Eli Lilly and Boehringer Ingelheim are cutting back on planned investments in Germany in response to a new government healthcare initiative, representatives for the companies told Fierce.
The cutbacks are significant. Lilly will slice its planned investment of 2.3 billion euros ($2.7 billion) in half, while Boehringer is cutting its domestic spending by 900 million euros ($1 billion). The German business newspaper Handelsblatt first reported the companies’ decisions Wednesday.
The reductions come in response to a planned reform initiative in Germany, which would cut government healthcare costs by billions of euros and trigger deep discounts on branded medicines.
Five weeks ago, as Swiss drugmaker Novartis revealed its first-quarter financial results, CEO Vas Narasimhan was critical of the German reform effort.
“Policies like this send the wrong signal to a high-innovation industry like ours, where we see U.S. and China actively investing in the biotech ecosystem to make it highly competitive,” Narasimhan told reporters.
A spokesperson for Boehringer explained that the company’s reduced investment will cover projects planned from 2027 to 2030 and that the “decision reflects the growing economic uncertainty and lack of investment predictability in the pharmaceutical sector in Germany.”
Jobs will not be impacted by the cutback, Boehringer Ingelheim’s spokesperson added.
In the case of Lilly, CEO David Ricks told Handelsblatt that the Indianapolis-based drugmaker has already spent more than 1 billion euros building a manufacturing facility in Alzey, Germany, which will produce injected obesity treatments and is due to become operational next year. Lilly now expects to reduce its capacity and employ approximately 500 people at the site instead 1,000 as previously planned.
Ricks said that the funding will likely be funneled to a new facility in the U.S. or to a site under construction in Pennsylvania.
“Germany will fall to last place among European markets in terms of supporting our industry,” Ricks told Handelsblatt.
In an emailed statement to Fierce, a representative for Eli Lilly noted that the German reform effort has the potential to “significantly undermine predictability for business.”
“Given the current policy direction, we can no longer commit to the full vision for Alzey and expect to reduce the scope of the project by 50% or more versus the original announcement,” the spokesperson explained.
Lilly will still make sure that the site becomes operational “to meet the minimum supply commitments to patients in Germany,” with the statement clarifying that operations at the site are still scheduled to begin “at reduced capacity” in 2027.
“The decision on whether to install the remaining capacity—and make Alzey the site we originally envisioned—is on hold until the Federal Government restores the stable, predictable economic framework that a long-term investment of this size requires,” the Lilly rep said.
The pressure being applied to Germany is similar to that faced last year by the U.K. as Lilly and other companies such as Merck, Sanofi and AstraZeneca reduced their presence or planned outlays in the country, citing the unwelcoming business environment for biopharma.
Earlier this year, the U.K. made an industry-friendly deal with the U.S., which will free it from tariffs on pharmaceutical products exported to America in exchange for the U.K., adjusting the thresholds under which it assesses the value of new drugs.
“Across many countries, the political and regulatory landscape for pharmaceutical research, production and marketing is shifting significantly,” Boehringer Ingelheim's spokesperson added in the company's statement to Fierce.
“While markets such as the US and China continue to increase their lead in research and development of innovative medicines, we are seeing a deterioration in the European environment,” the statement continued. “The market remains stagnant, with no clear signs of sustainable growth or improved competitiveness. At the same time, the anticipated additional burdens on the industry from the proposed savings package under the German statutory healthcare insurance framework are sending the wrong signal.”
During its fourth quarter earnings call in March, Boehringer Chairman Shashank Deshpande expressed his frustration with the regulatory landscape in Europe, noting that two of its products—Jascayd and Hernexeos—had been approved in the U.S. but were still awaiting endorsements in Europe.
“Why is that possible in one jurisdiction or territory and why does it take six months, nine months in Europe?" Deshpande asked. “We’re seeing generally, clearly a decline in European competitiveness, whichever metric we use, whether it’s clinical trials, whether it’s new drugs approved, whether it’s biotech deals. We clearly see China increasing its innovative force or power. When we look at Europe, we have to look at the facts: They say, we used to be—especially in this country—the pharmacy of the world. And so, as we look at declining output, as we look at increasing regulation, we certainly are also worried that Europe is falling further behind.”