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Building the “World's Pharmacy”: The Rise of the German Pharmaceutical Industry, 1871–1914

Published online by Cambridge University Press:  15 April 2015

Tobias Cramer
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Abstract

The German pharmaceutical industry dominated global drug creation from the late nineteenth century to World War I. Most of the industry's products were based on extensive scientific research. However, the research intensity of products varied across companies and intensified over time. A main contribution of this article is thus to identify different groups of firms within the industry and provide an analysis of their product portfolios before 1914. This essay embeds scientific developments in a coevolutionary framework of science, firms, and institutions and shows that the industry's research capabilities were complemented by other important factors for corporate success.

Type
Research Article
Information
Business History Review , Volume 89 , Issue 1 , Spring 2015 , pp. 43 - 73
Copyright
Copyright © The President and Fellows of Harvard College 2015 

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20 See Table 3, which excludes the unavailable data of three firms. Overall specialty sales were still higher.

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39 Merk, Die Absatzgestaltung der Erzeugnisse, 59. While Murmann calculated a failure rate of 78 percent for the German dye industry, less than 20 percent of all former pharmacies enumerated by Huhle-Kreutzer failed; see Murmann, Knowledge and Competitive Advantage, 202, and Huhle-Kreutzer, Die Entwicklung arzneilicher Produktionsstätten.

40 In 1910, 7 percent of sales were generated with galenicals and only 1.5 percent with specialties. Gehe to Merck, 17 Mar. 1913, H5/33, MA; Gehe to Fuchs, 19 Oct. 1910, H5/10a, MA.

41 For a list of Gehe's specialties, see Reipha, Grüne Liste der Reipha, 230–33, or Freia-List, 002-010, Schering Archives of Bayer AG, Berlin (hereafter SchA).

42 Gehe to Merck, 18 Feb. 1910, H5/10c, MA.

43 Boehringer, C. F. GmbH, Denkschrift der C. F. Boehringer und Soehne, G.m.b.H., Mannheim-Waldhof, anlässlich ihrer 75 jährigen Bestehens, 1859–1934 (Mannheim-Waldhof, 1934), 3Google Scholar; Siebler, Michael, Mit Menschen für Menschen: Aus der Geschichte des forschenden Pharmaunternehmens Boehringer Ingelheim (Ingelheim am Rhein, 2010), 16Google Scholar; memorial document [Gedenkblatt] C. F. Boehringer and Soehne 1859–1909, no shelf number, Roche Deutschland Archives, Mannheim (hereafter RDA).

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47 Ibid., 18. Therefore, Knoll is listed among former wholesalers here.

48 The share of specialties in total sales at Knoll ranked second behind the dye producers; see Table 2.

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53 Wimmer, “Wir haben fast immer was Neues,” 149.

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57 Annual report of the AGFA research laboratory for 1893, 5/E.A.26, BAL. For a list of AGFA's specialties, see Vershofen, Wilhelm, Die Anfänge der chemisch-pharmazeutischen Industrie: Eine wirtschaftshistorische Studie, 1870–1914, Bd. 3 (Berlin, 1958), 90Google Scholar.

58 Total sales in medicines in 1913 were 585,000 marks (AGFA).

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64 Siebler, Mit Menschen für Menschen, 26.

65 Ibid., 42. Rivalry over the name with the company C. F. Boehringer ended in a Supreme Court decision in 1908 whereby C. H. Boehringer was allowed to also use its name for the sale of alkaloids.

66 Siebler, Mit Menschen für Menschen, 64. See also Wenzel, Otto, ed., Adressbuch und Waarenverzeichnis der chemischen Industrie des Deutschen Reichs (Berlin, 1906), 48Google Scholar, which lists morphine, cocaine, and codeine.

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74 Wimmer, “Wir haben fast immer was Neues,” 372.

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83 A net profitability for Hoechst in 1884 may only be estimated for Antipyrin. Deducting an inventor's royalty of 10 percent generates a net profitability of 12.3 percent (Wimmer, “Wir haben fast immer was Neues,” 161).

84 Although bookkeeping was not yet standardized throughout all companies, gross profits were usually calculated by deducting production costs (raw materials), packaging, freights/customs, and agency commissions from sales. Further deductions of inventors' royalties and advertising resulted in net profits.

