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Monday, September 12, 2011

Reversing rising costs for pharmaceuticals – the German experience

by Torsten Bernewitz

The U.S. are not the only country working on healthcare reforms. In Germany, a new law governing pharmaceuticals (Arzneimittelmarkt-Neuordnungsgesetz - AMNOG) is in place since the beginning of the year, and recent data seems to indicate that it is working. Expenditures for pharmaceuticals shrunk(!) 6.3% in the first half of 2011, leaving the Germany sick funds with a surplus in spite of rising costs in other healthcare sectors. The sick funds had ended 2010 still with a deficit.
The new Germany law allows for early assessment of the benefit of a medicinal product. Shortly after regulatory approval of a new drug, a Joint Federal Committee (Gemeinsamer Bundesausschuss G-BA; self-governing body of physicians, dentists, hospitals and health insurance companies) will evaluate the additional benefit of the drug in comparison to a corresponding established therapy. The law thus establishes a "fourth hurdle" pharmaceutical manufacturers have to take when they bring new products to the market, in addition to having to demonstrate efficacy, safety and quality.
If an additional benefit is determined, the price of the new medicine will be negotiated between the Federal Association of the health insurance funds and the manufacturer. If no additional benefit is determined, the new medicine will be part of the fixed price system (“Festbetragsystem”) in accordance with their pharmacological profile.
Similar procedures have already been introduced in many other European countries.
The G-BA has in fact taken its first decision following the introduction of early benefit assessments for new innovative drugs. The G-BA decided to include Livalo (pitavastatin) - which was launched in Germany in June 2011 - in the existing level 2 reference price group for statins, because a therapeutic improvement was deemed not proven.
The new law has also created some “casualties”:  Thus Novartis has discontinued the marketing of Rasilamlo (aliskiren + amlodipine) in Germany, which was approved by the European Commission in April 2011 and launched in Germany in May. Novartis was unable to provide data requested as part of the early benefit assessment.
In another recent case, Boehringer Ingelheim and their partner Eli Lilly decided not to launch their new type 2 diabetes treatment, Trajenta (linagliptin) in Germany due to the negative pricing prospect for their drug. The drug manufacturers feared that the comparator (which remains unnamed) might well be a generic diabetes drug, and would in that case put the drug at risk of obtaining a generic price.
However, while these changes should have a cost containing effect in the longer-term, the current reduction of pharmaceutical budgets in Germany is most likely caused by the 16 percent mandatory rebate introduced a year ago.

Torsten Bernewitz is a healthcare industry analyst and management consultant.
He is Managing Principal, Healthcare Insurers and Payers at
ZS Associates.

This post is the author’s own and does not necessarily represent ZS Associates’ positions, strategies or opinions.

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