1

Pharmaceutical Industry
Narrative White Paper
Liz Azzarello, Rosie Stoyanova, Derek Schneider & Hayley Borgia

MARK 363 - Fall 2018

Professor Evanthia Geroulis

Introduction
 2

In this paper we propose a plan to penetrate the German pharmaceuticals market with a new

form of medical care known as personalized medicine as Bayer AG. Being one of the largest

biopharmaceuticals producers in the world, we should introduce a medicine that is personalized

to the patient and paired with technology. The analysis covers opportunities in elderly care, a

well-established pharmaceutical market, and a way to reach the consumers.

Industry History

Germany is known to have the first company in 1827 to start mass producing pharmaceuticals

in. In 2015, pharmaceuticals revenue in Germany totalled EUR 38 billion. They are the largest

pharmaceuticals market in Europe and fourth in the world. Germany is also the world’s leading

medical biopharmaceuticals producer, only second to the United States. The industry consists

of companies such as, Bayer, BASF, and Hoechst and Germany historically was known as “the

world’s pharmacy.” Revenue in the market has steadily risen in the past 7 years and is projected

to grow by 118% by 2030 (statista.com).

Abstract
 3

In the next ten years there will be a growth in the over 65 demographic and 40% of the global

market in 2022 is expected to be made up of personalized medicine and medical care. This paper

discusses why and how pharmaceutical companies should prepare and take advantage of the

gap in the industry. Investing in medicine that goes hand-in-hand with technology, is personalized

to the client’s genetics, and is cost-effective for the consumer are the biggest opportunities. The

aging baby boomers along with their caretakers and family will want the best care possible and

will recognize these avenues as superior. Though there is an emphasis both within and outside

the medical community to push for more natural medicines, the fact of the matter is that “big

pharma” medicine is here to stay and is the best solution for more advanced maladies. Advertising

an easy to take medicine with a company that shows it cares about the patients and the

environment will stand out in a market where “big pharma” rules. This paper argues the best way

to share the products with the public is to approach doctors and hospitals in northern Europe,

specifically Germany, with an ethical medicine.

TOWS

● Threats
○ Declining economy
 4

○ Competing with cheap or free medicines by international companies with cheap

imports from china and other countries.
○ Poor access to essential medical properties
○ High prices of new medicines
○ Non-tariff barriers
○ Interruption of research and development
○ Biotech companies becoming bigger than pharma companies

● Opportunities
○ Focus on elderly care
○ Medication that is paired with patient’s DNA and specific symptoms
○ Employ technology to ensure cost savings
○ Partner with medical technology
○ Invest in research that supports safe waste of medication
● Weaknesses
○ Diseconomies of scale
○ Not enough awareness
○ High risk business modeling
○ Expensive failures
○ Harnessing the latest science
○ Social responsibility vs. profit
● Strengths
○ Experienced research staff
○ High ROI on developing new medicines
○ Very large customer base to count on for revenue
○ Dominated by large and politically powerful conglomerates
○ Few industry competitors
○ High power over consumer base
○ Well developed supply chain to maximize economies of scale
○ Relatively low chance of new entrants to the industry
○ Buyer power is extremely limited

PESTEL
● Political
○ No unified standards for product regulation
○ Different governments have different bodies that approve or investigate new
products
 5

○ Government interest in pursuing on instituting price caps

○ Healthcare services can vary widely from country to country
○ Most governments have significant influence on how products can be sold,
developed, and marketed
○ Nationalist movements may lead to weakened EU government and stronger
national governments
● Economic
○ Economic downturns have a considerable impact on the sale of more expensive
medications
○ Rising per capita medical costs can price out more cost conscious consumers
○ Germany, Sweden, and France spend the most per capita on healthcare costs
○ Requires high tech equipment and expertise to remain competitive and even
viable
○ Consumers have little if any power over pricing
○ Industry relies on “big hit” products to justify research and development costs
● Social
○ The increasing age population.
○ Policies in the EU to make sure everyone is receiving quality health care.
○ Consumers demanding enhanced information on their conditions and treatments.
○ Elder maltreatment which is the physical, sexual, mental, or financial abuse of
those over the age of 60. Estimates indicate that in the EU around 4 million
people experience elder maltreatment a year.
○ 77% of the diseases and 86% of the deaths in the EU are due to diabetes,
cardiovascular disease, cancer, chronic respiratory diseases, and mental
disorders.
○ Poverty: Many older people cannot afford to pay for medical costs and for
prescription drugs from their own money. They need the Eu’s health system
funding.
● Technological
○ Pharma companies turn to gamification to reach people where they are online
because current incentives are obsolete.
○ Augmented reality and virtual reality give a new view of the world through digital
information.
○ Home genetic tests will help get personalized medicine customized to your own
genetic background.
○ Body sensors that measure health parameters in a comfortable and cheap way
to provide crucial data.
○ 3D printing
○ Drug testing on simulations modelling the physiology of the human body with
supercomputers. (cheaper, faster, more reliable)
○ Using supercomputers to make complex decisions, which will change the way
new drugs are found.
○ Nanorobots in blood
○ Technology improves retail pharmacy safety.
 6

