Europe's pharmaceutical industry at risk? What Trump's policy means for 2025 and beyond
The pharmaceutical industry is experiencing an upswing worldwide, but European manufacturers are facing challenges: the new American administration could make access to the most important market more difficult – with serious consequences for the pharmaceutical industry.
Antidepressants encourage school shootings and COVID-19 vaccines are crimes against humanity – the claims of Robert F. Kennedy Jr. are part of the cacophony of colourful personalities in current US politics. What makes it so explosive is that Kennedy not only bears a famous name, the self-confessed anti-vaccinationist is also the designated health minister of the Trump administration. And the appointment highlights the possible consequences of Trump's policies for pharmaceutical manufacturers in Europe.
Slimming injections, cancer and Alzheimer's drugs, new biologicals – over the past two years, there have been many positive reports of new investment projects by pharmaceutical manufacturers in Europe and Germany. This trend is being driven not only by the development of new products, but also by specific location factors. Manufacturers are currently reaping the rewards of their long-standing development efforts: German manufacturers alone could receive approval for 40 new compounds by 2025. However, clouds are already on the horizon.
As early as 2024, the chemical-pharmaceutical industry was confronted with significant economic and geopolitical challenges worldwide. In both Germany and Europe, the sector faced structural adjustments, cost increases and global market dynamics. The global economy has not picked up as hoped, which is also reflected in the key data of the chemical-pharmaceutical industry. Since the second quarter of 2024, the industry has not been able to build on the good start to the year. This applies not only to the industry as a whole, but also to pharmaceutical manufacturers. Recent analyses show that sales of pharmaceutical products abroad have recently declined and production has fallen.
Germany: challenges for the location
According to the industry association VCI, the chemical-pharmaceutical industry in Germany presents a mixed picture. Although production increased by 2% in 2024, it is still 16% below 2018 levels. Pharmaceutical production in particular recorded a decline of 1.5%, due to supply chain problems, capacity bottlenecks and high location costs. Declining orders from Europe and the US reinforced this downward trend. The order situation remained weak and production capacities were only utilised at 75%. For four years, these figures have been below the economically viable level, resulting in the permanent shutdown of production facilities.
Germany's competitiveness suffers primarily from high production costs, energy prices and an increasing regulatory burden. Markus Steilemann, President of the German Chemical Industry Association (VCI), was highly critical of the political situation: ‘The Commission is regulating Europe into a standstill.’ The demand for bureaucracy reduction and targeted investments to increase the competitiveness of German locations was more urgent than ever in 2024. Chemical companies, in particular, are increasingly willing to relocate their innovation and production capacities abroad, especially to the USA and Asia, where better economic conditions prevail. China has recently invested heavily in its own pharmaceutical industry and is increasingly positioning itself as a competitor to established European and North American companies.
Europe: mixed developments in global competition
The European chemical-pharmaceutical industry also faced major challenges in 2024. According to the VCI, high regulatory hurdles for drug prices in many European countries and the increasing dependence on non-European raw material suppliers exacerbated the situation. Countries such as France and Italy recorded falling purchasing manager indices, indicating weak industrial activity. Nevertheless, Europe remained one of the main buyers of German pharmaceutical exports, although a decline in orders was also noticeable here.
However, the greatest uncertainties are looming from the USA – the largest and most important market for medical technology and pharmaceuticals worldwide, where around half of the global turnover in the pharmaceutical sector is generated. With a share of 16.4% of global exports, the USA is also the largest customer for pharmaceutical products from Germany. If the new US President Donald Trump is serious about his industrial plans, this will not be without consequences for European pharmaceutical manufacturers either. Trump not only plans to introduce a general tariff of around 10% on all imports, his policy also weakens global trade agreements and could lead to a fragmentation of the world economy. This would significantly reduce the planning security for European pharmaceutical companies. One possible consequence: research and production could increasingly be relocated to the USA. In the German pharmaceutical industry alone, around 28% of jobs depend on exports to the USA.
However, it is difficult to assess how real these fears are – Trump's political manoeuvres have been too unpredictable in the past – and the EU Commission is already threatening countermeasures. In addition, the EU is an important innovation area for the pharmaceutical industry. Projects such as the funding of digital health applications (DiGA) and an increased focus on sustainable production methods characterise the trends. Politicians have also recognised this and are supporting the industry's efforts, for example in Germany with the National Pharma Strategy implemented in 2024.
Trends and innovations as the key to the future
Megatrends such as digitalisation, sustainability and biotechnology are increasingly shaping the chemical-pharmaceutical industry. Research and development (R&D) remain central areas. According to the BPI, German pharmaceutical companies continue to invest around 16% of their turnover in innovative technologies and products. Biopharmaceuticals, personalised medicine and digital health solutions such as DiGA are at the centre of the innovation agenda.
The green transformation is another key trend. The pressure to make chemical and pharmaceutical processes and products more environmentally friendly is leading to intensive investment in sustainable technologies. The integration of artificial intelligence (AI) into production and R&D processes is seen as a key innovation to enable efficiency gains and reduce production costs.
Cautious optimism for 2025
The outlook for 2025 is cautiously optimistic. The VCI predicts a small increase in production of 0.5% for the chemical-pharmaceutical industry in Germany. While the pharmaceutical segment could experience a slight recovery, the chemical segment will probably stagnate. Worldwide, the market continues to be driven by strong demand for healthcare services and new drugs. In the current ‘Pharmaceutical Chemicals Global Market Report 2025’, the market research company The Business Research Company forecasts an annual growth rate of 7.4% by 2029.
Conclusion: The challenges of 2024 have revealed the structural weaknesses and need for adjustment in the chemical-pharmaceutical industry in Germany. Above all, political uncertainties are currently slowing down the expansion of the industry. The industry, accustomed to success, is facing a strong headwind from US trade policy and tighter regulations. But the strength of the European pharmaceutical industry – particularly in innovation and research – gives cause for hope. The industry's R&D share of 10 per cent of production value is three times higher than the industry average. The realignment of production processes and the digital transformation are opening up promising prospects. Politically, the coming years are likely to be turbulent – or as a journalist once wrote: ‘Trump is unpredictable – and proud of it.’