C&EN: TODAY'S HEADLINES - GERMAN REFORMS AFFECT DRUG R&D

September 1, 2003
Volume 81, Number 35
CENEAR 81 35 p. 8
ISSN 0009-2347

REGULATION

GERMAN REFORMS AFFECT DRUG R&D
Firms put expansions on hold because of proposed health care changes

Pharmaceutical producers Merck and Pfizer are changing their plans for R&D in Germany. Their actions come in response to the country's proposed health care reforms that seem certain to cut into pharmaceutical companies' profits.

8135notw6_pfizer

CHANGING PLANS Pfizer's R&D site in Sandwich, England, will expand as German R&D operations are consolidated.
PFIZER PHOTO

Merck has scrapped plans to build an R&D center in Munich that would have employed about 150 people. Pfizer will consolidate its 150-person German R&D operations, part of the Pharmacia acquisition, with its European central R&D base in Sandwich, England. Other major drugmakers are also putting on hold plans to expand R&D in Germany, the third-largest pharmaceuticals market worldwide after the U.S. and Japan.

The firms are reacting to proposed German health care reforms that would nearly triple the contribution that companies have to pay insurers--from 6% of their sales on products in Germany to 16%. Under the national health care system, insurers pay for consumers' prescription drugs and get a 6% rebate from manufacturers to help contain costs; the remainder is paid by the government.

Moreover, the government is proposing price caps for medicines protected by patents. Together, the actions would enable the government to chop more than $1 billion from its health care budget.

Walter Köbele, chairman of Pfizer Deutschland, says his company would see $160 million cut from company profits in 2004 as a result of the proposed changes. He cautions that a decrease in drug industry investment in Germany will be an unintended side effect of the legislation.

"The necessity of structural reform is extremely urgent," Köbele says. However, "what is needed is a complete rethink--innovative drugs must finally be seen as an investment in the future of the patient and the system, and not as costs."

Top