Podcast INTO GERMANY!
Episode 16: A Shot in the Arm
- March 2024 -
Legislative changes are opening a host of new opportunities for pharma and biotech companies in Germany. Eli Lilly and Company are taking advantage.
Mar 01, 2024
In late 2023, American pharma giant Eli Lilly and Company announced plans to build a $2.5 billion production facility in western Germany. It’s one of the largest investments in the sector ever. The plant will at first produce its new tirzepatide drugs for diabetes and obesity. Demand is expected to soar. The major expansion comes as Berlin is reforming the rules governing German pharma, with a key aim of boosting drug production within the country.
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Our Guests
Gerd Kräh is associate VP of government affairs with Eli Lilly Deutschland. He is one of the most experienced media and political affairs executives in the German pharmaceutical industry.
Marcus Schmidt is director of the chemicals and health division at Germany Trade & Invest. He has worked as an advisor to the German government on reforming policies regulating the pharmaceutical sector, and helped Eli Lilly and Company find a location in Germany to build one of its largest plants outside of the United States.
Transcript of this episode
| This transcript was partly generated automatically, text errors are possible |
Karl Lauterbach Germany's Health minister:
"In the long term, we of course have to make sure that the production of pharmaceuticals comes back to Europe. We will start with antibiotics. Then cancer treatments. Anyone who wants to get exclusive deals with German health insurers, will have to demonstrate that at least half of their production is in Europe."
Presenter:
Hello and welcome to Into Germany, the German business podcast, brought to you by Germany’s international business promotion agency, Germany Trade & Invest. I’m Kelly O'Brien. We just heard German Health Minister Karl Lauterbach announcing new government policies for the pharmaceutical sector last summer. The reforms were necessary to address shortages for many medications that resulted from bottlenecks in global pharmaceutical production and other factors. Germany, the most populous country in Europe and home of many major drug companies, risked running short of medicine.
Fast forward a few months later, and US pharma giant Eli Lilly and Company announced that it would invest two-point-five billion dollars into a state-of-the-art production facility in western Germany. It is the biggest investment the company has ever made in Europe.
Gerd Kräh, Lilly Government Relations:
" To be honest, most of the business of the pharmaceutical industry is on both sides of the Atlantic. So for a variety of reasons, it was more than time to also have a major economic footprint for our company and covering our industry here in Germany."
Presenter:
That was Gerd Kräh, a government affairs executive at the U-S pharma company Eli Lilly and Company. They decided late last year to build a huge pharmaceutical plant in the town of Alzey, in western Germany.
Lilly will produce its Mounjaro drug to fight diabetes and obesity in the new plant.
And it comes precisely as Germany’s health minister wants to boost domestic production of pharmaceuticals.
We'll hear more about Germany's drive to reform the pharmaceutical sector later from Germany Trade and Invest’s health director Marcus Schmidt.
But first let's return to Gerd Kräh. Gerd, why don't you tell our listeners first a little about Lilly, and what you have been doing in Germany so far...
Gerd Kräh:
"We are a US headquartered company. We are coming from Indianapolis. Our mother company has been founded way back in 1876. And in Germany we have been here since the 60s or the last century. So, for quite a while, we've always have been in the state of Hesse in Germany. So currently we are in the wonderful city of Bad Homburg, that is very close to Frankfurt, in the Rhine Main area. And basically, Eli Lilly and Company serves patients with research-based pharmaceuticals. We don't really have any generics or in direct-to-consumer business. We are mainly focused on severe diseases. So, we have key focus areas in diabetes and obesity. We are also active in neuro psychiatry especially. One of the focus areas is Alzheimer's disease and dementia. But as well as in other autoimmune diseases and cancer, oncology is also a very relevant part of our business."
Presenter:
So Eli Lilly is now ramping up its presence in Germany, and in Europe, in a big way, with that 2.5-billion-dollar investment. Can you give us some insight into the strategy behind the decision?
