Why health policy is also economic and national security policy

Dr. Daniel Steiners

This is not an obituary for Germany’s economic standing. It is an invitation to shift perspective: away from the language of crisis and toward a clearer view of our opportunities — and toward the confidence that we have more capacity to shape our future than the mood indicators might suggest.

For years, Germany seemed to be traveling along a self-evident path of success: growth, prosperity, the title of export champion. But that framework is beginning to fray. Other countries are catching up. Parts of our industrial base appear vulnerable to the pressures of transformation. And global dependencies are turning into strategic vulnerabilities. In short, the German model of success is under strain.

Yet a glance at Europe’s economic history suggests that moments like these can also contain enormous potential — if strategic thinking and decisive action come together. One example, which I find particularly striking, takes us back to 1900. At the time, André and Édouard Michelin were producing tires in a relatively small market, when the automobile itself was still a niche product. They could have focused simply on improving their product. Instead, they thought bigger; not in silos, but in systems.

With the Michelin Guide, they created incentives and orientation for greater mobility: workshop directories, road maps, and recommendations for hotels and restaurants made travel more predictable and attractive. What began as a service booklet for motorists gradually evolved into an entire ecosystem — and eventually into a globally recognized benchmark for quality.

In times of change, those who recognize connections and are willing to shape them strategically can transform uncertainty into lasting strength.

What makes this example remarkable is that the real innovation did not lie in the tire itself or merely even a clever marketing idea to boost sales. It lay in something more fundamental: connected thinking and ecosystem thinking. The decision to see mobility as a broad space for value creation. It was the courage to break out of silos, to recognize strategic connections, to deepen value chains — and to help define the standards of an emerging market.

That is precisely the lesson that remains relevant today, including for policymakers. In times of change, those who recognize connections and are willing to shape them strategically can transform uncertainty into lasting strength.

Germany’s industrial health economy is still too often viewed in public debate in narrowly sectoral terms — primarily through the lens of health care provision and costs. Strategically, however, it has long been an industrial ecosystem that spans research, development, manufacturing, digital innovation, exports and highly skilled employment. Just as Michelin helped shape the ecosystem of mobility, Germany can think of health as a comprehensive domain of value creation.

The industrial health economy: cost driver or engine of growth?

Yes, medicines cost money. In 2024, Germany’s statutory health insurance system spent around €55 billion on pharmaceuticals. But much of that increase reflects medical progress and the need for appropriate care in an aging society with changing disease patterns.

Innovative therapies benefit both patients and the health system. They can improve quality and length of life while shifting treatment from hospitals into outpatient care or even into patients’ homes. They raise efficiency in the system, reduce downstream costs and support workforce participation.

In short, the industrial health economy is not merely part of our health care system. It is a key industry, underpinning economic strength, prosperity and the financing of our social security systems.

Despite public perception, pharmaceutical spending has remained remarkably stable for years, accounting for roughly 12 percent of total expenditures in the statutory health insurance system. That figure also includes generics — medicines that enter the ‘world heritage of pharmacy’ after patent protection expires and remain available at low cost. Truly innovative, patent-protected medicines account for only about seven percent of total spending.

Against these costs stands an economic sector in which Germany continues to hold a leading international position. With around 1.1 million employees and value creation exceeding €190 billion, the industrial health economy is among the largest sectors of the German economy. Its high-tech products, bearing the Made in Germany label, are in demand worldwide and contribute significantly to Germany’s export surplus.

In short, the industrial health economy is not merely part of our health care system. It is a key industry, underpinning economic strength, prosperity and the financing of our social security systems. Its overall balance is positive.

The central question, therefore, is this: how can we unlock its untapped potential? And what would it mean for Germany if we fail to recognize these opportunities while economic and innovative capacity increasingly shifts elsewhere?

Global dynamics leave little room for hesitation

Governments around the world have long recognized the strategic importance of the industrial health economy — for health care, for economic growth and for national security.

China is demonstrating remarkable speed in scaling and implementing biotechnology. The United States, meanwhile, illustrates how determined industrial policy can look in practice. Regulatory authorities are being modernized, approval procedures accelerated and bureaucratic barriers systematically reduced. At the same time, domestic production is being strategically strengthened. Speed and market size act as magnets for capital — especially in a sector where research is extraordinarily capital-intensive and requires long-term planning security.

When innovation-friendly conditions and economic recognition of innovation meet a large, well-funded market, global shifts follow. Today roughly 50 percent of the global pharmaceutical market is located in the United States, about 23 percent in Europe — and only 4 to 5 percent in Germany. This distribution is no coincidence; it reflects differences in economic and regulatory environments.

At the same time, political pressure is growing on countries that benefit from the American innovation engine without offering an equally attractive home market or recognizing the value of innovation in comparable ways. Discussions around a Most Favored Nation approach or other trade policy instruments are moving in precisely that direction — and they affect Europe and Germany directly.

For Germany, the implications are clear.

Those who want to attract investment must strengthen their competitiveness.

Those who want to ensure reliable health care must appropriately reward new therapies.

Otherwise, these global dynamics will inevitably affect both the economy and health care at home. Already today, roughly one in four medicines introduced in the United States between 2014 and 2023 is not available in Europe. The gap is even larger for gene and cell therapies.

The primacy of industrial policy: from consensus to action — now

Germany does not lack potential or substance. We still have a strong industrial base, a tradition of invention, outstanding universities and research institutions, and a private sector willing to invest. Political initiatives such as the coalition agreement, the High-Tech Agenda and plans for a future strategy in pharmaceuticals and medical technology provide important impulses, which I strongly welcome.

A fair market environment without artificial price caps or rigid guardrails is the strongest magnet for private capital, long-term investment and a resilient health system.

But programs must now translate into a coherent action plan for growth.

We need innovation-friendly and stable framework conditions that consider health care, economic strength and national security together — as a strategic ecosystem, not as separate silos.

The value of medical innovation must also be recognized in Germany. A fair market environment without artificial price caps or rigid guardrails is the strongest magnet for private capital, long-term investment and a resilient health system.

Faster approval procedures, consistent digitalization and a determined reduction of bureaucracy are essential if speed is once again to become a competitive advantage and a driver of innovation.

Germany can reinvent itself, of that I am convinced. With courage, strategic determination and an ambitious push for innovation.

The choice now lies with us: to set the right course and unlock the potential that is already there.