○ Technology reduces prescribing errors.

● Environmental
○ Legislation has been created to require the European Commission to develop an
approach to water pollution from pharmaceutical substances.
○ Currently a “roadmap” has been created which require anything, but gather data
to create legislation in the future.
● Legal
○ In order for medicines to be placed in the market they need to be authorized,
which there are two main routes, the centralized authorization procedure and the
national authorization procedure.
○ In order to market the product in Germany through the national authorization
procedure, a company must prove efficacy through clinical trials documented in
the registration documents. The tests must prove the benefits outweigh the risks,
if any.
■ This also requires the company to go through the Commission in Brussels
who coordinate with the European Medicines Agency (EMA), the scientific
staff of the German: Federal Institute for Drugs and Medical Devices
(BfArM), and other licensing authorities of the Member States of the EU.
○ Manufacturers, importers and distributors of medicines in the EU must be
licensed. The licenses are entered into EudraGMDP, the publicly available
European database operated by the EMA.
○ All suspected side effects must be entered into EudraVigilance, the EU web-
based information system operated by the EMA that collects, manages, and
analyzes reports of suspected side effects.

MARKET NEEDS AND DESIRES

Germany as of 2018 has the largest economy in Europe and the fourth largest in the world with

a massive amounts of potential spending power. Germans as a whole are used to certain

luxuries in life and have a reputation for producing high quality products. As a result, the
 7

German consumer population places high standards on products and services that are sold to

them and have a keen eye for maximizing utility and minimizing spending. Germans as

consumers have a tendency to have a low sense of brand loyalty and will shop around different

vendors before making a purchase. The population of Germany as a whole is aging and is quite

conscious of maintaining their health. German consumers as a whole have also become more

environmentally conscious and frequently consider a company’s environmental footprint when

making decisions of spending.

Germany itself is well developed for the production, research, and distribution of

pharmaceuticals. The country boasts world class infrastructure and hosts some of the most

prestigious medical research facilities in the entire globe. The industry itself boasts a market of

over 38 billion Euros and is expected to sustain a growth rate of approximately 5% per year.

German companies are estimated to have invested nearly 7 billion Euros in medical research

and development in the past year alone. The industry in Germany employs approximately

128,000 workers and counts over 1000 pharmaceutical companies that actively contribute to

the industry as a whole. In short, Germany is an absolute powerhouse in the pharmaceutical

field with the industry, infrastructure, and consumer base to back it up.

Personalized medicine is a rapidly growing segment of this industry and as of 2018 has a total

market size of over 1.7 billion dollars. This number is projected to grow to encapsulate nearly

2.8 billion dollars within the next four years. What is particularly important to know about this

particular segment of the pharmaceutical industry is that it promises herald a new form of
 8

medical care that will play right into the sensibilities of German consumers. Personalized

medicine is primarily concerned with custom tailoring treatment plans to the needs of patients

based on genetic information. This is expected to have two impacts. The first of which is that

treatments on an individual basis will be more effective as it will take into account nearly every

aspect of a patient’s genetic information. The second impact is that will help drive down the

overall costs of treatments due to the more personalized plan being more effective from the

start. Should personalized medicine be marketed properly to the German people as a more

efficient alternative to traditional methods.

We expect our potential consumer base to continue growing at considerable levels for the

foreseeable future. Though the overall population of Germany is in a net decline, we can expect

to see a great deal of growth in the number of aging baby boomers in the coming years. As this

generation ages, their overall life expectancy as a whole is also increasing. What this means is

that personalized medicine will have a very healthy target demographic from which to profit

from and will continue to be able to rely on.

