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Actually, the Lutheran church does have bishops and priests and deacons -- that is a hierarchy. They are closer, however, to the pentarchy of orthodoxy and earl Christianity than to the uniquely Roman concept of papacy. And the Lutheran church accepts the 2 Biblical sacraments (there are 5 others the Roman church accepts as well).
There were, of course, many differences between these two churches. Perhaps the two most important were differences in doctrine and differences in hierarchy.
In terms of hierarchy, the Lutheran church essentially had none. Secular rulers did exercise some control over the churches in their states, but there was no system of bishops and cardinals and popes in which one level had authority over the next. In terms of doctrine, the Catholic Church after the Council of Trent had reiterated its adherence to doctrines that were abhorrent to Lutherans. They reemphasized the importance of tradition as source of authority that was equal to scripture. They reemphasized that the Church was the only body that could interpret scripture. They upheld the validity of and the need for the sacraments. All of these positions made the Catholic Church very different from the Lutheran church.
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