What does Life Sciences mean?
The life sciences sector includes the areas of medicine, medical technology, biomedicine, biochemistry, molecular biology, biophysics, bioinformatics, pharmacology, agrochemistry and nutritional science. In light of the Covid-19 pandemic, life science companies and their products and services have received more awareness by the public eye. Especially the development of a vaccine against the virus and the corresponding companies developing it were broadly discussed in the German media and among the population. In addition, the sector was responsible for the production of covid-tests, masks and respiratory equipment. As a result, these companies have experienced an enormous public interest in their products and increase in their demand during 2020.
Overview of the German healthcare market
As the populations of many countries age, health care is becoming a key issue. Therefore, Germany continues to invest in this sector. The German healthcare market is the largest within Europe by market volume, number of patients, medical technology manufacturers, and healthcare providers. In 2019, the sector spent €400 billion which amounts to an increase of 4% over the past 10 years. The majority of these expenses account to treat chronic and long-term diseases. The consulting company McKinsey predicts that due to the steadily aging population, German healthcare spending will be growing at an annual rate of over 4% in the upcoming years. Therefore, industry experts are proposing to strengthen digitalisation efforts in this sector in order to reduce costs and increase efficiency.
Overall, of all companies from the life sciences sector, more than 12,000 companies belong to the medical technology industry, around 500 are working in the area of Pharmaceuticals and more than 800 in Biotechnology. Notably, the majority of these companies are small and medium-size enterprises.
The Covid-19 pandemic has proven that compared to other European countries, Germany offers a stable healthcare system, especially with regards to infrastructure, hospital beds and trained staff. The healthcare market employs 7.5 million people and their exports are worth €126 billion, positioning it as one of the largest economic sectors in Germany.
Research Facilities
Germany is known for its close relationship and cooperations between companies and scientific research facilities. Some of these world-known scientific institutions are: The Fraunhofer Institute, including the Department of Biomedical Technology, the Helmholtz Association of German Research Centres, the Robert-Koch Institute (RKI), the Paul-Ehrlich Institute (PEI) and the Leibniz Association. Overall, 40 German universities offer courses in the fields of medical- and biotechnology.
Internationally recognised researchers from research facilities and private research companies provide a solid basis for the development of clinical treatments and vaccines. Therefore, after the outbreak of the covid-19 pandemic at the beginning of 2020, a large number German research companies started working on a vaccine.
International Investment
The large demand in life science and health care products as well as the favourable location in the heart of Europe attracts foreign investors and companies to Germany. They continue to establish subsidiaries in Germany or expand their European footprint.
In reference to Covid-19, the global search for vaccine and medicine has proven how fast research development can be performed when global players are working together with the whole world anticipating their results. One example is the German pharmaceutical company BioNTech that collaborated with the global Pharma giant Pfizer and Asian partner Fosun Pharma. They were the first to present positive results from their clinical trial for a Covid-19 vaccine.
The involvement of German companies in the development of vaccine and medicine emphasises the high reputation of German companies in terms of research and development, production, infrastructure and resources for the health care and life science sector.
In January 2021 the “Horizon Europe” incentive program for innovation and research is set to launch. This initiative supports European partnerships in different sectors, among them the health industry’s focus on cancer research.
Once a year, Germany hosts the world’s largest trade show in the health care and life science sector, MEDICA. The event focuses on medical technology, health, pharmaceuticals, and the medical supply industry, while connecting partners, collaborators, buyers and suppliers from all over the world.
Innovation and Transformation
Hardly any industry is changing as rapidly and deeply as the health care and life science sector. Particularly, artificial intelligence (AI), Big Data and digitalisation in general, are revolutionising the industry and paving its technology-based transformation. According to a study, conducted by Deloitte, more than 60% of global life science companies have invested over €16 million in AI research and are expecting to increase this effort in the future. These companies leverage AI to enhance their efficiency of processes and increase the quality of their products. In light of Covid-19, biopharma companies incorporated AI into their drug discovery research and development for example by searching for potential candidates to test the drug and vaccine. Furthermore, AI can ensure affordability and an increased focus on personalisation of health care products.
Challenges of the Sector
- Strict regulatory requirements for companies operating in the healthcare and life science industry through German and European Union directives, standards, and safety regulations
- Finding highly skilled, science-based workforce able to adapt to change quickly
- Product development life cycles are long → up to 12 years
Booming E-Health Market
In the future, AI will not only be a crucial part of the life science sector but continue to influence health care in general. Especially, the secure exchange and digitalization of patient data will enhance the quality and reduce the costs of healthcare in the future.
As the German population, especially the younger generations, have increasingly developed a health and fitness consciousness in the last years, they are open for innovative new solutions regarding their health. These market changes offer new opportunities for start-ups and established players to take advantage of investing in digitalization. As a result, the German parliament passed the Digital Care Act (DVG) in 2019 to promote digital health applications.
During Covid-19, one element of E-Health, Telemedicine, has experienced enormous growth in demand. Telemedicine stands for diagnostics and therapy measures through the use of telecommunication.
This aims to bridge distance and time intervals between doctors and patients or between consulting doctors. Telemedicine reduces problems such as medical staff shortages in rural areas or developing countries, as patients have access to virtual consultations with medical specialists through video calls. According to a study by PwC, more than ½ of the population can imagine communicating with their doctor via video instead of coming to his practice. This would allow doctors to attend more cases and will spare the patients time in the waiting room.
The Digital Patient File
Currently, the most relevant issue of the German healthcare system is the digital patient file. According to a study by McKinsey, the implementation of unified digital patient files would cut health care spending by more than 6 billion €. Countries such as Austria have already successfully implemented electronic patient files. Hereby, all patient information and documents are digitally collected and made available to all health care providers and institutions. Electronic prescriptions and artificial intelligence to support doctors are also intended to simplify the healthcare sector, increase its efficiency and cut costs.
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