85 An average net profitability for the years 1896–1904 at Bayer was 17.4 percent (dyes) vs. 32.9 percent (pharmaceuticals) (Mr. H. Cassel, statistics book, 10/1.2, 53, 75, BAL).

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90 Merck Annual Report for 1899–1900, F3/4a, 10, MA, my translation. At Merck in 1900, the six major wholesale products generated a gross profit/sales ratio of only 15 percent.

91 Memorandum regarding pharmaceutical specialties, Gehe, 11 Nov. 1911, H5/30, MA, my translation.

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94 Ibid., 71. It fell to 2–3 percent in 1927 (Winckelmann, Die Arzneispezialitäten, 54).

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96 Gerhard Sporleder, Der deutsche Drogenhandel in wirtschaftsgeschichtlicher Entstehung (1921), appendix 3.

97 Riedel and Gehe joined Mediwa in 1912. Merck Annual Report 1911 and 1912, Abt. D I, F3-15a and F3-16a, MA; Rosenberg, Pharmazeutischer und kosmetischer Spezialitäten, 73; Daum, Albert, Lagerhaltung und Einkauf im pharmazeutischen Großhandel (Würzburg, 1941), 89Google Scholar; Wüllrich, Geschichte der Hageda, 144; Salzmann, “Zur Entstehungsgeschichte der Handelsgesellschaft,” 1081; Letter, Riedel to IG Pharma, 4 Dec. 1916, FA 083, AKA; Wenzel, Otto, ed., Adressbuch und Waarenverzeichnis der chemischen Industrie des Deutschen Reichs (Berlin, 1912), 39 (part 3)Google Scholar.

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99 Heyden feared “that some plants . . . work unprofitably for a period of war which precedes an agreement among manufacturers” (Heyden Annual Report 1910, U 107 Sign. 13, 2, SWA, my translation).

100 Merck Annual Reports, Conventionen, various years, F3-1a (1896–1897) to F3-17a (1913), MA; Böttinger, “‘Böttingerschrift,’” 441, UNT 600, BAL; Kretzschmar, Hermann, Die Kartellbewegung in der chemischen Industrie (Heidelberg, 1921), 155–57Google Scholar.

101 Exact values are 31.7 percent (specialties) vs. 15.5 percent (cartelized products).

102 For a detailed history of IG Pharma, see Burkert, Klaus, Die Deutsche “Pharmazeutische Interessengemeinschaft” (1906–1918), Ein Beitrag zur Firmenpolitik der pharmazeutisch-chemischen Industrie bis zum Ende des Ersten Weltkrieges (Stuttgart, 1990)Google Scholar.

103 Merck Annual Report 1907, F3-11a, 3, MA; Mr. Wilhelm Conzen, report, F6/7, 54, MA.

104 Considerations regarding the annual results in Darmstadt, 12 Dec. 1914, in Annual Report (IG) 1913, R15/14a, MA.

105 Although some companies showed a high share of specialties in total pharmaceutical sales even before World War I (Table 2), specialties became the dominating pharmaceutical product category in the interwar period, on industry average. For their share in total pharmaceutical sales between 1913 and 1938 at Merck, Schering, Ciba, Roche, Heyden, IG Farben, and Sandoz, see Cramer, Der geborene Markenartikel, 97.

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114 Cartel agreements [Syndikatsverträge] regarding manufacture and sale of Antipyrin, CIBA RE 2.03, Novartis Archives, Basel.

115 Merck thus called its specialties “patent AND specialty products.” For Merck's definition, see Spezial-Archiv, Die Chemische Industrie im Deutschen Reich 1939/40 (Berlin, 1939), 341Google Scholar.

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125 Duguid, Paul, “French Connections: The International Propagation of Trademarks in the Nineteenth Century,” Enterprise and Society 10, no. 1 (2009): 3Google Scholar.

126 In 1888, the German Supreme Court ruled that a foreign brand enjoyed protection even if it was not admissible according to German trademark law. Kohler, Josef, “Der Schutz gewerblicher Urheberrechte insbesondere der Patent-, Muster- und markenschutz (Gewerbe. III Teil),” in Volkswirtschaftslehre: In zwei Bänden, ed. Schönberg, Gustav, 3rd ed. (Tübingen, 1891), 804Google Scholar.

127 The British patent law of 1883 had already allowed labels to include words, but it did not allow foreign brands to be registered.

