GERMAN PRICING REFORM SPOOKS INDIAN DRUGMAKERS

Following reports that several Indian generics makers were to target the German generic medicines sector, recent regulatory changes in the country could oblige potential investors to re-evaluate acquisition plans.

Germany's new reference pricing legislation sets a maximum price for pharmaceuticals, with patients paying any extra cost above this ceiling out-of-pocket. The changes are expected to force manufacturers to lower prices, implying lower margins, and the reform reportedly privileges products offering therapeutic advantages at the expense of non-innovative medicines.

Plans to reduce Germany's drugs bill by EUR1bn (US$1.18bn) were announced in December 2005, and it was hoped the latest package of measures would boost generics makers. Germany's generics market was valued at US$12.6bn in 2004, but some observers speculate that growth prospects are limited, given that the sector already accounts for roughly 30% of market value.