Market Access: Germany vs UK

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In recent years the German government has introduced a series of reforms designed to radically cut the costs of drugs. With VBP being considered here in the UK, Dr Arnim Jost explains how these measures have affected pharma companies in Germany.

As the biggest pharmaceutical market in Europe and a price reference point for other European markets, success in Germany has always been essential for pharmaceutical companies. However, recent changes in legislation have combined to make Germany an increasingly tough challenge even for the pharmaceutical originators delivering innovative new drugs.

Germany was one of the last countries in Europe to allow pharmaceutical companies to determine prices. Now, with an estimated goal of cutting €2 billion from pharma spending, that is changing, with even new drugs facing tough value assessments before prices are set. With the UK Government considering the adoption of VBP, with fees negotiated on the scienti­fic assessment of a drug’s clinical value, once the Pharmaceutical Price Regulation Scheme expires in 2013, the impact of this change in Germany will be keenly watched by pharmaceutical companies in this country.

Price pressure

Since 2007 and the introduction of GKV-WSG (Gesetzliche Krankenversicherung-Wettbewerbsstaerkungsgesetz), which allowed public insurers the chance to negotiate discount agreements with pharmaceutical companies for generics and off-patent products, companies have seen prices erode.

These public health insurers represent 90% of the population of 82 million, and hence have signi­ficant influence. Over the past twenty years there has been significant consolidation of these organisations, from 1,100 in 1990, to 226 in 2008, and 155 today.

Within the next three to five years that number is set to fall further to just 50. For pharmaceutical companies this consolidation is a double edged sword: there are fewer organisations to target and understand; but each insurer has a far greater buying power and can drive ever stronger discounts across the market.

Price pressure increased in 2010 with the GKV ÄndG (Gesetzliche Krankenversicherung-Aenderungsgesetz), which demanded mandatory discounts for non-reference price products to increase from 6% to 16%, and introduced a retroactive price freeze for all non-reference price products from 1 September 2009 until 31 December 2013, a move expected to save €1.15 billion, according to

Innovative overspend

At this time, pharmaceutical companies were at least allowed to set prices for innovative new products after a drug’s introduction to the market. However, this changed in January 2011, in response to €32 billion spent on medicines by the public health insurers in 2009, creating a signi­ficant deficit.

With the Health Minister claiming innovative drugs were responsible for the overspend, a new law was passed which limits the amount that pharmaceutical companies are allowed to charge for new prescription drugs.

AMNOG (Arzneimittelmarkt-Neuordnungsgesetz) demands pharmaceutical companies provide a value dossier within three months of the product launch, demonstrating the medicine’s cost and bene­fits. If a new drug is found to have additional medicinal benefits, its price will be negotiated between the manufacturer and the insurers within a year.

However, maximum prices – reference prices, in Germany called “festbetrage” – will be set for drugs which do not have any additional benefits over an existing drug.

Evidence based

The implications for pharmaceutical company market access strategies are significant. Market access has now shifted towards justifying the price, towards conducting cost benefit analysis and evidence based medicine. Of course, for the first three months of any product’s life there is little opportunity to undertake evidence based assessment.

Companies in Germany are, therefore, now involving business units, including sales and marketing, up to 12 months before a product launch to create cost benefits dossiers and prepare the value arguments for the medical and pharma-economical experts within the regulatory bodies G-BA (Gemeinsamer Bundesausschuss) and IQWIG (Institut für Qualität und Wirtschaftlichkeit im Gesundheitswesen).

Companies now need access to greater depth of information regarding the decision makers within G-BA and IQWIG to determine the on-going strategy for this value-based assessment.

Indeed, this process requires far greater information resources – from therapy data, to information about comparable products and product costs. Pharmaceutical companies must now analyse the entire health chain, from diagnosis through therapy to rehabilitation to assess and demonstrate the true potential value of the new product.

They are not, however, as yet able to work effectively with hospitals to ensure drugs are used appropriately in order to achieve the expected benefits. Unlike the UK, where the NHS is being actively encouraged to co-operate with pharmaceutical companies to promote research, innovation and better practice, in Germany the boundaries between health provider and pharmaceutical company are still strong, with hospitals looking to optimise their own working practices without pharmaceutical co-operation.

Clinical autonomy

At primary care level, meanwhile, clinicians have limited opportunity for any strong decision making. Whilst the UK is now pushing hard to reinvigorate the role of clinicians within the health service, clinicians in Germany continue to lose decision making power. GP prescribing is strongly led by the discount agreements between pharmaceutical companies and the public insurance companies: if a prescription does not reflect the agreement, it will be automatically substituted by the pharmacist when it is fulfilled – unless the GP has specifically requested no substitution.

Similarly within secondary care, there is a lack of clinical empowerment. Many hospitals are part of purchasing groups, which has increased buying power, but limited the decision making options for both individual doctors and hospital pharmacists.

However, there are signs of a new level of interaction between pharmaceutical companies and health care services in Germany on the joint development of innovative services. Whilst in the past pharmaceutical companies were constrained from negotiating contracts direct with hospitals or doctors to deliver such services, over the past two years there has been a evolution towards more integrated healthcare contracts that have evolved beyond basic discounting towards shared risk models based on the joint delivery of services – most notably within diabetes.

Moving forward

Given the emphasis on the reduction of drug prices across Europe, the evolution of cost saving on pharmaceuticals within the German market is notable for any similar sized market place, such as the UK. From initial focus on generics, with reference pricing and discount agreements to the impact of AMNOG on the new chemical entities, every aspect of the pharmaceutical market has been affected.

Indeed, despite the market size, this new price point has resulted in companies deciding not to launch new products in the German market due to the problem this would create across Europe with reference pricing: get it wrong in Germany and a pharmaceutical company could end up with an unsustainable price point in many other countries.

The biggest test for pharmaceutical companies in Germany in the coming months will be to understand the challenges created by AMNOG and to determine how best to create the value dossiers. To date, only one product, Merckle Recordati´s Pitavastatin, has passed the examination of the G-BA, but without the approval of a pre-price, there’s only the allocation of a reference price – so the industry has no real evidence of how this process works, or how successful companies will be.

However, with 15 products currently under review, this model will become far clearer in coming months. Market access strategies must be supported by a new depth of information relating to this value-based decision making, most notably granular visibility of the key influencers within G-BA. Armed with this insight, pharmaceutical market access teams will be able to refine their information analysis and determine how best to disseminate the value message to the market.

 Dr Arnim Jost is General Manager, Germany, and VP REGION D-ACH, for Cegedim Relationship Management.