128 Rhenius, Wilhelm, “Was kann als Waarenzeichen geschützt werden?” Zeitschrift für Angewandte Chemie 10, no. 5/6 (1897): 181Google Scholar; Freund, S., “Bedeutung, Umfang und Wirkung des Wortzeichenschutzes nach dem Deutschen Reichsgesetze zum Schutz der Waarenbezeichnungen vom 12. Mai 1894,” Archiv für bürgerliches Recht no. 11 (1896): 292Google Scholar.

129 Freund, “Bedeutung, Umfang und Wirkung,” 293.

130 Hickel, “Das Kaiserliche Gesundheitsamt”; Seckelmann, Industrialisierung, Internationalisierung, 201; Wimmer, “Wir haben fast immer was Neues,” 33.

131 Speech, Köbner, B1-750/1, 1, SchA.

132 Kobrak, National Cultures, 249.

133 Roche to Zimmer, 29 Nov. 1905, VW.3.2.101805f, 3, Hoffmann-La Roche Archives, Basel (hereafter HAR). The petition is reprinted in Die Chemische Industrie no. 3 (1906): 54–58.

134 N. N., “Vereinsangelegenheiten,” Die Chemische Industrie 28, no. 19 (1905): 545Google Scholar; N. N., “Protokoll der 28. Hauptversammlung des Vereins zur Wahrung der Interessen der chemischen Industrie Deutschlands E.V., abgehalten in der Stadthalle zu Heidelberg am 22. September 1905,” Die Chemische Industrie 28, no. 20 (1905): 610Google Scholar.

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136 Ibid., 607.

137 Protocol of the meeting on 1 Dec. 1905, 170/2.1, BAL.

138 Exposé by E. Merck, 1 Sept. 1916, FA 083, 27, AKA.

139 The names were “Vereinigung zur Bekämpfung von Auswüchsen im Inseratenwesen” (1905), “Inserentenverband chemisch-pharmazeutischer Fabriken” (1906), and “Verband der chemisch-pharmazeutischen Großindustrie e.V.” (Cepha, 1908).

140 For political lobbying, the companies also employed two associations not specific to the chemical industry: the Markenschutzverband (Verein der Fabrikanten von Markenartikeln e.V.) and the Deutsche Verein für gewerblichen Rechtschutz. For more information, see Cramer, Der geborene Markenartikel.

141 Vershofen, Die Anfänge, 132; J. D. Riedel, Remarks regarding the exposé written by Merck, FA 083, 18, AKA; “Zentralstelle für markenschutz,” in Annual Report Pharmaceuticals 1908, 2/001, HoeA.

142 See Cramer, Der geborene Markenartikel, for a detailed description of the industry's international activities.

143 N. N., “Protokoll der 28. Hauptversammlung,” 590.

144 Speech, Köbner, 3, 5.

145 This is reflected in the original name, “Zentralauskunftsstelle für Markenschutz” (my emphasis). It was changed in 1907 to “Zentralstelle für Markenschutz.”

146 For the prehistory, see Cramer, Der geborene Markenartikel.

147 Hoechst to members of Zema, 8 Nov. 1909, H0000984, HoeA, my translation.

148 The treaty was revised in 1916, 1927, and 1931 (Vershofen, Die Anfänge, 140).

149 Roche to Zimmer, 27 Nov. 1905, VW.3.2.101805f, 3, HAR.

150 N. N., “Vereinsangelegenheiten: Aenderungen im Mitglieder-Verzeichnis,” Die Chemische Industrie 29, no. 2 (1906): 29Google Scholar.

151 Peyer, Hans C., Roche—Geschichte eines Unternehmens: 1896–1996 (Basel, 1996), 49Google Scholar.

152 Ciba joined Cepha soon after the initial meeting. It had joined Zema in 1909 and Freia from the beginning.

153 This phrase was coined by Wimmer, “Wir haben fast immer was Neues,” 101. Only at the end of the 1920s, when Roche's Berlin subsidiary merged with its former plant in Grenzach (Cewega, then independent), a Freia member since 1922, was international scope in doubt. It was resolved by Roche Basel rejoining Freia.

