Eli Lilly and Boehringer Ingelheim are reducing planned investments in Germany in response to the government’s new healthcare initiative, representatives from both companies told Fierce.
Reduction is important. Lilly will cut its planned investment of 2.3 billion euros ($2.7 billion) in half, while Boehringer will cut domestic spending by 900 million euros ($1 billion). German business newspaper Handelsblatt first reported the companies’ decision on Wednesday.
The cuts were made in response to a planned reform initiative in Germany that would cut government healthcare spending by billions of euros and trigger deep discounts on branded medicines.
Five weeks ago, when Swiss drugmaker Novartis announced its first-quarter results, CEO Vasu Narasimhan criticized Germany’s reform efforts.
“Such a policy would send the wrong signal to a highly innovative industry like ours, where the United States and China are actively investing to make the biotech ecosystem more competitive,” Narasimhan told reporters.
A Boehringer spokesperson said the company’s investment cuts will cover projects planned between 2027 and 2030, explaining that “this decision reflects the growing economic uncertainty and lack of investment predictability in the German pharmaceutical sector.”
A Boehringer Ingelheim spokesperson added that the reductions have no impact on employment.
In Lilly’s case, CEO David Rix told Handelsblatt that the Indianapolis-based drugmaker has already spent more than €1 billion building a manufacturing facility in Alzey, Germany, where the injectable obesity treatment will be produced and is expected to be operational next year. Lilly now plans to reduce production capacity and hire about 500 people at the site, instead of 1,000 as previously planned.
Ricks said the money would likely go into a new facility in the U.S. or a site under construction in Pennsylvania.
“Germany will fall to the bottom of the European market in terms of supporting our industry,” Rix told newspaper Handelsblatt.
In an emailed statement to Mr. Fiers, an Eli Lilly representative said Germany’s reform efforts could “significantly impair business predictability.”
“Given the current policy direction, we can no longer commit to the full vision for Alzey and expect the scope of the project to be reduced by more than 50% compared to originally announced,” the spokesperson explained.
Lilly intends to continue to ensure the facility is operational “to meet minimum supply commitments for patients in Germany,” and the statement clarified that operations at the facility are still scheduled to begin “at reduced capacity” in 2027.
“Decisions on whether to install the remaining capacity and make Alzey the originally envisioned location are on hold until the federal government restores the stable and predictable economic framework necessary for long-term investments of this magnitude,” a Lilly representative said.
The pressure on Germany is similar to that faced by the UK last year as companies such as Lilly, Merck, Sanofi and AstraZeneca cut their presence and planned spending in the country, citing an unfavorable business environment for biopharmaceuticals.
Earlier this year, Britain struck an industry-friendly deal with the United States, exempting medicines exported to the United States from tariffs in exchange for Britain and harmonizing standards for assessing the value of new medicines.
“The political and regulatory landscape surrounding pharmaceutical research, production and marketing in many countries is undergoing significant changes,” a Boehringer Ingelheim spokesperson added in the company’s statement.
“While markets such as the United States and China continue to extend their lead in innovative medicine research and development, the environment in Europe is deteriorating,” the statement continued. “The market remains stagnant, with no clear signs of sustainable growth or improved competitiveness. At the same time, the expected further burden on the industry from the proposed savings package under Germany’s statutory health insurance framework sends the wrong signal.”
Boehringer Chairman Shashank Deshpande expressed frustration with the regulatory environment in Europe during a fourth-quarter earnings call in March, noting that two of the company’s products (Jascayd and Hernexeos) have been approved in the United States but are still awaiting approval in Europe.
“Why is it possible in one jurisdiction or region and why does it take six months, nine months in Europe?” Deshpande asked. “Whether you use any metrics, whether it’s clinical trials, new drug approvals, or biotech deals, there’s a clear decline in European competitiveness across the board. It’s clear that China is becoming more innovative and more powerful. You have to look at the facts. They say, especially in this country, it used to be the pharmacy of the world. So I’m certainly concerned that Europe is going down even further, as we’re seeing a decline in production and an increase in regulation.” ”
