Germany and the pharma industry: seeing eye to eye at last?

Germany is the third-largest drug market in the world – and the biggest in Europe – but its cost-containment measures in recent years have seen some pharma companies opt out of launching medicines there. Now the government has put together a new deal to improve market access, and the industry is cautiously optimistic, reports Andrew McConaghie.

For a nation famed for its world-beating manufacturing and industrial champions, Germany hasn't held its pharmaceutical sector in high esteem in recent years.

The giants of its automobile industry, Volkswagen, Daimler and BMW, and hi-tech companies such as Siemens and SAP, have been held up as examples of Germany's industrial excellence and innovation. But the pharma sector – where Germany is also one of the world's biggest exporters – has suffered from cost-cutting government reforms.

Germany remains the biggest pharma market in Europe, and is still the third largest worldwide, after the US and Japan, but pressure on prices and market entry over the last five years has made it an often hostile environment.

Once well known for its high medicines prices, with pharma companies given the freedom to set their own prices at launch, this changed in 2011 with the AMNOG legislation (Arzneimittelmarkt-Neuordnungsgesetz or Pharmaceuticals Market Reorganisation Act).

The industry is still attacked frequently for its 'Mondpreise' – or astronomical prices – and some politicians and health insurance leaders want to see the pressure maintained.

Cheapest in Europe

German pharma industry association the VFA says that, since 2011, new drugs have been priced at below the European average typically, with some even forced into being the cheapest anywhere in Europe.

These judgements have resulted in public rows between the German system and pharma companies, with several going as far as withdrawing treatments, or refusing to launch new products on to the market.

One of the worst-affected areas has been diabetes.

In 2011, Lilly and Germany's own Boehringer Ingelheim (BI) declined to launch their new diabetes treatment Trajenta in the country.

AstraZeneca (and then marketing partner Bristol-Myers Squibb) withdrew the diabetes treatment Forxiga for pricing reasons in December 2013 and then, in July last year, Novo Nordisk withdrew its new insulin product Tresiba.

However, there appears to be some light at the end of the tunnel for the sector. The government has been in wide-ranging talks with the industry research institutes and trade unions for a year and a half in a process called 'Pharmadialog', and has just announced a top-level agreement. The arrangement won't sweep away the price controls or mandatory rebates, but it does aim to strike a mutually beneficial deal to maintain access to new drugs whilst controlling costs. Most important to the industry is the hope that the system of judging cost effectiveness by comparing new drugs with cheap generics will come to an end.

Pharma's contribution valued

Of equal importance to pharma is that the government has now made it clear that the sector is, after all, a valued one in Germany, and a major contributor to the country's health and wealth.

Speaking to pharmaphorum and other UK-based journalists this week, BI chairman Andreas Barner addressed the issue at the company's annual media conference.

"Germany has [only been] willing to pay the lowest prices in Europe, but those aren't reasonable prices...they are starting to understand that they cannot be an economically successful country and not take part in medicines innovation."

He said he detected a 'better comprehension' of the benefits the industry brings, and said that a positive approach towards life sciences in the UK was now finally being adopted again in Germany.

Although the negotiations are complex and wide-ranging, for pharma, the key issue is how the AMNOG regulations work. These are primarily overseen by reimbursement authority the G-BA.

It reviews the dossier from the pharma company, with input from health technology appraisal organisation the Institute for Quality and Efficiency in Healthcare (IQWiG).

Choice of comparator crucial

This process considers a drug's benefits compared to standard therapies – but, crucially, much depends on which drug has been chosen as the comparator.

In many categories new, high-price drugs are compared to standard generic treatments, which inevitably results in the new treatments being judged not cost effective.

In diabetes, this means new oral agents have been compared to metformin, while insulin analogue Tresiba has been compared to older human insulin products.

Pricing negotiations ultimately end with GKV-Spitzenverband, the association of healthcare insurers across the country's 16 regions.

Companies can still set their own prices for a drug's first year on the market in principle, but the threat of no reimbursement has forced prices down rapidly.

Comprehensive package

Federal Health Minister, Hermann Gröhe has put together a comprehensive package of measures, with promises to review this system in exchange for concessions elsewhere from pharma. These includes initiatives to incentivise antibiotic research, and restrict use of existing treatments.

Mr Gröhe is a member of Chancellor Angela Merkel's CDU, but the party must also accommodate the views of its coalition partners the Social Democratic Party. This complicates pharma's negotiations, and the coalition hasn't yet committed to jettisoning the generic price benchmark.

The industry feels hopeful at last, but stresses that the devil will be in the detail of the final deal.

Bayer is Germany's biggest homegrown pharma company and, indeed, currently stands as the country's biggest corporation in terms of market cap; this is thanks to its own renaissance, as well as to the emissions scandal which has hit Volkswagen.

The company has given a cautious welcome to the breakthrough in understanding evident in Pharmadialog.

In a statement, a spokesman said the company wanted to see "a balanced and sustainable package of measures" agreed, emphasising the key point that R&D investment must be rewarded and that "the price level of generics cannot be the yardstick for reimbursing innovative medicines."

There are many other potential reforms still on the table. The idea of assessing a drug's cost and clinical effectiveness some time post-launch has also been mooted. However it is unclear which drugs would be granted a 'late benefit assessment', though it may well be rare disease treatments.

Finally, the German government hasn't given up on finding new cost savings – especially as total spending on medicines continues to rise as growing demand has wiped out savings from price cuts.

This means any new legislation is also expected to add incentives for generics and biosimilars. For biosimilars, this could include better information on these cheaper biologics, as well as potential regional targets for prescribing to lift uptake and, consequently, cost savings.

About the author:

Andrew McConaghie is pharmaphorum's managing editor.

Contact Andrew at andrew@pharmaphorum.com and follow him on Twitter.

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