154 Other associations, such as the “Markenschutzverband,” also had Swiss members. Fritz Heimann, Max Gabriel, and Verband der Fabrikanten von Markenartikeln e.V. Abteilung Chemisch-pharmazeutische Kosmetische und Nährmittel-Industrie, Zu den Paragraphen 6, 7, 8 und 15 des Entwurfs eines Gesetzes gegen Mißstände im Heilgewerbe (Berlin, 1911), 36–38Google Scholar.

155 Speech, Köbner, 9, my translation. The 1910 treaty is reprinted in Annual Report Pharmaceuticals 1909, Annex II, 2/001, HoeA; revisions of 1912, 1916 in 367/292, BAL and of 1927 in 19-100, SchA. For the 1931 treaty, see Vershofen, Die Anfänge, 140.

156 To become an innovation, an invention needs to be successfully incorporated into the production process. Pierenkemper, Toni, Unternehmensgeschichte: Eine Einführung in ihre Methoden und Ergebnisse (Stuttgart, 2000), 132Google Scholar.

157 Wimmer, “Wir haben fast immer was Neues,” 228, 322.

158 Ibid., 102.

159 Sales, Jan.–Dec. 1914, 1915, and 1916, 6/ [RFL 11], HoeA; Sales per product 1913 and 1914, U 107 Sign. 60, SWA.

160 According to §1 of the 1927 Freia treaty, an entry should be omitted if the product was not marketed for two years. The voiding in German patent law had been changed for German patent holders into a mandatory license in 1911. Seckelmann, Industrialisierung, Internationalisierung, 234.

161 Heyden's “Calomelol” was omitted only in 1930; see Freia-List.

162 Annual Report (IG) Knoll 1917, Annex Nr. 6, R15/14e, MA.

163 Product sales data exist only for Roche Basel (excluding Cewega), FR.2.3.1-104482, HAR.

164 According to Ashish Arora, Ralph Landau, and Nathan Rosenberg, what generally differentiated the German chemical industry from foreign competitors was its willingness to invest in the commercialization of science-based innovations; see Arora, Landau, and Rosenberg, “Dynamics of Comparative Advantage in the Chemical Industry,” in Sources of Industrial Leadership: Studies of Seven Industries, ed. Mowery, David C. and Nelson, Richard R. (Cambridge, U.K., 1999), 248Google Scholar.

165 Murmann, Knowledge and Competitive Advantage, 214.

166 Ibid., 52.

167 Taking 1912–1913 as an example, Bayer employed twelve, Hoechst seven, and Merck eight researchers. Burhop, “Pharmaceutical Research in Wilhelmine Germany,” 482; Meyer-Thurow, Georg, “The Industrialization of Invention: A Case Study from the German Chemical Industry,” Isis 73, no. 3 (1982): 371Google Scholar; Reinhardt, Carsten, Forschung in der chemischen Industrie: Die Entwicklung synthetischer Farbstoffe bei BASF und Hoechst, 1863 bis 1914, 1st ed. (Freiberg, 1997), 286Google Scholar.

168 Such as Liebreich, Filehne, Schmiedeberg, Baumann, Kast, v. Mehring; see Eichengrün, A., “25 Jahre Arzneimittelsynthese,” Zeitschrift für Angewandte Chemie 26, no. 7 (1913): 49Google Scholar.

169 Ibid., 50; Winckel, Max, “Ueber den Wert pharmakologischer Arbeiten für die pharmazeutische Chemie,” Apotheker-Zeitung (1909): 381Google Scholar.

170 Hickel, Erika, “Die Grundlegung der industriellen Arzneimittelforschung an der Deutschen Reichs-Universität Straßburg 1872,” in Biochemische Forschung im 19. Jahrhundert: Mit einer Bibliographie der Quellen, ed. Hickel, Erika (Braunschweig, 1989), 206Google Scholar. Bayer employed a pharmacologist in 1890 for the first time. Schering conducted physiological animal experiments beginning in 1902. See Wimmer, “Wir haben fast immer was Neues,” 118, 125, 175, 208.

171 Hickel, “Die Grundlegung,” 211.

172 Hickel (ibid., 202) lists prominent Strasbourg researchers and their industrial partners.

173 This collaboration is said to have facilitated the first scientific application of pharmaceuticals. Letter from Hoechst to Kaiserliche Gesundheitsamt, reprinted in Hickel, Erika, “Die industrielle Arzneimittelforschung am Ende des 19. Jahrhunderts und die Durchsetzung einer reduktionistischen Biologie,” in Materialistische Wissenschaftsgeschichte: Naturtheorie und Entwicklungsdenken, ed. Bonik, Klaus (Berlin, 1981), 139Google Scholar.

