Special Report: Pharmaceutical Pricing and Reimbursement in Germany, 2008

Decision Resources, Inc, March 2008, Pages: 70

Introduction
Over the past two decades, the German pharmaceutical market has undergone a greater number of radical reforms than any other major drug market. With the German government exerting pressure on all sectors of the pharmaceutical market, the resulting reimbursement and prescribing restrictions continue to place a considerable burden on drug manufacturers. The result of such cost-containment mandates has led pharmaceutical companies
to seek greater control of their destiny by establishing innovative systems to handle all aspects of the country’s reimbursement restrictions. This report features several illustrated tables that provide an overview of the country’s health care reform initiatives and the fi nancial impact such reforms have had on the pharmaceutical industry over the last two decades.

Get the Answers You Need to Shape Your Strategy
- Pharmaceutical companies seeking to do business in Germany must contend with many cost controls imposed by the government. How will manufacturers deal with these increasingly restrictive cost controls in the coming years? What new reimbursement deals will companies attempt in order to secure market access?
- Manufacturers of novel—or potentially risky—therapies will undoubtedly face vexing barriers to market access. What new restrictions will the country’s governing agencies introduce in this market? What strategies will companies explore to overcome these restrictions?
- The German government will continue to rely heavily on its most enduring cost control—reference pricing. How will the probable expansion of this cost-containment system affect patent-protected agents in the new few years?

Scope
- The German government will overhaul the funding of the German health care system in January 2009: statutory health insurance funds will no longer be free to set their own premium rates; governmental reforms, which are often partisan, have stymied the pharmaceutical industry as it struggles to keep up with the frequency of such reforms.
- Reference pricing is the country’s most enduring cost-containment strategy: drug manufacturers object to a system whereby health insurance funds are responsible for setting reference prices for the products they reimburse; from 2005 through 2008, the government has expanded considerably the list of reference-priced products; a 2006 change in the method by which reference prices are calculated has resulted in substantially lower reference prices.
- Reimbursement of hospital medicines is based on a diagnosis-related group system that began in 2004: a key objective is to shorten the length of hospital stays; the new system presents the pharmaceutical industry with both opportunities and challenges.
- Off-label prescribing is a controversial subject in Germany: reimbursement of off-label therapy must meet specifi c requirements; drugs used off label in clinical trials must satisfy legal requirements; physicians can face substantial fi nes for improper off-label prescribing.

Executive Summary
Strategic Considerations
Stakeholder Implications
Overview
Organization and Funding of the German Health Care System
Pharmaceutical Prices in Germany
Reimbursement of Outpatient Medicines
Cost-Containment
Reference Pricing
Extension of Reference Pricing to Patent-Protected Drugs
A More Aggressive Reference Price Method
Market Impact
Incentives to Undercut Reference Prices Price Freeze
Mandatory Rebates
Voluntary Rebate Contracts, Cost-Sharing Deals, and Risk-Sharing Agreements
Prescribing Budgets
Daily Cost-of-Therapy Limits
Prescribing Guidelines
Use of Generic Drugs
Market Dynamics
Pricing Trends and Generic Erosion
Generics Substitution
Parallel Imports
Patient Copayments
Negative List
Dereimbursement of Nonprescription Medicines
Health Technology Assessment
Role of the Institute for Quality and Effi ciency in Health Care (IQWiG)
Introduction of Health Economic Evaluation
Regulatory Framework
Opposition from Health Economists and the Pharmaceutical Industry
Response of the GBA and IQWiG to Criticism
Draft Methodology for Health Economic Evaluation
Future Focus on Costly New Therapies
Reimbursement of Hospital Medicines
Pricing and Reimbursement
Prospective Payment
Pharmacy Decision Making
Monitoring Pharmaceutical Use and Spending
Interaction Between Hospitals and Primary Care
Disease Management Programs
Off-Label Prescribing
Outlook for the German Pharmaceutical Market
Appendix: Glossary of German Terms Used in This Report

Sidebar
The Impact of Reference Pricing on the German Statin Market

Tables
1. Statutory Health Insurance Receipts and Expenditures, 1991-2006
2. German Health Care Reforms of Particular Signifi cance to the Pharmaceutical Industry, 1988-2007
3. Multilateral Comparison of Average Ex-Manufacturer Prices of Branded Medicines in
Select Markets as a Percentage of U.K. Average Ex-Manufacturer Prices, 1992-2004
4. German Prices of Best-Selling Drugs as a Percentage of U.S. and European Average Prices, 2006
5. Prices of Leading Biologics in the Major Markets as a Percentage of U.S. Prices, 2006
6. Maximum Wholesalers’ Margins on Ex-Manufacturer Prices of Prescription-Only Medicines
7. Maximum Pharmacists’ Margins on Pharmacy Acquisition Prices of Drugs That Are Not Subject to Prescription-Only Status But Are Prescribed and Reimbursed by the GKV
8. Average Composition of Retail Pharmaceutical Prices in Germany, 1990-2007
9. Targets of Key Pharmaceutical Cost-Containment Measures in Germany
10. New Reference Pricing Groups Implemented in Germany Effective January 1, 2008
11. 2007 Retail Prices and New Reference Prices of Largest Pack Size of Nebilet
12. Evolution of Savings from Reference Pricing in Germany, 1989-2007
13. Reference-Priced Drugs’ Place in the German Pharmaceutical Market
14. Out-of-Pocket Payments for Reference-Priced Drugs in Germany
15. Select Rebate, Cost-Sharing, and Risk-Sharing Agreements on Branded Drugs
16. Generics’ Share of the Potential Generics Market and the Total GKV Prescription Market, 1981-2006
17. Average Percentage Price Difference Between Median Prices of Generic and Branded Versions of Off-Patent Drugs, 1981-2006
18. Key Trends in the German Prescription Drug Market. Implications for the Pharmaceutical Industry