Gerd Kräh:
"Well, bottom line, the story is that due to our portfolio, especially if we look at diabetes and obesity, there's a huge demand worldwide for our products. Which is great for us, but we're at the end of the day, in consequence, this means if we want to serve patients' needs, we need to build up our production footprint. And the idea was simply also in terms of sustainability and resilience, that we are not just invested in the US itself, but all around the world. And so, we were looking for a nice place for an investment and you name it, it's, uh, huge investment. It's a $2.5 billion investment. And so, Germany inside the European Union, is still a highly attractive place for us from a perspective of a pharmaceutical industry, because Germany has quite a heritage so known in the former times as the cradle of the pharmaceutical industry was big players as you may be aware of. And so at the end of the day, if you are cutting down the decision tree, we thought Germany is a good place for investments and therefore we went to G-T-A-I and asked for their support. If it's possible to find a proper place and this is where we are right now."
Presenter:
So you mentioned GTAI there. Tell us more about how that worked.
Gerd Kräh:
"Yeah, that was also new. Um. At the end of the day, a new experience for us as well as you may imagine, because at first was the decision, the general decision, to take an investment in Germany. And from there on, you need to say, okay, how do you proceed? And then we came to learn about that. There is this Germany Trade and Invest. So the public agency that is working for the German government, and we found out that they were very helpful in terms of using their database, their knowledge and their expertise to find our requirements in terms of what would be a proper location, in which area, which size of land do we need, what is an appropriate and the framing by time. So, we went to GTAI, we exchanged views on that, and at the end of the day, GTAI proved to be a kind of a very smart and highly professional interface in pulling all these data facts together and provide us with a couple, and a couple is probably not the right word, so with many proposals and ideas so that we could get early on, a good sense and a feeling of what real opportunities in terms of places to invest, finding a proper location in Germany. And the final decision then, as you know was Alzey. But the whole process coming from a broad variety of interesting places to at the end of the day, the decision for Alzey was in close cooperation with the guys from GTAI."
Presenter:
Germany got quite a scare last year, when global supply chain issues related to the Covid pandemic and other factors contributed to shortages of some vital pharmaceuticals. The government in Berlin then announced reforms designed to encourage pharmaceutical firms to produce here. So that must have been played a role...
Gerd Kräh:
" I mean, for sure. I mean, that was a very powerful sign from German government. I mean, the intention as we got it was with this paper of the so-called former strategy that the German government is keen on attracting investments in innovation to Germany. And so, for sure that was encouraging for us to see. And at the end of the day, that's clearly helped to make a, sound and positive decision for Germany. As we saw in the current government is willing to discuss how investments are being made attractive to Germany. This for sure, at that point of time, a nice coincidence. And so it was for sure supportive and not contradictory to our decision to the investment in Alzey."
Presenter:
Could you give us some specific ideas about how Germany's pharma reforms will benefit people in your industry though?
Gerd Kräh:
"Well if I look at the paper the government sent out, it's all about general focus areas, like improvements in the way clinical studies are going to be facilitated in terms of data security but also some, reimbursement decisions so that there is more planning, planning certainty for our industry. Which is always helpful, as you know, if it comes to long-term investments. That there is some kind of reliability of the environment in the framework. And encouragingly, just to name a last example in the paper, was that Germany takes a clear stand on the relevance of intellectual property rights. Which also is, for us, highly important because as I laid out before, we are really completely dedicated to research-based innovations. So we are not diversified with generics and so on. So clear and convincing statements on intellectual property rights is key, because this is the heart of our business."
Presenter:
You already have many plants in Europe. But this will be the largest and employ up to 1,000 people I believe. And the focus will be on diabetes and obesity drugs, including Mounjaro and the injection pens to administer them...
