By Jens Leutloff, Senior Consultant
The discussion of cost containment measures in the German healthcare system does not seem to stop, and could gain new momentum after Germany’s federal election in September.
Once again, the idea to shorten the free pricing period in Germany was raised recently. During a virtual event celebrating 10 years of AMNOG, Josef Hecken, chair of Germany’s health technology assessment (HTA) body G-BA, suggested to limit free pricing of new drugs to 6 months instead of 12 months. The purpose of this suggestion is not, in his words, “to annoy the pharmaceutical industry, but to keep our ability to afford new innovative expensive drugs in the future”.
The current legislation allows manufacturers to freely set the price of a new drug for the first 12 months, while G-BA conducts their benefit assessment (6 months duration) and while price negotiations with the sick funds’ umbrella organisation, GKV-SV, are ongoing (max. 6 months duration).
Hecken suggests to keep this process, but to apply the negotiated price retroactively from the time G-BA gave their benefit rating (i.e., 6 months after launch). Manufacturers would have to pay a rebate to sick funds for months 7-12 if the negotiated price is lower than the launch price. The idea to limit free pricing was raised by Hecken and also by politicians before, as early as 2016.
Due to increasing financial pressure on Germany’s sick funds, other cost containment measures are being discussed as well. These include the removal of the automatically granted “additional benefit” rating for Orphan Drugs (ODs). At another conference in December 2020, Hecken demanded higher evidence requirements for ODs, which according to him make for 0.04% of prescriptions in Germany, but 7.3% of drug costs. Putting ODs under more scrutiny has also been demanded before, and this option could become more likely after Germany’s federal election in September 2021. The outcome may depend on which parties will be in power.
With ca. 6 months to go, the result of the election is still speculative. However, it seems likely at the moment that either a coalition of CDU (conservative party) and Die Grünen (green party) will be formed, or a coalition of Die Grünen, SPD (social democrats), and FDP (liberal party).
Die Grünen and SPD are generally proposing a more regulated, less market-oriented approach to healthcare. They would likely be open to cost-containment measures and stricter regulation of drug prices. While CDU and FDP generally stand for a more liberal approach, they were the ones who introduced the AMNOG law in 2010, bringing an end to free pricing of new drugs in Germany. They also introduced a price moratorium in 2010, which essentially makes price increases impossible, and increased the mandatory discount for patent protected drugs from 6% to 16% (which is now back at 6%). Therefore, while CDU and FDP may appear to be more industry-friendly, manufacturers should not expect too much of them.
Cost containment in the German healthcare system is an ongoing discussion, which moved into the background for a while, as sick funds had plenty of reserves. As the financial pressure increases, a more restrictive approach is likely after the federal election. Manufacturers should monitor developments as limitations to free pricing and increased scrutiny of ODs are realistic options. Moreover, any changes to the free pricing can also have implications on EU launch pricing strategy and launch sequencing.
AMNOG is the abbreviation of a law which came into effect in 2011 and which established G-BA’s early benefit assessment procedure, as well as the subsequent price negotiations between manufacturer and the sick funds’ umbrella organisation, GKV-SV.
Orphan Drugs are currently granted an “additional benefit” rating by law, which means more leniency in terms of evidence requirements. Recognition of an additional benefit is a requirement to negotiate a price premium with GKV-SV; without additional benefit, the price of a new drug is limited to the price of the appropriate comparative therapy.