Strengths and Weaknesses

The location of Germany is considered the best international location. The area is great

strength due to the research, high- tech production and distribution (Julia Albrecht) According

to statista in 2017 there were 17.71 million people over the age of 65 living in Germany
 9

(Statista). According to Worldatlas Germany is the fourth most populated country with people

over the age of 65. Within Europe Germany has the largest pharmaceutical company market

along with being the leading market for non-prescription medicines. Also being a leader in

clinical studies because of the large amount of universities and research associations (Julia

Albrecht).

The number one weakness surrounding the country is the regulations. The country's reputation

is on the line because of its lack of concern for its citizens health. And its inconsistency of

regulation. “Government regulation such as the German government’s commitment to its fiscal

austerity program and and continued spending cuts restricted the economy’s potential” (Anette

Salama). It's illegal and prevents Pharmaceutical chains. Around 20,000 different individually

owned pharmacies exist. Along with this pharmacy owners are only allowed to own one

pharmacy (Anette Salama).

There are a number of threats that will need to be closely watched in order to successfully

market personalized medicine in Germany. Threats include Germany losing its spot as a leading

country in the pharmacy industry. “Only 5.2 percent of pharmaceutical sales are made with

products that are younger than five years” (Statistics). Other countries are proven to be two or

three times higher on modern pharmaceuticals. This can happen due if it continues to not

increase its innovation for the industry based on the governments regulations (statistics).

Among these concerns are the numerous regulatory hurdles that will slow down the rate of

development for personalized medicine in Germany and the European Union at large. Although
 10

these regulations tend to be less stringent than those laid out by the American FDA, they are

still a force to be reckoned with in terms of slowing down any growth in market size.

Additionally, the advertisement of medical treatments is stringently regulated in Germany and

has become more challenging over the years to do increased focus of further regulating how

pharma companies can advertise treatments. Lastly, due to the nature of medical care in

Germany, most payments for personalized medicine will be done through government health

subsidies and not from individual consumers. This means that much of the revenue generated

from personalized medicine will need to come from government subsidies of the product.

Luckily there are opportunities open up due to the aging population to keep Germany the top

country for Pharmaceuticals in Europe. Also opportunities exist with the increase of the use of

technology. “The pharmaceutical industry has also implemented new and modernized

technologies to improve the efficiency of operations” (Anette Salama). Online pharmacy sales

have increased and continue to rise with a study done in 2016 according to IMS health. The

ABDA created an information technology division to digitally bring together all of the

pharmacies. This “digital pharmacy” has a plan by the year 2030 to have an app as a way of

making seeking out help and communication easier between patients and pharmacists. (Anette

Salama).

OBJECTIVES

Personalized medicine and healthcare are newly introduced concepts to Germany that deals

with challenges in the current healthcare system. Using these new concepts will help bring the
 11

treatment of diseases to a new light and it will improve health outcomes in many communities

in Germany, more accurately, German Baby Boomers and their successors. It has emerged as a

concept to strategically prevent, diagnose, and treat individuals or groups of individuals using

their unique genetic profile and DNA sequences. It will determine their susceptibility to disease

and it will provide them with the most suitable and individualized treatment. It will also reduce

the number of unnecessary procedures, while it also eliminated the need for inessential over

the counter or prescription drugs. Using pharmacogenomics to study the role of the genome in

drug response we are able to customize health care, with decisions and treatments tailored to

each individual in every way possible.

Genomic information is important since it provides the blueprint for the production of a certain

protein in the body. It is important to know that information for several reasons including that

the protein plays a role in breaking down the drug, it helps with the absorption or

transportation of the drug, the protein is the target of the drug or it has some role in a series of

molecular events triggered by the drug. Researchers found that a set of people who share a

certain genetic variation also share a common treatment response like a greater risk of side

effects, no benefit from the treatment, and no need for a higher dose to achieve a therapeutic

effect. Using this treatment information will improve the selection of dosage of drugs to treat a

wide range of conditions like cardiovascular disease, lung disease, HIV infection, cancer,

arthritis, high cholesterol and depression. Using that information will strategically help us battle

the current ongoing problems with medicine and medical care in Germany.

