Incentive Structure for Innovations in the Pharmaceutical Industry

Arguments and Positions

In 2016 the German pharmaceutical industry spent some 6.5 billion euros on research and development (R&D). Both research into new forms of therapy and the further development of existing active substances involve high costs and efforts. With almost 13 percent of sales, the pharma industry invests more in R&D than any other sector. The development process of a medicine lasts roughly between 10 and 13.5 years.

Positive effects for the good of society
Pharmaceutical innovations become manifest not only in new medicines and therapeutic options but across the whole range of products and services from the industry. They bring medical progress. Consequently, they benefit not only individual patients: they are indispensable for the good of society overall. Beside classic pharma research, modern molecular biology methods (e.g. genome editing) have great potential – inter alia, for the treatment and cure of hereditary genetic diseases or cancer.

Research incentive: reliable property rights
Essential framework conditions for successful pharmaceutical research include fiscal research incentives as well as patent protection: When a new medicine is placed on the market, out of the twenty years of patent protection already several years without market access have passed due to the long development process – so that only around ten years of patent protection with market access would be left. With supplementary protection certificates (SPCs) the manufacturers can extend the patent term by maximally five years. The protection of data is important too, so that the documents submitted for the marketing authorisation of a given medicine cannot be used right away by other companies in marketing authorisation applications for their generics.

Innovation check and innovation-friendly funding concepts
Another necessary component to sustainably strengthen the innovation capability of industry would be introducing an „innovation check“ in the impact assessment of legislation. Furthermore, funding for innovative companies and start-ups needs to be improved, mainly by means of risk investment-friendly and attractive fiscal framework conditions for venture capital providers.


  • Create incentives for pharma innovations
    • Reliable protection of intellectual property through adequate patent terms, the possibility to use supplementary protection certificates and data protection are decisive for creating incentives for research innovations. The existing SPC system should be maintained, and a uniform SPC needs to be added. This is the only way for companies to benefit from the advantages of the European patent system.
    • An improved fiscal framework for research-intensive companies and their investors – by introducing fiscal research incentives for all research-based companies and attractive conditions for venture capital providers that also encourage risk investments – would round off an innovation-friendly environment for the pharma industry in Germany.
  • Introduce an „innovation check“ in the impact assessment of legislation
    Political framework conditions should not render investments more difficult or even stand in their way. Instead, existing and future laws should be examined in well-balanced risk/benefit assessments and also in an innovation check. This applies in particular for new technologies.

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Elena Michels