Standortmarketing mbH Notes
Friedrichstraße 60 All rights reserved ©Germany Trade & Invest,
10117 Berlin October 2020
Germany
Reproduction, in whole or in part, only permissible
Executive Board with express prior authorization. All market data
Dr. Jürgen Friedrich, Chairman/CEO provided is based on the most current market
Dr. Robert Hermann, CEO information available at the time of publication.
Germany Trade & Invest accepts no liability for
Authors the actuality, accuracy, or completeness of the
Julia Albrecht, GTAI; Dr. Gregor Kemper, GTAI information provided.

Editor Order Number

William MacDougall, GTAI 20858

Layout
Danielle Röbbenack, GTAI

Print
Kern GmbH, 66450 Bexbach
www.kerndruck.de

15
About Us
Germany Trade & Invest (GTAI) is the economic development agency
of the Federal Republic of Germany. The company helps create and
secure extra employment opportunities, strengthening Germany as
a business location. With more than 50 offices in Germany and abroad
and its network of partners throughout the world, GTAI supports ­
German companies setting up in foreign markets, promotes Germany as a
­business location and assists foreign companies setting up in ­Germany.
All investment services and related publications are free of charge.

Germany Trade & Invest Germany Trade & Invest

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Friedrichstraße 60 Villemombler Straße 76
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