TARGET AUDIENCE
 12

Germany as of 2018 has a total population of over 80 million people and is currently

experiencing a net decline in its overall population growth rate of -.17% per year. Of this

population, approximately 38% of the population is over the age of 55 years of age and will see

a steady increase in its share of the overall population demographics. It is this group of people,

the elderly (or perhaps more precisely “German Baby Boomers”), that will be our primary

audiences for our marketing strategy. Germany has on average one of the oldest populations in

Europe and within the next year or so will find that it will have more people over the age of 60

than under the age of 30. German Boomers are and mostly will be most likely to be found

within one of Germany’s many cities, given the highly urbanized environment that encapsulates

much of Germany’s population.

The gender makeup of Germany’s Baby Boomers is at near parity, with women expected to live

slightly longer on average compared to their male counterparts. They are relatively well

educated when placed in comparison to the rest of the world and have a near universal literacy

rate. German boomers are very likely to have finished high school and achieved some

secondary education before or during their time in the workforce. Moreover, this demographic

will on average have an annual salary of over 55,000 Euros. However, the rapidly aging

population of Germany will produce a number of socio-economic concerns for Germany in the

coming decades. The amount of German boomers that are or will be claiming pensions will

continue to put pressure on an already highly taxed pension system. The longer living boomers

will also mean that the large number of people that will need to be cared for will also mean

that this strain will go on for longer.

 13

Yet it is this same system that many German boomers rely on in order to subsidize the cost of

medication and treatment and have done so for decades. There is an implicit trust in this

system that has been built up over its many years of use. As a result, the comparatively low cost

of treatment due to government subsidies will ensure that our target market will be able to

afford most if not all of the treatments that will be involved with personalized medical care.

The only question that will need to be answered is how much the German government will

subsidize this model of treatment due to its comparatively recent entrance into the medical

field.

Ordinary German citizens that are of prime working age will be impacted by the greying

population as it means that they too will be tasked caring for more of their elders for longer.

This demographic, the working Germans of ages between 21 to 35 will become our secondary

market. The working Germans will also most likely be involved when it comes to the medical

care and treatment of their elders and will thus have a say in what medicines are given to their

infirm elderly. Indeed, in many cases they will become the decision makers with regards to their

elders’ treatments if said elderly are unable to make decisions themselves. As time goes on,

these working Germans will transition into becoming elderly themselves and will become our

primary audience. If we are able to successfully ingratiate our product line with this upcoming

generation of elderly, we will have an entire generation of people that will remember us as they

themselves will require the same treatments their elders.

 14

However, there is a substantial difference in the overall consumption of media between these

two generations that will need to be addressed before any campaign is put together. German

boomers will be far more likely to consume more traditional forms of media such as print,

radio, and television compared to our secondary audience. Younger Germans will be far more

likely to consume more modern media sources such as social media and online sources. What

this will mean for our marketing strategy is that we will very likely need to focus on a broad

number of media outlets in order to reach our target demographics.

But this too presents a further challenge as advertisements for medical care and other

pharmaceuticals face more regulatory scrutiny in the European Union than in the United States.

Advertising for medical products through traditional media is highly regulated and faces

significant hurdles before an advertisement for such products would be allowed to be shown. In

the past, pharmaceutical companies advertised these products by enlisting the aid of doctors to

hand out samples to their patients or giving the doctors free equipment which would then be

used to help treat patients. However, due to new legislation in 2016 that added further

regulations to this practice in order to combat corruption, this practice has all but been

dropped by the pharma industry.

As it stands, traditional methods of reaching Baby Boomers have become limited in their scope

and application. The millennial demographic by contrast offers more promising avenues in

terms of consumer outreach. German regulation of pharma advertisements over social media is
 15

comparatively lax and does not have many of the restrictions that have been placed on other

sources of media.

MARKET ENTRY STRATEGIES

Partners that would be beneficial for us would be working with BAH the German Medicines

Manufacturer’s Association. They actively are apart of discussion on public health (Germany

Trade & Invest). This is something us as a company would agree is important and go along with

our company's view on social responsibility. They create over the counter drugs, prescription

drugs, and medical devices. Another partner would be with BPI. They are the German

Pharmaceutical Industry Association. There goal is to ensure that patients are cared for and to

be given the medication the are required (Germany Trade & Invest). Our last partner would be

with VFA or known as Association of Researched based Pharmaceutical Companies. They are a

trade organization for pharmaceutical companies in Germany that are researched based. We

will partner with them due to their beneficial progress in pharmaceuticals and their quality

pharmaceutical therapy (Germany Trade & Invest).

