German Drug Pricing Reforms: What do they mean for P&MA?
German Drug Pricing Reforms:
What do they mean for P&MA?
Situation
In autumn 2021, the traffic light coalition, consisting of the Social Democrats, Free Democrats, and Greens, won a majority in the German parliament elections. Soon after, the coalition released their proposed agenda which included reforms of the German healthcare system [1,2]. With the COVID-19 pandemic and increased healthcare expenditure, there is pressure on Germany to cut back on healthcare spending [3]. This article will describe the cost-containment measures introduced by the new government and how they influence drugs’ pricing and market access potential.
Insights
In the initial coalition agreement, the parties are seeking to “strengthen the ability of health insurers to limit the prices of drugs” and call for 2 key changes [2].
1. Reduction in Free Pricing Period:
Currently, pharmaceutical companies are free to set a price during the first twelve months when the G-BA (Gemeinsame Bundesausschuss) and GKV-SV (Spitzenverband Bund der Krankenkassen) evaluations are occurring. This makes Germany a highly appealing market for newly approved drugs and therapies, often the first EU market for a drug to launch. The new proposed pricing scheme aims to complete the additional benefit assessment and price negotiation within 6 months [4].
2. Extension of the Prize Freeze:
Drugs which are not subject to price referencing (i.e., negotiated with the GKV-SV), are typically allowed to increase price in line with inflation. However, legislation introduced in 2010, froze price increases – this legislation was extended in 2017, and the new proposal recommends an extension to 2026 [4,5].
While the coalition letter remains vague and lacks mechanistic details on AMNOG (Arzneimittelmarkt-Neuordnungsgesetz "Pharmaceuticals Market Reorganisation Act"), or pricing legislation reforms, a recently published (March 2022) draft bill by the Federal Ministry of Health, sheds light on the future cost-containment measures to mitigate healthcare expenditure [6].
Orphan Drugs: The sales threshold for an abbreviated early benefit assessment should be lowered from €50 to €20 million. Currently, G-BA automatically assumes an additional benefit for orphan drugs, as long as their annual sales do no exceed €50 million. Above the sales threshold, agents lose their Orphan Drug Designation (ODD) and need to undergo a full benefit assessment. The ODD has been widely criticized by representatives of G-BA and IQWIG (Institut für Qualität und Wirtschaftlichkeit im Gesundheitswesen) and while according to the new bill, it will stay in place, the decrease of sales threshold will significantly limit the number of eligible agents [7,8]
Mandatory Rebates: The bill proposes to temporarily increase rebates given to the insurance companies by manufacturers from the current 7% to 19% (2023) and subsequently reduce to 16% (2024), 15% (2025) and 10% (2026). On top of that, for select combination therapies, insurers can claim an additional 15% rebate during negotiations.
Price-volume limitation: Binding price-volume agreements should be introduced during price negotiations in the form of annual volume caps.
Even though the bill still has a long way before approval, it shows the general direction of Federal reforms in Germany towards a stricter cost containment of pharmaceuticals with less trust in the orphan drug designation.
Windrose’s take
Reduction in Free Pricing Period:
Many markets in Europe look to Germany for leadership in pricing mechanisms and their list prices is referenced by over 30 countries. Reducing the free pricing period will result in a smaller window for manufacturers to set a high price anchor. The risk of a lower pricing potential in Germany may shift the typical EU launch sequence and require new strategies for manufacturers to gain approval and a higher price.
Simultaneously, the outcome of the G-BA evaluation would be available earlier and would likely be considered during other markets’ Health technology assessment (HTA) assessments. Germany may have a greater influence over other markets HTA assessments in the future.
Given the 6-month time constraint, there may be less back and forth and a less detailed evaluation which could be leveraged by manufacturers; conversely, there is a risk that the G-BA / GKV jump to conclusions and deny reimbursement without considering all evidence
In addition, with the shorter G-BA negotiations, manufacturers would have less time to collect real-world evidence to further support novel agents, which could have negative implications for uptake by physicians.
Mandatory Rebates
Mandatory rebates will have a direct implication on the sales potential for manufacturers in the region potentially making a Germany less attractive market for manufacturers.
To account for higher rebates, manufacturers may have to increase their target list price, which could have a knock-on effect in International Reference Pricing (IRP) and might potentially enable higher list prices elsewhere.
Orphan Drug Threshold
The €20 million ODD threshold would notably decrease the number of agents eligible for the abbreviated added benefit, for orphan drugs. The loss of an automatic additional benefit may have knock-on implications and decrease price potential or likelihood of access across Europe and other markets.
Price-volume limitation
This represents a new willingness of German payers to restrict the treated population to contain budget, and it may also be reflected in other types of managed entry agreement in the future. It places additional limitations on the pricing opportunities in Germany, making it a relatively less attractive market.
Overall, the long-term innovation may take a hit as the total return on drugs is constricted with expected decreased innovation and investment in German pharmaceuticals.
