On 24 November 2021, the three-party coalition poised to form the next German federal government has unveiled its coalition agreement which announces tighter pricing controls on reimbursable pharmaceuticals. While details and timing of these changes remain to be seen, pharmaceutical companies should factor these changes into their short-term product launch strategy.
- Free pricing period for new medicines to be cut from 12 months to 6 months
- Further changes to reduce public reimbursement spending for medicines
- What to expect next?
The Social Democrats (SPD), Green Party (Grüne) and Free Democrats (FDP) have presented on Wednesday, 24 November 2021, their coalition agreement which sets forth their agenda for the four-year legislative term until September 2025. On health, the coalition agreement gives much emphasis on the healthcare system, promising investments in the care services (which are heavily strained under the pandemic) and further digitalization. The few paragraphs dedicated to pharmaceuticals, however, are a mixed bag: On the one hand, investments for reshoring the manufacture of medicinal products and active substances into the EU are contemplated, although no specifics are provided. On the other hand, the coalition promises to reduce the spend on pharmaceuticals, and does already provide some specifics:
Free pricing period for new medicines to be cut from 12 months to 6 months
Since the AMNOG Act of 2011, the reimbursement price for medicines with a new active substance can currently be freely set for the first 12 months of marketing. However, during this 12-month period, the scientifically proved additional benefit of the new medicines vis-à-vis standard therapies is assessed by GBA, a joint statutory body; the assessed additional benefit is prejudicial for the subsequent price negotiations between the pharma company and the payer associations. The benefit-determined, negotiated reimbursement price applies from the beginning of 13th month of marketing in Germany. Prior to the Bundestag elections, public payers had pushed to reduce the free pricing period by applying the reimbursement price retroactively.
The coalition agreement specifically provides that this 12-month period, during which the price set by the pharma company is reimbursed, shall be reduced by half into a 6-month period. The negotiated reimbursement price shall apply retroactively from the beginning of the 7th month of marketing. The details of the reimbursement or claw-back during the 6-month period for which the reimbursement price will apply retroactively are not clear yet.
For pharmaceutical companies planning product launches in the near term, a key question will be whether new medicines which are still in their first 12 months of marketing when the legislative change takes effect will see their legacy 12-month free pricing period unaffected or reduced.
Further changes to reduce public reimbursement spending for medicines
The coalition agreement further announces three measures to reduce the spend on medicines in the public healthcare system:
- The AMNOG law, which introduced the aforementioned reimbursement price negotiation process for new medicines, shall be further developed. The changes to the AMNOG process are not specified. They may be ancillary to the aforementioned reduction of the free pricing period, or may consist in additional cost-cutting measures.
- The tools of public sick funds to limit prices for medicines shall be strengthened. Whether these reinforcements pertain to the reimbursement of new medicines (AMNOG), the substitution of biologicals for biosimilars, or public procurement measures, or other aspects remains to be seen.
- The statutory price freeze (Preismoratorium), which precludes pharmaceutical companies from raising prices except adjustments for inflation, shall be maintained.
What to expect next?
The coalition agreement provides some clarity on a key pricing issue for medicines in the German market, but leaves many questions open. The details and implementation of the changes to the medicine reimbursement pricing rules, as well as the speed in which these announced changes will materialize in legislative proposals, will depend on the person to be appointed as minister of health.
The coalition has agreed that the minister of health will be chosen by SPD. The currently speculated candidates include Karl Lauterbach, a very prominent SPD health expert and Bundestag member with a track record of criticizing drug prices, and Petra Köpping, a lesser-known state-level minister of health in the federal state of Saxony. Presumptive chancellor Olaf Scholz of the SPD is expected to reveal the nominees for the SPD-led ministries in the next two weeks.
Pharmaceutical companies should continue to monitor these developments closely and, where appropriate and possible, consider them in their short-term product launch strategies.