Gerd Kräh:
"Well, as I said, the focus is right now really on a high demand, especially on this drug. But the design of our new production site will be what we call the incretin portfolio. So it's mainly about this drug but drugs in that class in general. Exactly as you said, it's a parenteral drug. So injectables. It's not about tablets. So it's quite a difficult production which we will set up. But this is short term. What will be produced mid to long term? I think that will depend upon what's coming out of our pipeline. But for the time being, it's injectable. It's the incretin platform. And first and foremost, it is about the drug you mentioned."
Presenter: The "incretin platform"; by that you are referring to the molecule tirzepatide. Sold by your company as Mounjaro for diabetes, and Zepbound for obesity treatments. Demand is soaring, right?
Gerd Kräh:
"As we know, this drug, is on the one hand relative for to treat diabetes. And here we see a lot of good studies we have in place, but also in this world to treat obesity. And as you know, obesity is something that we had not many alternatives to treat in the past. And there is a higher demand. So for us, it's much more important that this drug be used in a very proper way with medical background. Because it's not a lifestyle drug, and we don't want to be perceived as a lifestyle drug. Nevertheless, if you have and if you have a look around the globe, there are lots of people who are suffering from obesity. And we know that obesity is one of the key root causes for many diseases, not just diabetes, but other diseases as well. So we anticipate that a drug that can be used and has the label to treat obesity will have a certain demand.
Presenter:
Well, thanks for that Gerd Kräh, associate V-P for government affairs for Eli Lilly and Company here in Germany, where the company hopes to break ground on a major new production facility pending final approvals this year.
We'll have more on Lilly's deal in Germany after the news--and more on Germany's pharma sector-- when we speak with Marcus Schmidt. But first, let's look at some of the stories making headlines on Germany's business scene.
Nokia News
Finnish telecommunications company Nokia is investing 360 million euros in chip design in the southern German cities of Ulm and Nuremberg. The aim is to develop chips for future 5G-Advanced and 6G mobile systems, so that they will use less electricity. The initiative is part of the EU’s “Important Projects of Common European Interest” program for microelectronics and communication technology projects.
Top Performer
Germany’s digital industry organization Bitkom predicts that the German information technology and communications market will grow by 4.4 percent in 2024. That’s four times or more as much as the German GDP as a whole, according to some GDP forecasts. Last year, the industry grew by two percent, reaching 215 billion euros, according to Bitkom’s findings. Factors driving growth are the increasing popularity of artificial intelligence, working from home offices, and the greater demand for cybersecurity.
Staying with things digital, Ready to Go
The International Monetary Fund’s “Artificial Intelligence Preparedness Index” ranked Germany third among countries most prepared for A-I
That was behind Singapore and the United States. The market value of A-I in Germany is projected to be 11.7 billion euros in 2024. It’s expected to grow annually by more than 15 percent between now and 2030.
Capital Injection
Industry organization BIO Deutschland says that German biotech took in 1.08 billion euros in increased capital and venture capital last year. This marked an upturn from 921 million euros in capital inflow in 2022. The standout performer in the sector last year was Isotope Technologies Munich, a privately financed biotech company that raised 255 million euros. It specializes in radioactive medications for treating cancer.
And finally, speaking of injections, In Good Shape
In more positive news for Eli Lilly and Company, its injectable - Mounjaro - has been cleared for use in Germany to fight obesity. Analysts say the market for this medication could reach 20 billion euros. And some predict that the world turnover for anti-obesity drugs may hit 100 billion DOLLARS in the years to come.
Presenter:
And that brings us back to the German pharma sector. We heard before from Lilly’s Gerd Kräh about his company’s plan to build a state-of the art production facility in Germany, and how that fits in with Germany's goal of attracting more drug producers to reduce dependency on suppliers outside of the country.
Now we are joined by Marcus Schmidt, chemicals and health director at Germany Trade and Invest. Marcus was in the loop on Lilly's decision to build the plant for its diabetes and obesity treatments in Germany. He’s also served as an advisor to German Chancellor Olaf Scholz on pharmaceutical policy.
Hello Marcus, it seems like Germany's pharmaceutical sector is getting a proper shot in the arm. But it’s already huge right?
