German ‘Mittelstand’ in Europe

Small and medium-sized enterprises (SMEs): they develop, produce and market prescription only and non-prescription medicines which are important for health care. The so-called SMEs are facing increasing administrative regulations and increasing pricing pressure. This has an immediate impact on their competitiveness.

According to the German Institute for Research on Small and Medium-sized Enterprises (Institut für Mittelstandsforschung, IfM) based in Bonn, SME are defined as enterprises with a staff of less than 500 people and an annual turnover of up to EUR 50 million. In 2015, the entire staff of the 342 German pharmaceutical manufacturers amounted to 114,000 people. About 85 percent of these companies are classified as SME, based on the size of their staff.

Due to increasing regulatory requirements and growing pricing pressure induced by legal reimbursement regulations, small and medium-sized pharmaceutical enterprises are facing particularly enormous challenges. At the same time, it is just this sector which is often considered to be the ‘economic locomotive’ of Germany. Over 99 percent of all German enterprises are characterized as medium-sized. Among the members of the BAH the percentage is 84. The total number of SMEs in Europe is about 23 million, of which about 3.7 million are based in Germany. Their contribution to the pan-European economic performance amounts to about 60 percent.

The economic locomotive should not be slowed down…

German small and medium-sized pharmaceutical enterprises have been a successful and integrative component of the German health system for decades, with many for more than a century. The companies create professional and sustainable jobs and are situated in rural as well as in urban regions. Many pharmaceutical SMEs possess strong regional roots and have been family managed for generations. This not only shapes their corporate culture, but is of utmost importance for the regional economy. Personal corporate management and continuous business contacts are the most important guarantees for solid growth and to ensure the supply of patients.

SMEs are in no way inferior to large companies: The number of SMEs and larger companies engaging in research and development is almost equal. This has been demonstrated by a member survey undertaken by BAH. SMEs invest in the future: The rate at which SME members of BAH offer professional training almost equals the rate of large-scale enterprises, with focus on commercial, natural science, technical and IT educations. The rate is higher by far than the German average.

…but rather be kept under steam

With a view to the importance of SMEs as an economic factor, more attention should be dedicated to their specific concerns on the European level, and adequately designed legal rules should reduce the burden on them to keep them innovative. This is necessary because, due to their structure and history, these enterprises are an important motor for economic development. SMEs could for example be supported by funding and investment programmes like the EU Framework Programme for Research and Innovation ‘Horizon 2020’.

Constructive integration of SMEs in Horizon 2020 means: The companies should be granted simple and fast access to subsidies and the use of the Enterprise Europe Network (EEN) as a central contact point. Besides an improved framework for investments, the initiative envisages establishing a European Fund for Strategic Investments (EFSI). This EUR 21 billion fund will mobilise funds from the private sector for strategic investment projects and consequently promote innovative projects in the area of research and development. The initiative will open up specific opportunities for small and medium-sized enterprises, secure jobs, create new jobs and generate innovative products. Following the principle of ‘boosting strengths’, the European Commission should furthermore intensify the promotion of exports, with the aim to expand the export competence of German small and medium-sized pharmaceutical enterprises. Through trade promotion the European Commission should further support small and medium-sized pharmaceutical companies by suitable market information or networks, complementary to international trade agreements.

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