Figures
1. Average Prices of Leading Biologics, Small-Molecule Drugs, and Pharmaceuticals
Overall in the Major Markets as a Percentage of U.S. Prices, 2006
2. Evolution of Average Drug Prices in the Statutory Health Insurance Pharmaceutical Market, 1983-2007
3. Percentage of Reference-Priced Drugs with Retail Prices Above, in Line with, or Below Their Respective Reference Prices, January 1, 2008
4. Reference-Priced Drugs’ Share of the German Statutory Health Insurance Pharmaceutical Market, 2004-2007
5. Evolution of Retail Prices in the German Pharmaceutical Market, June 2006- December 2007
6. Reasons Given to Statutory Health Insurance Patients for a Change of Prescription 2007
7. Reactions of Statutory Health Insurance Patients Whose Prescriptions Were Changed, Drugs, 2007
8. Structure of the German Pharmaceutical Market, First Half of 2007
9. Percentage Decrease in Weighted Average Retail Prices of Eight Best-Selling
Off-Patent Drugs in Germany, March 2006 Through April 2007
10. Average Brand Market and Unit-Volume Share for Products That Have Lost Patent and Exclusivity Protection
11. Average Prices of Brands and Generics as a Percentage of Respective Brands’ Price Prior to Generics Entry
12. Correlation Between Generic Price Erosion and Competitive Intensity
A. Consumption of Statins in the Statutory Health Insurance Market, 2001-2006

- Arzneimittelkommission der Deutschen Ärzteschaft (AkdÄ; Pharmaceutical Commission of the German Medical Profession)
- AstraZeneca
- Bundesausschuß der Ärzte und Krankenkassen (BÄK; Federal Committee of Physicians and Health Insurance Funds)
- Bundesfachverband der Arzneimittelhersteller (BAH; Federal Association of Pharmaceutical Manufacturers)
- Bundesinstitut für Arzneimittel und Medizinprodukte (BfArM; Federal Institute for Medicines and Medical Devices)
- Bundeskartellamt (Federal Cartel Offi ce)
- Bundesverband der Betriebskrankenkassen (BKK; Federal Association of Occupational Health Insurance Funds)
- Bundesverband der Pharmazeutischen Industrie (BPI; Federal Association of the Pharmaceutical Industry)
- Bundesvereinigung (KBV; Federal Union of Health Insurance Fund Physicians)
- Bundesvereinigung Deutscher Apothekerverbände (ABDA; Federal Union of German Pharmacists’ Associations)
- Bundesverfassungsgericht (Federal Constitutional Court)
- Deutsche Angestellten-Krankenkasse (DAK; German Employees’ Health Insurance Fund)
- Eli Lilly
- Gemeinsamer Bundesausschuß der Ärzte, Zahnärzte, Krankenhäuser und Krankenkassen (GBA; Joint Federal Committee of Physicians, Dentists, Hospitals, and Health Insurance Funds)
- Gesellschaft für Konsumforschung (GfK; Society for Consumer Research)
- GlaxoSmithKline
- Insight Health
- Institut für Qualität und Wirtschaftlichkeit im Gesundheitswesen (IQWiG; Institute for Quality and Efficiency in the Health Care System)
- Janssen-Cilag
- Kassenärztliche Bundesvereinigung (KBV; Federal Union of Health Insurance Fund Physicians)
- Kassenärztliche Vereinigung Westfalen-Lippe (Westfalen-Lippe Association of Statutory Health Insurance Physicians)
- Novartis
- Organization for Economic Cooperation and Development (OECD)
- Pfizer
- ProGenerika
- Psychonomics
- Roche
- Sanofi -Aventis
- Spitzenverband Bund der Krankenkassen (Federal Lead Association of Health Insurance Funds)
- Statistisches Bundesamt (Federal Office of Statistics)
- Verband Forschender Arzneimittelhersteller (VFA; German Association of Research-Based Pharmaceutical Companies)
- Verband der niedergelassenen Ärzte Deutschlands (Association of Office-Based Physicians)
- Wissenschaftliches Institut der Allgemeinen Ortskrankenkassen (WIdO; Scientific Institute of the General Local Insurance Funds)

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