Marcus Schmidt:
"Germany is the fourth largest pharmaceutical market worldwide, after the US, China and Japan. And that indicates it's by far the largest market within Europe. Um, now, we don't have the final numbers for 2023 yet, but based on the first three quarters, we estimate that sales were about €59 billion last year. So just shy of 60. Um, now, of course, you know, Germany is the most populous country in Europe. But there's more than that because, you know, only because the drug is being approved by the European authorities does not mean it's being made available in this country. And that's because health care budgets are simply limited. So when you look at the numbers, uh, the number of medications available per country, again, Germany comes out on top. And that's a major factor. And final point. Medications are made available very quickly in Germany only takes about 50 days on average from approval until a patient actually has access. Um, while the EU average is about 500 days, so ten times as long. And that's because in Germany there's a parallel process for price negotiations, while in most other countries they first negotiate about prices and then decide whether to introduce a drug or not."
Presenter:
So what went wrong that Berlin had to scramble to revise pharmaceutical policy?
Marcus Schmidt:
"There were basically two major concerns. First of all, there had been a few cases of shortages of pharmaceutical products in recent years, including, um, you know, some really widely used medications for children. And, uh, uh, the reason for the shortages was, you know, some had to do with interrupted supply chains. When you think back about the pandemic and in other cases, prices were set so low that other markets simply had a higher priority when there was limited supply. So either way, shortages of critical drugs are simply not acceptable. That's one concern. The other concern is that Germany was slowly losing ground compared to other countries. When you look at, um, the number of clinical trials conducted especially by, um, by private sector companies via clinical trial, it's important that Germany is not just a major market, but a leader in research and development, also production. Companies in Germany spent more than €8 billion alone on the development of new drugs each year. And, um. Exports exceed more than 100 billion. Um, so it's a huge economic factor. And the government simply wanted to make sure that Germany remains competitive and stays on top."
Presenter:
At the top of the podcast, German Health Minister Karl Lauterbach said bringing production back to Germany and to Europe was one of the key goals of Berlin's new pharma strategy. The others?
Marcus Schmidt:
"The national strategy includes more than 40 measures aimed at improving Germany's competitiveness. First, I would say, you know, there are measures to simplify and accelerate the development and approval of pharmaceuticals. Um, of course, without sacrificing safety or quality. You know, we talked about clinical trials. Example would be, you know, when you conduct clinical trial trials in several states, you have to deal with multiple ethics committees, for example, data protection officers. So this process is simply streamlined, and bureaucracy is being reduced. So the process is faster, easier, and less expensive. This is one example. Um, now another set of measures aims at the use of data. Germany has a tremendous pool of health data, but so far it's not really accessible. Um, and this luckily is about to change. So. Now, of course, we're talking about anonymous data here. Uh, you know, none of this health data can be tracked back to any individuals, but, um, this can really be a game changer. Other countries have served as a great example. They make the data available, too. But when you think about Germany's size and the quality of data. This can really make a huge difference in the development of new innovative drugs. And I would say also for more personalized medicine, you know, that, uh, you know, all drugs have side effects. So you want to make sure the right patients get the right kind of medications. Um, so people receive better treatment and suffer from this, uh, side effects. Yeah. So luckily in this, um, area, legislation is already underway, and, uh, hopefully we won't have to wait for too long. And then there are, um, other incentives to stimulate more research and development in general, as well as production in Germany. And, uh, finally, there are also mechanisms, uh, to evaluate and fine tune the price settings, uh, to avoid shortages, as we talked about earlier."
Presenter:
We just heard from Gerd Kräh at Eli Lilly and Company about how those reforms helped the company choose Germany for their 2.5-billion-dollar plant. He also said your agency, Germany Trade and Invest, played a role.
