German Pharma in good health, despite economic difficulties

German's pharmaceutical industry has proved to be a bastion of stability during the economic downturn. Previous export success stories such the chemicals, vehicle manufacturing and electrical appliance industries were hit hard by the global recession but foreign pharmaceutical sales held up comparatively well.

Indeed, it was the sector with the smallest dip in foreign sales in 2008. Exports to Asia, notably Japan, continued to expand while those to the euro-zone stayed steady. The Eastern European and US markets were far less satisfactory.

A study by Prognos AG, commissioned by the German research-based drugmakers group the VFA, shows that pharmaceutical's share of overall exports has expanded rapidly over the past few years, from 2.3% in 2000 to 4.8% last year and a projected 5.6% in 2015. Pharmaceutical exports more than quadrupled to 45.2 billion euros ($67.3 billion) between 2000 and 2008, while total German exports doubled over this period. Above-average growth is also being pencilled in for pharmaceuticals in the years to 2015. Foreign drug sales should rise by an annual 6.3%, compared to 3.6% for overall exports.

As far as the VFA is concerned, these figures underline the pharmaceutical industry's key role in the economy, particularly as a source of stability during the economic crisis. This study also backs up a recent government report concluding that pharmaceuticals are the main driver of export growth for Germany's overall health sector. Half of the latter's exports comprise drug products.

Companies expect stability or growth in 2010

A recent VFA survey of its members also bodes well. 80% of VFA members expect stable or growing turnover next year. Those expecting a fall cite the global crisis, patent expiries, fixed drug-price regulations and [bulk, with health service?] discount deals as key problems. Over 60% of companies, meanwhile, plan to boost hiring or keep it steady next year; 37.5% intend to cull jobs.

R&D expenditures should be stable too. 16% plan to cut budgets in this area, 55% expect to maintain them at current levels and 29% will increase them. Of biotechnology and genetic engineering firms, 38% plan to increase R&D spending and the rest expect to keep it steady; not a single company plans to cut. Overall R&D expenditure rose by 6.9% to E4.84bn last year.

The VFA's chairman, Wolfgang Plischke, notes that being open to innovation is a key strength of the German health care market; patients have immediate access to approved drugs and drug companies rapidly develop a foothold in Europe's most important market.