The German Bundestag has passed, in its second and third reading, a legal amendment that will extend the price freeze on reimbursed drugs not subject to internal reference pricing until the end of 2017, among other significant pharma-related measures.
IHS Global Insight perspective | |
Significance | A legal amendment has almost completed its passage through the German legislature that will extend the price freeze on reimbursed medicines not subject to internal reference pricing until the end of 2017, among other measures. |
Implications | The German Ministry of Health has presented the continuation of the price freeze as a compensatory measure in light of the abandonment of the process of retroactive benefit assessments, which is also a part of the amendment. |
Outlook | Generics producers will be highly pleased with the amendment, while innovative producers are predictably unhappy with it, especially the continuation of the price freeze. The measure to make the reimbursement price the official price for calculating margins and co-payments, which is expected to mean that the lower reimbursement price could be used by countries that reference Germany for international reference pricing, rather than the higher list price, is also a major reason for concern among the innovative industry. |
On 21 February, the Bundestag passed, in its second and third reading, the 14th amendment to the fifth book of the German Social Code, which includes a number of important measures relating to pharmaceutical pricing and reimbursement (P&R) in Germany, most of which featured in the government's coalition agreement. However, there have been important changes and additions to these. The standout measure is the extension of the price freeze on reimbursable drugs until the end of 2017, although the coalition has opted to exempt medicines that are subject to internal reference pricing (festbetrag) from this. Overall, Germany's health minister Hermann Gröhe is estimating that the combined measures will result in annual savings of EUR650 million (USD892.7 million) for the statutory health insurance (GKV) funds. The press release outlining the measures included in the amendment can be accessed from the website of the German Federal Ministry of Health (MoH) here, in German.
Pharma P&R-related measures in amendment
Extension of price moratorium, re-setting of mandatory discount level: generics producers spared
The amendment will mean that the price freeze on reimbursable drugs, which has been in place since 1 August 2010 and was due to cease at the end of 2013 (but was temporarily extended until the end of the first quarter of this year, as the coalition had insufficient time to pass through a longer-term extension before the end of the year), will be extended until the end of 2017. It had been previously intended that this will apply to all medicines, including those subject to internal reference pricing (mostly generics), but, ultimately, the government has decided that the continued price freeze will not apply to medicines subject to internal reference pricing.
Furthermore, the mandatory discount due from pharmaceutical manufacturers on the prices of reimbursable drugs – with the exception of generics and off-patent medicines – is to be reset at 7%; between 1 August 2010 and 31 December 2013, it had stood at 16%, having been raised from its previous 6% level – it had been due to revert to 6% at the end of 2013.
End to retrospective benefit assessments
The amendment will also mean that the process of retrospective benefit assessments of reimbursed drugs that were marketed first in Germany, before the Pharmaceutical Market Restructuring Act (AMNOG) came into force at the beginning of 2011, under the AMNOG system will be definitively ended. The MoH justifies this decision on the grounds that the methodological and administrative burden of this process is unjustifiably high. It also states that because of the lost anticipated savings from the retroactive process, the extended price freeze is especially important.
Margins and co-payments to be calculated on basis of reimbursement price
The coalition has decided that the reimbursement price (erstattungsbetrag) of pharmaceuticals will be used as the basis of calculating margins for pharmaceutical wholesalers and pharmacies, as well as patient co-payments, rather than the list price. The reimbursement price, which is the basis of the final sale price of medicines, is generally lower than the list price, which is defined by producers. In the case of drugs that have gone through an AMNOG benefit assessment, margins and co-payments have until now been calculated based on the list price, which is set by producers before price negotiations. Therefore, this development will be unfavourable for all groups involved in the pharmaceutical industry, not least pharmaceutical companies, since it could mean that these lower prices will have an influence on prices in countries that reference Germany under international reference pricing (IRP).
Non-substitution list to be defined by G-BA
The coalition has also decided that because of the delays in agreement between the National Association of Statutory Health Insurance Funds (GKV-Spitzenverband) and the German Pharmacists' Association (DAV) on the drugs to be included in the non-substitution list for pharmacies in Germany, this task will be carried out by the Federal Joint Committee (G-BA; see Germany: 30 January 2014: Germany plans new legislation to end non-substitution list dispute).
Outlook and implications
Many of the measures included in the amendment appear in the coalition agreement, although there have been important changes made during its passage through the legislature (see Germany: 6 December 2013: New German government finalises healthcare plans featuring significant pharma-related measures). The amendment is expected to come into law from the beginning of April, after a final reading in the Bundestag during March.
The reaction from the innovative pharmaceutical associations to the amendment has been understandably critical, with particular focus on the price freeze. The generics association, Pro-Generika, while pleased that the government has decided to remove generics from the price freeze and increase mandatory discounts, maintains that the regulatory pressure on generics producers has not diminished, although at least it has not worsened. To some extent, it appears that the recent communications from Pro-Generika about the importance of generics, particularly their dominance in the market in volume terms, and the strong pressure on generics producers due to discount contracts and other mandatory rebates have paid off (see Germany: 11 February 2014: German pharma market boosted by 4.2% y/y rise in GKV reimbursement expenditure in 2013).
Regarding the decision to make the reimbursement price the official price used in calculating margins and co-payments, Swiss pharma major Roche is reported by Bloomberg Businessweek to be concerned about the change and its potential effect on prices in other markets because of IRP. Since the reimbursement price is lower – sometimes considerably lower – and this price, not the list price, will be reported to databases such as IMS Health in future, as the source states, this could set off significant price reductions in markets where German list prices have until now been referenced.