German Confidential Net Pricing: Is the Return on Investment Worth It?

Articles
Written By Adam Foster

Overview

Article by Georgina Powell & Jason King, Windrose Consulting Group

Historically, Germany has been the only country in Europe to maintain transparent list-net pricing. However, the 2022 AMNOG guardrails set the pricing opportunity relative to the G-BA outcome, whereby “No Additional Benefit” rating can result in price parity with off-patent comparators. This risk of low visible net prices can pose significant revenue implications through International Reference Pricing. From the 1st of January 2025, the Medical Research Act aims to allow select manufacturers to enter a confidential reimbursement contract with the Statutory Health Insurance payers (GKV-SV)[1].

The initiative aims to bolster Germany’s attractiveness as a hub for pharmaceutical research and development (R&D), which has seen a prominent decline in industry-sponsored clinical trials [2]. As such, only manufacturers with evidence of R&D operations in Germany will qualify for this confidentiality option. Eligible manufacturers have a 5-day window, starting on the day the GKV-SV determine a net price, to decide between transparent or confidential pricing. Opting for confidentiality triggers an additional mandatory 9% discount on the negotiated net price [3].

If confidentiality is chosen, the pre-AMNOG price will remain the only visible price in Germany. Manufacturers will receive this price but must then reimburse sick funds for the difference between the pre-AMNOG and confidential price, along with any overpaid mandatory surcharges, including pharmacy, wholesaler, and VAT fees*.

A review of the reform is scheduled for 2026, with a Sunset Clause in place for June 2028[4]. If the system has not prevented market withdrawals or achieved savings, it could be discontinued.

Qualification Criteria

To qualify, a pharmaceutical manufacturer must provide proof of an active R&D department in Germany. Specifically, this must be a research department in Germany with proof of relevant proprietary projects and collaborations with public institutions in preclinical or clinical pharmaceutical research [3]. To ensure confidential net pricing does not impact physician prescribing quotes, information on the cost-effectiveness of drugs is also a mandatory part of the electronic programs used by prescribing physicians**.

AMNOG Guardrail “Flexibility”

A further provision of the Medical Research Act states that if companies show at least 5% of their clinical trial patients were treated in Germany, the AMNOG guardrails are waived [5]. Free price negotiations apply and the GKV-FinStG law linking additional benefit to price would be softened (e.g. no additional benefit would no longer result in rules that the cost of therapy cannot exceed those of an off-patent comparator). Unlike the confidential pricing rule, the AMNOG guardrail flexibility can increase price potential of the product within Germany.

* Manufacturers should be careful of the added procurement and financial challenges of setting up cash flow to reimburse the Sickfunds the difference between the visible price and confidential price. **To inform physician prescribing, the cost-effectiveness of prescribing the product in relation to the prescription of other medicinal products or other therapies with comparable medical benefits in the indication must be presented without providing information on the costs.

Opportunities & Challenges for Manufacturers

The main opportunity for confidential pricing is protection for markets that reference Germany in International Reference Pricing (IRP). Germany is a highly referenced market for major EU markets (e.g. Spain, Italy & Switzerland), as well as markets further afield (e.g., UAE & South Korea), and Japan for foreign price adjustment. Confidential pricing means the list prices in those markets can be protected and mitigate risk of knock-on net price impact and subsequent revenue loss.

Nonetheless, the Sunset Clause in 2028 offers a very limited window in which companies can increase R&D efforts in Germany, or design and execute the necessary trials. Dorothee Brakmann, Managing Director of Pharma Deutschland, emphasizes that pharmaceutical manufacturers in Germany are operating within a space where they are “facing many open questions and a lack of planning” [6]. Additionally, the investment requirements unequally favour larger manufacturers, with many smaller companies left unable to leverage the new law to their benefit.

Windrose Take – Is the Return on Investment Worth It?

Manufacturers who do not already meet the R&D requirements will need to consider their portfolio in the next 3 years and conduct a trade-off analysis on whether the return on investment to increase R&D efforts in Germany is worth the pricing protection.

To assess the revenue opportunity, manufacturers should consider:

  1. The proportion of products launching from now until 2028 which are likely to receive “less favourable” G-BA outcomes (i.e., Minor Added Benefit or below) which could benefit from confidential pricing, or flexibility in AMNOG guardrails.

  2. Of the proportion with Minor Added Benefit or below, the “high risk” products should be identified where the net pricing potential is significantly lower than prices achievable in markets that reference Germany, and risk triggering global price and revenue erosion.

  3. If possible, the revenue opportunity should be quantified both within Germany with greater “flexibility” in AMNOG pricing, and outside of Germany with price confidentiality.

To assess the lost opportunity costs, manufacturers should consider:

  1. The additional cost to increase R&D efforts in Germany and meet the GKV-SV requirements.

  2. The 9% decrease on net pricing for each product with confidentiality, as well as any hidden costs (e.g., requirements for payment of tax and VAT).

  3. The cost for 5% of trial participants in Germany to qualify for AMNOG flexibility, and potential repercussions in other markets (e.g., APAC launches often require a set proportion of trial investment in APAC populations).

If meeting the R&D requirements to pursue confidential pricing: manufacturers should be selective with products they’re applying for. For products with “Considerable Added Benefit” or more, the visible net price is unlikely to cause significant revenue loss and justify the additional 9% net price discount. Whereas for products receiving “No Additional Benefit” in settings with off-patent SoC, it may be worth planning to ensure 5% of trial participants in Germany and gain some pricing flexibility.

Manufacturers must weigh the risks and rewards with confidential pricing as soon as possible due to Germany’s evolving pricing landscape, and the Sunset Clause in 2028.

German Confidential Net Pricing: Is the Return on Investment Worth It?

Article written by Georgina Powell & Jason King, Windrose Consulting Group


 
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