Pharmaceutical Majors Cut Investments in Germany

Written by Martin Lynch, European News Editor for IIR News Intelligence (Sugar Land, Texas)

Summary

Major healthcare reforms in Germany are being cited by pharmaceutical majors Eli Lilly and Boehringer Ingelheim for cutting their planned investments by more than US$2 billion.

Germany Faces Pharma Rebellion

Pharma majors Eli Lilly and Boehringer Ingelheim are cutting more than US$2 billion from proposed investments in Germany due to controversial healthcare proposals by the government. 

Eli Lilly has confirmed that it is cutting its planned investment of 2.3 billion euro (US$2.7 billion) in half at the under-construction manufacturing facility in Alzey. Due to come online next year the facility will produce injectable GLP-1 drugs Zepbound and Mounjaro, but Lilly is scaling back its capacity and it will now employ 500 people instead of the original 1,000. Boehringer Ingelheim is reducing its domestic investment by 900 million euro (US$1 billion) on projects planned from 2027 to 2030. A spokesperson told Fiercepharma that "the decision reflects the growing economic uncertainty and lack of investment predictability in the  pharmaceutical sector in Germany." According to Industrial Info Resources dat,a there are four active projects at Alzey worth almost US$2.7 billion and two active Boehringer projects worth more than US$400 million underway. 

Industry Reaction 

"Given the current policy direction, we can no longer commit to the full vision for Alzey and expect to reduce the scope of the project by 50% or more versus the original announcement," Lilly told Fiercepharma. "The decision on whether to install the remaining capacity--and make Alzey the site we originally envisioned--is on hold until the Federal Government restores the stable, predictable economic framework that a long-term investment of this size requires." Speaking to Handelsblatt newspaper, Lilly chief executive officer David Ricks said: "Germany will fall to last place among European markets in terms of supporting our industry."

Controversial Government Plans

The German government is backing proposed legislation that will lower healthcare spending, tighten drug reimbursements and reduce some healthcare benefits. The proposed introduction of a 'dynamic manufacturer rebate' is the main issue for pharma companies. They already pay statutory rebates and negotiate prices. The dynamic manufacturer rebate will sit on top of that and act as an automatic cost-control mechanism for pharmaceuticals. Now, when Germany's statutory health insurance (GKV) costs grow faster than its revenue, pharmaceutical discounts will be increased automatically to cover the difference. There has been a major reaction from the pharma sector, led by the spending cuts of Eli Lilly and Boehringer Ingelheim and others. 

Oliver Kirst, Chairman of the German Association of the Pharmaceutical Industry (BPI), said: "The planned dynamic manufacturer's discount would mean the end of planning certainty. Under such conditions, an investment becomes an incalculable risk." There are unconfirmed media reports that behind closed doors the German government is planning to scrap the dynamic manufacturer rebate following the backlash and potential loss of billions of euro in investment. Industrial Info Resources is tracking 228 pharmaceutical and biotech projects in Germany worth more than US$23 billion in investment. 

Key Takeaways

• Germany faces losing more than US$2 billion in investment as pharma companies react to planned government rebate cuts.
• Eli Lilly and Boehringer Ingelheim have announced cuts in excess of US$1 billion each.
• Industrial Info Resources is tracking 228 pharmaceutical and biotech projects in Germany worth more than US$23 billion in investment.

About Industrial Info Resources
Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, Industrial Info Resources is tracking over 250,000 current and future projects worth $30.2 Trillion (USD).