Indian firms rethink German investment

Indian pharmaceutical firms have reportedly postponed plans to acquire German drug making companies, due to the anticipated drop in valuation of many such groups. The news follows the new reference pricing bill, recently passed by the German government. The bill requires that a maximum reimbursement price is set for pharmaceuticals, with patients paying any excess if a manufacturer sets the retail price above the reference. The practice, which initially appears to effect patients, is designed to force manufacturers to reduce prices.

Products will only be exempt from the reference pricing scheme if they display clinical superiority to currently established therapies. Generic drug manufactures are likely to be the firms most effected by the new controls because generic products are unlikely to demonstrate any therapeutic advantage over existing products, and therefore will be subject to maximum pricing.

The German pharmaceutical market, the world's third largest and the biggest in Europe, is seen as an attractive target for non-European firms which wish to establish a presence. In recent months, Indian companies such as Ranbaxy, Wockhardt, Zydus Cadila and Nicholas Piramal were among the generic drugmakers that had been seeking entry into the German market via corporate acquisitions and mergers (Marketletters passim).