GERMANY: An Introduction to Healthcare
Overview
For over a century, Germany’s healthcare system has been defined by its statutory health insurance. Nowadays, approximately 74 out of 843 million inhabitants are covered by statutory health insurance, whereas only ten million patients are privately insured. The statutory health insurance funds spent more than EUR300 billion in 2024 on services for their insured. As a result, the statutory health insurance funds have an important impact on all stakeholders in the life sciences industry. This leads to a highly regulated life sciences sector with a major emphasis on the cost-benefit ratio of the services provided.
In addition to the density and quantity of regulations, healthcare is one of the most complex and rapidly changing regulatory branches. In-patient and out-patient services are regulated by national laws. Public and private hospitals, as well as out-patient service providers, mustalso follow regulations at the state level and need to deal with local authorities. Overall, legal advice for the healthcare industry must cover many areas. This obviously includes legal know-how and expertise on healthcare regulation and extends to, inter alia, mergers and acquisitions, antitrust and competition, public procurement and data protection issues.
Current Developments and Challenges for the Industry
The German healthcare sector offers attractive investment opportunities. Outpatient medical centres and nursing homes are the main targets for financial and strategic investors. Following market consolidation in radiology, laboratory medicine and dialysis services, the focus has shifted to investment opportunities for orthopaedic service providers. Over the past two years, the Minister of Health has reiterated the need for legislation that would prohibit private investors from acquiring medical care centres. This was based on the claim that private investors focus solely on their financial interests to the detriment of the health of their patients. It is also claimed that the expected profits outweigh the quality of care. This issue has sparked intense debate among stakeholders, and potential legislative obstacles must be anticipated. The Minister of Health has shelved these plans. As the German parliamentary elections and the formation of a new government will take place in February 2025, it is uncertain whether this issue will be revisited with a newly elected Minister of Health.
A major reform of hospital planning came into force at the beginning of 2025. Historically, in order for German hospitals to be reimbursed by the SHI for the treatment of insured patients, the hospitals had to be included in a “hospital plan” with the service area to which the treatment is assigned. Until now, the service areas have corresponded to medical specialties, but the reform will change this. The regulator will create further subdivisions within the medical specialties as well as groups of services (Leistungsgruppen). Hospitals will then be included in the hospital plan for these groups of services based on the general care needs within a certain area. As a result, some hospitals may be remunerated for a narrower range of treatments than before. The details of how the groups of services are to be formed are still to be regulated by law. The law also stipulates that a hospital will only be included in the hospital plan for a group of services if it provided a certain minimum number of treatments in that group of services in 2023. This minimum number has not yet been determined.
As a result, many hospital operators are facing uncertainty about whether and to what extent they will be allowed to provide inpatient services and how these services will be remunerated. As a result, there will be a great need for advice and litigation. The specifics of the second branch of hospital financing at the state level are also subject to this reform. Discussions of these aspects are heated and focus on generating ideas for the structure of a reformed funding system. Stakeholders are looking for advice on how to prepare for new regulations and how to adapt business models accordingly.
A hospital reform has already been implemented in North Rhine-Westphalia. This reform is the blueprint for the ongoing reform at the federal level. In North Rhine-Westphalia, the competent authorities issued administrative acts assigning groups of services to hospitals in December 2024. Of the 350 hospitals in the state, around 70 are reported to having taken legal action against these decisions.
As the pace of legislative activity accelerates towards the digitalisation of service providers themselves and their technical means of communication with all stakeholders, the challenges of designing business models in compliance with the new regulations must be addressed.
Many companies are developing marketplace models to provide prescription medicines through a combination of telemedicine (prescriptions made by physicians) and mail-order pharmacy delivery. These models must comply with a variety of different regulations including the law governing the medical profession, pharmacy and pharmaceutical law, advertising law and data protection regulations.
These models are subject to court decisions. Legal questions arise as to whether, and in what form, doctors involved in the marketplace may only prescribe medication based on a telemedicine consultation. The main question is whether a medical history questionnaire is sufficient for a thorough diagnosis, or whether at least a real-time video call is required.
Another point of contention before the courts is how pharmacies will be integrated into the marketplace. Only pharmacies are allowed to dispense prescription medicines to patients. However, the pharmacy law stipulates that patients must always be free to choose their pharmacy. Hence, a marketplace must not co-operate exclusively with one pharmacy. In addition, pharmacies are not allowed to enter into co-operations that result in the preferential supply of prescription medicines to certain patients. A way must therefore be found for the marketplace models to achieve the co-operation and communication with pharmacies necessary for the reliable and rapid supply of medicines within these framework conditions.
Online pharmacies have been re-entering the prescription drugs (Rx) market in Germany since electronic prescribing (eRx) was implemented in the country, but they continue to face opposition from brick-and-mortar pharmacies, which seek to undermine the online pharmacy business model through (i) legal action and (ii) lobbying for state intervention to decrease the economic attractiveness of such a business model.
Historically, out-patient services have mainly been provided by self-employed physicians. However, these physicians are often reluctant to invest in their own practices. Hence, stakeholders are constantly developing business models offering infrastructure and personnel so that physicians are able to run their practices according to a short-term model with lower financial risks. However, as existing regulations have not fully adapted to these models, legal advice is essential to navigate this changing landscape.
Finally, the proliferation of AI applications raises legal issues. The interaction between the AI Act and the Medical Device Regulation (MDR), as well as the financing of AI implementation, are particularly relevant. The protection of health data is also of particular importance. Questions also arise as to whether and how the data processed and generated in this context may and can be used by third part