Germany's Drug-Reimbursement Spending Growth Slows to 1% Y/Y in 2010, at USD44 Bil.

The amount spent on the reimbursement of medicines under mandatory health insurance—Gesetzliche Krankenversicherung (GKV)—in Germany increased by only 1% year-on-year (y/y) in 2010, according to the Arzneiverordnungs Report (drug regulation report; AVR) for 2011—which gives information about 2010—prepared by the Scientific Institute (WIdO) of the Allegemeine Ostkrankenkasse (AOK), the largest health insurance fund in Germany. Spending on the reimbursement of medicines reached a reported EUR32.0 billion (USD44.0 billion), representing a significant decline in the growth dynamic of public drug spending in the country, which in 2009 had increased by 4.8% y/y. The figures do not include spending on vaccines. The press summary of the report can be accessed, in German, here.

Drug Spending Grows Slower than Spending in Other Healthcare Areas

Spending on drug reimbursement by the GKV grew slower than that on healthcare as a whole, which was up 2.9% at EUR180.7 billion. Spending on hospital care grew a reported 4.5% y/y to EUR58.82 billion, and spending on dental treatment increased 2.2% y/y to EUR11.87 billion. Thus, the proportion of overall spending accounted for by drug reimbursement went down from 19.0% in 2009 to 17.7% in 2010.

Much Greater Savings Possible

According to the influential report, there are still considerably more opportunities for savings within the German drug reimbursement system, and it is estimated that by a more effective application of internal reference pricing, extra savings of EUR4.7 billion could have been made in 2010 on generics and "disputed" drugs. Furthermore, it estimates that on the basis of European price referencing savings of EUR12.1 billion could have been made.

German Prices Still Seen As Unacceptably High

The authors of the AVR point to a continuing discrepancy between the comparatively high cost of medicines in Germany and low costs in the United Kingdom and Sweden. Several examples of patent-protected medicines are given, including Abbott (US)'s rheumatoid arthritis drug Humira (adalimumab), which is reported to be 82.4% more expensive in Germany than in the United Kingdom, and AstraZeneca (UK)'s bipolar disorder and depressive disorder drug Seroquel (quetiapine), which is reported to be 36.1% more expensive—while it is emphasised that in the UK VAT is not charged on medicines, in contrast with Germany. Nevertheless, the system in place in the UK is portrayed in a highly favourable light by the AVR, also with regard to the prices of generics, which are seen as excessively priced in Germany. The UK and Sweden are seen as markets to emulate in this regard. Thus, a further price comparison is made between Germany and the UK for a number of generics or patent-expired drugs, with German prices reaching up to 211.7% higher than those in the UK in some cases, with the difference between several others in the high double figures. Indeed, the authors of the AVR estimate that, on average, the price of leading generics in Germany is 90% higher than in the UK.

Existing Regulatory Instruments Seen As Inadequate for Generics

The authors of the AVR are highly critical of the existing regulatory instruments in place in the generics market in Germany, pointing to what they call a lack of transparency, and criticising the rebate agreements and generic quotas, which they suggest lead to less transparency than if these mechanisms were not in place. They suggest that the major structural reform of the German pharmaceutical market passed in 2010, the AMNOG, cannot solve these problems, and that a separate AMNOG is needed for generics. They estimate that if UK prices of top-selling generics had been in place in Germany, some extra EUR3.3 billion could have been saved from the GKV's drug bill in 2010.

Outlook and Implications

Among the main reasons seen for the decline in the growth of drug-reimbursement spending by the GKV funds in 2010 are: the three-year price freeze on pharmaceutical prices introduced in August 2010, and the increase in the forced discounts on medicines not included in the internal reference-pricing system in Germany—in other words innovative medicines—from 6% to 16%, introduced at the same time.

While the structural reform of the German pharmaceutical market regulation (AMNOG) has made important steps to achieving the aims of reducing spending on drug reimbursement, its measures are clearly seen as inadequate by the authors of the AVR. Considering the fact that international (European) reference pricing is only being applied in a limited sense—with the possibility of a price being imposed on an innovative product on the basis of European price comparisons if no agreement is reached with the GKV funds—this is still very limited in its scope for savings.

The reported disparity between the prices of top-selling generics in Germany and in the UK is likely to motivate the authorities in Germany to look at ways to improve the regulatory mechanisms in place in the country today so that they will be able to bring these prices more into line with the comparison countries. While reductions in spending in 2010 connected to the savings from generic rebate contracts went up to EUR1.3 billion in 2010 from EUR846 million, they could have increased further. In the current economic climate, it is likely that more regulation in the area of pharmaceutical pricing and reimbursement will be on the way.