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 Germany, Europe's biggest market for medicines, is
already one of the toughest for pharmaceutical companies, in part
because statutory health insurers club together to increase their
bargaining power in price negotiations with the industry.
Now, in its latest drive to curb rising healthcare costs, Berlin has
drafted new rules that will blow the lid on the previously
confidential discounts the insurers win. Discounts vary widely, but
can be around 20 percent off drugmakers' list prices.
The aim of the new law, which could come into force as soon as
April, is to stop wholesalers and pharmacies from basing their
margins on list prices rather than the discounted prices.
But the pharma industry fears publishing the discounts could trigger
price falls elsewhere as dozens of healthcare agencies in Europe and
as far as Japan use German prices as references for their own.
Countries which have so far used list prices in Germany could switch
to discounted prices as the new standard.
That would pile extra pain onto an industry already under pressure
to provide keen value to Europe's socialized healthcare systems in
the wake of the region's debt crisis. Britain, for example, struck a
tough deal with drugmakers in November to hold flat the amount its
state health service spends on branded medicine for the next two
years.
"Right now, the negotiated (discounted) price is not readily
available information. I think pharma companies have a point in
demanding that it stays that way," said Ulrich Huwald, a sector
analyst at brokerage M. M. Warburg. "They have a right to
confidentiality and more disclosure would hurt their business."
Some executives believe the risk to drugmakers is such they may
increasingly skip Germany when bringing new drugs to market rather
than letting the German price become the norm elsewhere.
"There could be an increasing number of opt-out decisions," said
Hagen Pfundner, the chairman of Germany's pharma lobby VFA and head
of Swiss drugmaker Roche's German unit.
But drugmakers will be reluctant to miss out on the world's
third-largest pharma market which, according to healthcare
information firm IMS Health, was worth $42 billion in 2012.
Uncertainty over pricing in Germany led Deutsche Bank analysts to
describe the country as the "wild card" in the European pharma
landscape in its 2014 outlook for industry.
SEA CHANGE
The German pharma market underwent a sea change three years ago when
Berlin allowed statutory medical insurers working through the
Federal Joint Committee, or G-BA, to pool their bargaining power in
price talks with the drugs industry.
Statutory insurers pay medical bills for about nine out of 10
Germans and the private insurers who cover the rest use the same
prices.
The insurers follow the lead of the Institute for Quality and
Efficiency in Health Care (IQWiG), an advisory panel of medical
experts, which assesses the "additional benefit" of new drugs over
existing ones.
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Like Britain's National Institute for Health and
Clinical Excellence (NICE), Germany's IQWiG presents an additional
hurdle for drugmakers whose products have already been licensed by
European regulators. IQWiG has a history of
discounting statistical evidence previously acknowledged by the EU
regulator. It even spurned several newly approved drugs as no better
than established therapies available as cheap generics, prompting
the insurance body to offer sharply lower prices. As
a result of the tough stance, drugmakers have over the past three
years kept a total of six new drugs off the German market, which is
home to pharma majors such as Bayer, Boehringer Ingelheim and Merck
KGaA.
These drugs include potential blockbusters such as AstraZeneca's new
diabetes treatment dapagliflozin, branded as Forxiga, which is
expected to gross more than $1 billion globally by 2019.
Eli Lilly and Boehringer also declined to launch another diabetes
drug, Trajenta, because of low prices.
The pharma industry believes German patients could miss out on many
more new medicines if companies face the risk of low prices in
Germany becoming the benchmark across the world.
However, IQWiG and the German government believe they are simply
ensuring they get the best value for money.
Chancellor Angela Merkel's government coalition partner, the Social
Democrats, has also said it would be unfair to poorer European
neighbors such as Greece if their health authorities' based drug
reimbursement on "artificially inflated prices".
The government argues as well that foreign authorities already have
means to find out negotiated price discounts.
"I don't fully understand what the fuss is about," said Jens Spahn,
the speaker for health affairs in the parliamentary group of
Chancellor Merkel's conservatives.
But the pharma industry fears putting discounted prices on public
display in Germany could be all it takes to upset a system of
cross-border price referencing that has so far been based on list
prices.
($1 = 0.7317 euros)
(Additional reporting by Ben Hirschler
in London and Frank Siebelt in Frankfurt; editing by Mark Potter)
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