The "Contergan catastrophe" was pivotal for the introduction of a special licensing procedure for medicinal products in Germany. This sleeping pill with the active substance thalidomide was placed on the market in 1957 and withdrawn four years later after it was found that the drug had caused birth defects in newborn babies. This case showed clearly that the drug safety regulations in place then were insufficient. At that time, the medicinal products being marketed only had to be registered.

The pharmaceutical legislation was then reformed constitutionally in 1976 with the aim of extensive improvements in drug safety. Notably, the new Drug Law which came into force in 1978 introduced a licensing system with strict requirements regarding the proof of quality, efficacy, and safety of medicinal products. Thus, for the first time a national procedure for the surveillance of medicines had been introduced. Since then, the manufacturers of medicinal products have to prove both how the drug acts and, by way of pharmacological and clinical tests, that it is not dangerous. Furthermore, provisions for improved protection during clinical trials with medicinal products were issued and the liability of pharmaceutical companies was increased.

Against this background, the Institute for Drugs was founded in 1975 as part of the Federal Health Office (Bundesgesundheitsamt, BGA). After the dissolution of the BGA in 1994, three independent institutes emerged: the BfArM (which was assigned the tasks of the Institute for Drugs), the Robert Koch Institute, and the Federal Institute for Consumer Health Protection and Veterinary Medicine.

In May 2020, the BfArM and the German Institute for Medical Documentation and Information (DIMDI) were merged into one authority under the aegis of the BfArM. The aim was to combine the resources of both authorities and thus make the best possible use of the opportunities arising from the many developments in the health care system for the benefit of patients.