174 Burhop, “Pharmaceutical Research in Wilhelmine Germany,” 484.

175 At Merck, the shares were between 8 and 50 percent (ibid., 490).

176 Treue, Wilhelm, “Carl Duisbergs Denkschrift von 1915 zur Gründung der ‘Kleinen I.G.,’” Tradition: Zeitschrift für Firmengeschichte und Unternehmerbiographie 8, no. 5 (1963): 212Google Scholar.

177 Burhop, “Pharmaceutical Research in Wilhelmine Germany,” 493.

178 For the timing of cooperation, see Liebenau, Jonathan, “Industrial R&D in Pharmaceutical Firms in the Early Twentieth Century,” Business History 26, no. 3 (1984): 342Google Scholar.

179 Furman, Jeffrey L. and MacGarvie, Megan, “When the Pill Peddlers Met the Scientists: The Antecedents and Implications of Early Collaborations between U.S. Pharmaceutical Firms and Universities,” Essays in Economic and Business History: The Journal of the Economic and Business Historical Society 26 (2008): 134Google Scholar; Parascandola, John, “Industrial Research Comes of Age: The American Pharmaceutical Industry, 1920–1940,” Pharmacy in History 27, no. 1 (1985): 17Google Scholar.

180 Gabriel, Joseph M., “A Thing Patented is a Thing Divulged: Francis E. Stewart, George S. Davis, and the Legitimization of Intellectual Property Rights in Pharmaceutical Manufacturing, 1879–1911,” Journal of the History of Medicine and Allied Sciences 64, no. 2 (2009): 170Google Scholar.

181 Ibid., 145, 171. By 1910, however, a substantial number of physicians had come to accept the legitimacy of pharmaceutical patents.

182 Ibid., 136.

183 Ibid., 137; Parascandola, “Industrial Research Comes of Age,” 18; Rasmussen, Nicolas, “The Drug Industry and Clinical Research in Interwar America: Three Types of Physician Collaborator,” Bulletin of the History of Medicine 79, no. 1 (2005): 56Google Scholar; Weiner, Charles, “Patenting and Academic Research: Historical Case Studies,” Science, Technology and Human Values 12, no. 1 (1987): 53Google Scholar.

184 Burhop, “Pharmaceutical Research in Wilhelmine Germany,” 493.

185 Contract, Dr. Goldmann, 20 July 1897, 271.2.1, BAL; Merck Annual Report 1921, Advertising Dept. [Marketing], F3-25e, MA; Wüst, Erinnerungen, no shelf number, 19, HoeA.

186 Annual Report 1921, Advertising Dept. [Marketing].

187 Ibid., 2; Greiling, Walter, Im Banne der Medizin, Paul Ehrlich: Leben und Werk (Düsseldorf, 1954), 129Google Scholar; Wimmer, “Wir haben fast immer was Neues,” 190.

188 Only 5 percent of newly developed substances went to clinical research; after the clinical tests, only 0.5 percent of the initially discovered medicines were actually marketed. Boehringer, C. F. GmbH, C. F. Boehringer & Soehne G.m.b.H. Mannheim-Waldhof (gegründet 1859) [1859–1934] (Mannheim, 1934), 21Google Scholar.

189 Even Bayer considered Knoll (and others) as a model. Bartmann, Zwischen Tradition und Fortschritt, 104.

190 Annual Report 1921, Advertising Dept. [Propaganda], 15; Knoll AG, Knoll's Mitteilungen, 7.

191 Robson, Michael, The Pharmaceutical Industry in Britain and France, 1919–1939 (London, 1993), 399Google Scholar; Rasmussen, “The Drug Industry and Clinical Research,” 55.

192 Henderson, Rebecca, Orsenigo, Luigi, and Pisano, Gary P., “The Pharmaceutical Industry and the Revolution in Molecular Biology: Interactions among Scientific, Institutional, and Organisational Change,” in Sources of Industrial Leadership: Studies of Seven Industries, ed. Mowery, David C. and Nelson, Richard R. (Cambridge, U.K., 1999), 270Google Scholar.