IHS Global Insight Perspective | |
Significance | The plan targets both generics and patented drugs by reinforcing rebate contract schemes and imposing pricing negotiations for patented drug makers. |
Implications | Expected to enter into force in January 2011, the reform marks a turning point for the German pharmaceutical market, and especially for innovative firms which were until now protected by an advantageous free-pricing scheme. |
Outlook | The new cost-benefit methodology of the IQWiG is set to play an increasing role as patented drugs will from 2011 be scrutinised by the German watchdog in order to help the GKV negotiate prices with pharmaceutical companies. |
In 2009, drug spending rose 5.3% year-on-year (y/y), a 1.5-billion-euro increase compared with 2008. With patented drugs being identified as the main growth driver, the reform is not surprisingly focused on branded drug producers.
Reimbursement of Innovative Medicines
The new reform, unveiled on Friday (26 March), maintains the free market access for innovative products but introduces the obligation for drug makers to negotiate prices with Germany's public health insurers within the first year after marketing approval. In that context, the role of the Federal Joint Committee on Healthcare (G-BA) and of the Institute of Quality and Efficiency in Healthcare (IQWiG) are likely to be strengthened to include the cost-effectiveness assessment of new launched drugs. Medicines demonstrating no added value compared with alternative treatments will be directly included in Germany's reference pricing system while prices of those showing added value will be at the centre of negotiations between the GKV and pharmaceutical companies. Prices negotiated within one year of marketing approval will have effect for all the GKV funds in the country. If no agreement is concluded within three months of benefit assessment, the GKV will set a price based on international reference prices.
Reference Pricing System
Meanwhile the reference pricing system, which covers approximately 60% of medicines reimbursed under the GKV public insurance system, is maintained with drugs priced at least 30% below the reference price being eligible to have patient co-payments removed. However, drugs included in the reference pricing system will be increasingly targeted by discounted contracts. While this should yield valuable savings for Germany's public health insurance scheme, patients will still have the possibility to choose non-discounted medicines in exchange for additional co-payments.
Outlook and Implications
The inclusion of branded pharmaceuticals in the reference pricing system is currently limited to a defined number of therapeutic classes. Therapeutic areas currently included in the reference-pricing system are:
- Proton pump inhibitors;
- Angiotensin II antagonists;
- Statins;
- Triptans;
- Sartans;
- Alpha glucosidase inhibitors;
- Triazole antifungals;
- Antibacterial fluoroquinolones;
- Macrolides;
- Serotonin 5HT3-receptor antagonists (for the treatment of nausea and vomiting);
- Anti-anaemics;
- Heparins;
- ACE inhibitors;
- Antagonists;
- Beta 2-sympathomimetic drugs;
- Prostaglandin synthetase-type NSAIDs; and
- Sulphonylurea diabetes treatments.
If the project law of the coalition government passes, the number of medicines included in the scheme will be much larger as all classes of branded medicines will be eligible for reference-pricing. This will strengthen the work of both the G-BA and the IQWiG, which are currently only reviewing drugs included in the reference scheme as newly licensed medicines are generally not assessed by Germany's healthcare authorities. Proving the added value of a drug will be key to ensure being exempted from the reference pricing scheme, which fixes a maximum reimbursement ceiling. This will be particularly challenging for cancer drugs makers, which will have to face the stringent criteria of the IQWiG to secure positive pricing and reimbursement levels (see Germany: 19 March 2010: IQWiG Regards Overall Survival as Only Valid Endpoint in Oncology).
The system of free drug pricing has been increasingly seen as a major barrier to reducing drug spending in Germany where average prices are growing at a fast pace and are elevated compared with its European neighbours (see Germany: 22 February 2010: Concerns Raised over Sharp Increase in Flu Vaccine Prices in Germany). International reference pricing is set to play an important role in price negotiations, from 2011. Germany is a reference for many European countries, while having, at the moment, no international reference. In that context, prices in the United Kingdom and in France are most likely to be the basis for the determination of price levels in the country. The reform will therefore not only have a significant impact in Germany but also in Europe where Germany, along with France and the United Kingdom, is considered as one of the most influential reference countries in terms of pricing.
Meanwhile, generic versions and reference-priced products are also targeted by the coalition government which aims at multiplying the number of mandatory rebate schemes thanks to the inclusion of additional branded products in the reference-pricing scheme. This development has been feared by the pharmaceutical industry since the introduction of the generic rebate scheme in 2008 which clearly favours the use of generic versions. Nearly all generic versions are targeted by the schemes and new rebate contracts are sealed as soon as copycat versions of newly off-patent drugs are rolled out. If these measures are introduced, branded drug makers will face a tighter competition in Germany where pressures on prices are likely to be a blow for the pharmaceutical market in coming years.