The way we would try to market our drugs to physicians and consumers would include small

amounts of approaches. Because of the regulations in Germany we would not be allowed to

market prescribed drugs. One way our company would be able to market is creating campaigns

for disease awareness. As a company we truly care about our citizens and the diseases they

have a chance receiving as they age. With the large amounts of regulations in Germany creating

a campaign is the best way for us to market ourselves without breaking the law. It is a win-win
 16

situation for us as a company and for the country. It helps spread awareness of different

diseases and our company. This of course would not qualify as a form of advertising for our

products. Our campaign will help to inform people about the possibilities of contracting the

disease and the different forms of treatment. No specific products for use will be stated.

Another way we would be able to lawfully market is feeding information actually about our

products to health care professionals. Sending and providing them information to open the

door of possibility using our products. Due to the amounts of regulations surrounding

advertising and marketing pharmaceuticals to the public in Germany, we do not believe it

would be in our best option to any other forms at the risk of getting into any legal trouble.

Conclusion

We are expecting the market for personalized medicine to grow at a considerable pace within

the next five to ten years and highly encourage the capitalization of this market. This combined

with the overall greying of Germany’s population will lead to more people that will be old

enough to be at risk for sickness for longer. In addition, more of these elderly will find

themselves within the care of younger relatives who will in turn be purchasing and

administering medicine for them. As a result, we will be shifting focus away from more

traditional forms of media advertisement such as by doctors or other more regulated outlets to

social media where we will have less restrictions and access to German millennials.

Personalized medicine will soon lead to a great deal of change within the pharma industry that

allows for treatments to be more effective, less resource intensive, and more client specific. By
 17

properly marketing this to Baby Boomers and their Millennial care-takers, we will ensure that

Bayer is at the forefront of this coming paradigm shift in Germany.

Works Cited

https://www.ncbi.nlm.nih.gov/pmc/articles/PMC5355974/

https://www.medicaltourismmag.com/precision-medicine-reshaping-healthcare-europe/
 18

https://www.euapm.eu/

https://www.politico.eu/sponsored-content/is-europe-ready-for-personalized-medicine/

https://www.researchgate.net/publication/316249469_Personalized_medicine_in_Europe_not_y

et_personal_enough

https://www.cia.gov/library/publications/the-world-factbook/geos/gm.html

https://www.vfa.de/embed/the-pharmaceutical-industry-in-germany.pdf

https://www.bayer.com/

https://iclg.com/practice-areas/pharmaceutical-advertising-laws-and-regulations/germany

https://www.alumniportal-deutschland.org/en/global-goals/sdg-10-inequalities/elderly-older-people/

https://www.mckinsey.com/business-functions/marketing-and-sales/our-insights/what-german-consumers-

want-tomorrow

https://en.portal.santandertrade.com/analyse-markets/germany/reaching-the-

consumers?&actualiser_id_banque=oui&id_banque=18&memoriser_choix=memoriser

https://www.visualcapitalist.com/germany-scary-demographic-milestone/

http://www.gtai.de/GTAI/Navigation/EN/Invest/Industries/Life-sciences/pharmaceuticals.html

file:///C:/Users/Derek/Downloads/BerichtMarktanalyse_25_06_2012_ENG_final_2.pdf

https://www.statista.com/statistics/728124/global-market-for-personalized-medicine/

http://worldpopulationreview.com/countries/germany-population/

https://www.pharmine.org/wp-content/uploads/2014/05/VFA-Pharma-Industry-Germany-2008.pdf

https://www.worldatlas.com/articles/countries-with-the-largest-aging-population-in-the-world.html

https://build.export.gov/build/groups/public/@eg_main/@byind/@healthtech/documents/webcontent/eg_m

ain_113098.pdf

http://hwwi-rohindex.de/fileadmin/hwwi/Publikationen/Policy/HWWI_Policy_Report_No.7_overview.pdf

https://www.gtai.de/GTAI/Navigation/EN/Invest/Industries/Life-

sciences/pharmaceuticals.html?view=renderP

https://practiceguides.chambers.com/practice-guides/pharmaceutical-advertising-2018/germany

https://www.statista.com/statistics/783145/pharmaceutical-sector-growth-forecast-worldwide-by-country/
19