Marcus Schmidt:
"Usually companies you know see our website and then they contact us. And in some other cases we may reach out to them when we notice that companies are able to expand on. But this case was a little different. In this case the CEO of Eli Lilly, David Ricks, was visiting Berlin with a group of other CEOs, and they had some meetings with government officials and, uh, Germany Trade and Invest was invited to one of them at the chancellery. So after the meeting, Mr. Ricks approached me and, uh, he shared that they were considering setting up a new production facility in Europe. So we exchanged cards, and soon after, uh, we were in contact with, uh, get Cray and, uh, the site selection team of Eli Lilly in the US. Now how did we assess them specifically? You know, I cannot go into all the details. That's more up to Eli Lilly, but, um, I would say the main service was to help in the site selection process. Uh, you know, they had very specific requirements, not just for the size of property, but logistics, utilities, workforce availability, timelines that had to be met, uh, for start of construction sort of operation. Um, so we worked very closely with our local partners on a state and regional level and, um, evaluated possible sites. There were probably about, you know, 60 sites we looked into in more detail until we found a really good match. Um, so in reality, it's a little bit more complex, but that's I would say that's in a nutshell."
Presenter:
So Lilly says the new German plant is one of its biggest investments outside of the United States. How does that stack up in Germany though? This is huge even by German standards, right?
Marcus Schmidt:
"Um, yeah, that's a really good question. I'm not sure if it's the largest single investment in a new production facility in the pharmaceutical industry, but it's certainly one of the biggest, uh, the biggest I can remember. Um, so again, we're talking about €2.3 billion. Yeah. And overall investment in the industry per annum is about, you know, 4 to 5 billion. Just to put it in context."
Presenter:
Before we go, Lilly also says it is putting some 100 million euros into a program to invest in biotech companies. Completely aside from the plant it wants to build. How good is that news for the biotech scene in Germany?
Marcus Schmidt:
"Yeah, we're really excited about this announcement as well. Um, it's interesting, you know, biotechnology I think was really under the radar for many years in Germany until the pandemic. And BioNTech all of a sudden, uh, you know, came into the limelight and, and people realized what huge potential there is, um, in Germany. And it's not just BioNTech. There are so many other companies, um, many of them not really known to the public. Um, you know, but they work well with large pharmaceutical companies, and together they develop, um, new products and bring them to market. So I think, you know, Lilly is very smart to invest in some of those. Not just startup companies, but, you know, mostly specialized companies and just tap into this huge potential. It benefits both, um, the biotech companies or the pure play biotech companies as well, as well as pharmaceutical companies. It's sometimes a little hard to distinguish between the two, because they are so closely linked. Yeah. But this is certainly going to be this is great news for Germany."
Presenter:
Thanks for that Marcus Schmidt director of the chemicals and health division at Germany Trade and Invest. Before we say goodbye, here's a look at HOW GERMANY WORKS.
Before medications can go on the market, they have to be approved. How does this happen in Germany? The European Medicines Agency verifies the efficiency and safety of drugs, drawing on the scientific expertise from EU member states. In Germany, the state bodies responsible for approving clinical trials are the Federal Institute for Drugs and Medical Devices - or BfArM for short, and the Federal Institute for Vaccines and Biomedicines – also known as the Paul Ehrlich Institute. They are the largest institutions of their kind in Europe.
The time it takes for medications to get to market in Germany is a fraction of that in countries like France or the UK. That’s because Germany prioritizes the availability of medicines. Companies are allowed to set their own prices for a limited time to avoid delays. When prices are fixed, they often serve as a reference for other countries – in the EU and even beyond. And THAT’s how Germany works.
So, we've come to an end of another episode of Into Germany. If your pharmaceutical or medical biotech company is looking for an injection of new business, maybe Germany Trade & Invest is just what the doctor ordered. There’s no waiting room and no need for insurance. As a government agency, all GTAI ministrations come free of charge .
Get in touch at gtai.com. We’re also keen on your opinions, suggestions and questions. Please leave a comment in your favorite podcast app or drop us a line. You’ll find all the details in our show notes.
So, till next month, stay healthy, “Auf Wiederhören” and remember: Germany means business.
