Lilly and Boehringer pause $2bn German investments over planned drug-spending curbs

Lilly announced that it would reduce the not-yet-implemented part of its major project in Alzey, in the Rhineland-Palatinate region, by around half. The production facility for biopharmaceutical medicines is still scheduled to begin operations in 2027, but with lower capacity than originally planned. According to the company, investments of up to US$1.5bn, as well as a significant share of the jobs originally planned, are now in question.

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In 2023, the company had announced total investments of US$2.5bn for the site. Construction is already well advanced, with interior work under way, and several hundred employees have been hired. The decision on any further expansion will now depend on future economic and regulatory conditions in Germany.

Boehringer Ingelheim has also halted investment plans. The family-owned company had intended to invest around €900m in German sites over the next four years, including in new research and laboratory buildings. The company cites the German government’s planned interventions in statutory health insurance drug spending as the reason. The industry is particularly critical of additional rebate and savings measures, which it says undermine the long-term predictability needed for investment.

The development comes at a time of growing international competition for pharma and biotech investment. While the US is attracting production and research capacity through industrial-policy incentives and extensive funding programmes, Asian countries are also investing heavily in their life sciences industries. Against this backdrop, companies have long warned of a gradual deterioration in Europe’s attractiveness as a business location.

Associations had issued warnings

For Germany, the current development is especially noteworthy because the federal government has repeatedly stated in recent years that it wants to strengthen the domestic pharmaceutical and biotechnology sector as a strategic industry of the future. The newly announced investment freezes show how sensitively companies respond to changes in the healthcare policy environment.

The state government of Rhineland-Palatinate announced that it would seek talks with both companies at short notice. According to sources in Mainz, economic competitiveness and the stabilisation of statutory health insurance must both be taken into account.

Whether the decisions by Lilly and Boehringer are isolated cases or the first signs of a broader reluctance to invest will now be watched closely by the industry. What framework conditions are needed to ensure that the research, development and production of innovative medicines can continue to take place in Germany in the future? What is often overlooked in this discussion is that very few innovative medicines originate in Germany, or even in Europe.

Dependent on international innovation

A rough initial analysis by our editorial team of the 38 novel active substances (NAS) approved by the EMA last year shows that only around 30% can be traced to a scientific origin – meaning the place where the actual invention was made – in Europe. The majority originate in the US, with a clear concentration in the Boston region. In Europe, the research sites behind these substances are located in Switzerland, the UK and France; not a single active substance originated in Germany.

This dependence is also reflected in the fact that, among medicines recently approved by the FDA in the US as novel active substances – that is, medicines addressing medical conditions for which no treatment had previously been available – around 30% do not reach patients in Germany. Industry associations, including vfa, BPI and others, have repeatedly pointed this out in recent months, citing the healthcare policy framework as the reason.

Pharma Deutschland and vfa both view the current preliminary decision by the two companies as a dramatic turn of events. “The withdrawal by Lilly and Boehringer Ingelheim is a strong warning signal and a signpost for the economic policy of this federal government. Companies that wanted to invest billions in Germany without subsidies are reversing that decision. This means our fears have come true: a pharmaceutical dialogue in which, apparently, no one in the federal government apart from the health ministry has any interest, and a statutory health insurance savings law that destroys confidence in Germany as a location, cannot remain without consequences. If the federal government now claims to have been surprised by these decisions, it should be clear to the last remaining industry that this government lacks awareness of what is needed for economic recovery,” says Jörg Wieczorek, chairman of Pharma Deutschland.