Innovation:

Incentive Structure for Innovations in the Chemical and Pharmaceutical Industry

Arguments and Positions

Maintaining its top position in research and development (R&D) is getting increasingly difficult for the industry location Germany. Emerging markets are catching up. Established industrial nations massively invest in education and research and create innovation-friendly framework conditions.

The German chemical-pharmaceutical industry is facing this challenge. In 2017, the industry invested about 10.8 billion euros in R&D and worked consistently on eliminating company-internal obstacles to innovation. But industry alone cannot defend Germany’s leading position – support from politics is needed for this purpose. But industry alone cannot defend Germany’s leading position – support from politics is needed for this purpose.

Backing from politicians and society
Innovative products and processes from chemistry and pharma are part of the solutions to the great societal challenges (healthcare, demographic change, food, mobility, climate protection, resources). Politicians and society should be open to innovation and thus facilitate progress.

Introduce an innovation check
A necessary component to sustainably strengthen the innovation capability of industry would be introducing an "innovation check" in the impact assessment of legislation.

Provide research incentives
Funding for innovative companies and start-ups needs to be improved, mainly by means of investment-friendly fiscal framework conditions for venture capital.

Essential framework conditions for successful pharmaceutical research include patent protection. When a new medicine is placed on the market, out of the 20 years of patent protection already many years have passed due to the long development process – so that only around 10 years of patent protection with market access would be left. With supplementary protection certificates (SPCs) the manufacturers can extend the patent term by maximally 5 years, making up for the long development times of medicines.

THE VCI IS CALLING FOR THE FOLLOWING

  • Increase spending, fiscal incentives for research and venture capital, reliable protection rights
    The political goal of raising the share of R&D spending in GDP to 3.5 percent is positive. For this very reason, the framework conditions for research and innovation need to be improved – mainly by way of fiscal incentives for research for all companies. Furthermore, tax loss carryforwards for start-ups should remain possible without limitation in time or amount, and the legal provisions for venture capital should be optimised. Adequate patent terms, the possibility to use supplementary protection certificates and data protection are decisive for a reliable protection of intellectual property.
  • Consistently continue the German High-Tech Strategy
    Adequately funded R&D promotion programmes for a sufficiently wide range of technologies are important for maintaining the high level of research in Germany: in the energy sector, for more resource efficiency, health research and key technologies – such as new materials, catalysis, nano- and biotechnology and the use of renewables. R&D promotion programmes need to take into account the specific needs of both SMEs and large companies.
  • Strengthen natural science education, STEM subjects and university funding
    General natural science-technical knowledge ("Sachkunde") should be introduced already in elementary schools, and one third of the total number of lessons in secondary schooling should be dedicated continually to STEM subjects. Excellent basic research is essential for the chemical-pharmaceutical industry. Universities should have more funding. Possibilities for further advanced education and qualification of employees need to be expanded.
  • Introduce an "innovation check" in the impact assessment of legislation
    Political framework conditions should not render innovations more difficult or even stand in their way. Instead, existing and future provisions should be examined in well-balanced risk/benefit assessments and also in an innovation check. This applies in particular for new technologies.

For questions or suggestions, please feel free to contact us.

Contacts

Hans-Jürgen Klockner

E-Mail: klockner@vci.de