Following the COVID-19 pandemic and the resulting supply chain disruptions, global drug pricing and access reforms have multiplied. The Inflation Reduction Act (IRA) has been introduced in the US while the European Commission is looking at a major overhaul of the EU’s pharmaceutical regulations. Germany, in light of the growing financial burden on its healthcare system and recent drug shortages, has also been pushing forward reforms, the latest being the “ALBVVG”, legislation that has garnered complaints from generics makers and the innovative pharma industry as well as insurers and doctors.
Germany may be one of Europe’s most attractive pharma markets and a top healthcare spender, but the country’s healthcare system suffers many of the same woes as other countries. Having weathered the pandemic and now faced with rampant inflation and a huge deficit, the statutory health insurance (GKV), which covers about 90 percent of the population in combination with private health insurance systems (PKV), is under considerable financial pressure. Moreover, the country has suffered widespread medicines shortages.
The expectation to combat supply bottlenecks in the long term is not being met
Carola Reimann, Chairwoman of the Board, AOK-Bundesverbund, Germany’s largest health insurer
Drug Pricing and Reimbursement Overhaul
With last year’s draft Financial Stabilization of the Statutory Health Insurance System Act (GKV-Finanzstabilisierungsgesetz, or GKV-FinStG) the German government aimed to amend its drug pricing and reimbursement laws and in so doing ease the financial strain on the GKV.
Measures in the GKV-FinStG include the reduction of the free pricing period for new medications with the reimbursement price for new medicines set to apply seven months after market entry. This reduces the period where companies are able to set their price for a new drug from 12 to 6 months.
The bill also impacts the AMNOG, the German HTA procedure, giving the GKV increased power in rebate negotiations with the mandatory manufacturer rebate on patent-protected drugs rising from 7 percent to 12 percent.
Furthermore, a new 20 percent discount will be brought into the AMNOG rebate negotiation for brand-brand combination products and the sales threshold for orphan drugs will be reduced from EUR 50 million to EUR 30 million per year.
Confronting Supply Issues
At the beginning of this year, the government proposed additional reforms geared towards the prevention of supply shortages after the country suffered shortages of almost 500 medicines and in June the German parliament passed the Act to Combat Supply Shortages and Improve the Supply of Medicines (ALBVVG).
Since the government has recognised that the shortages were in part caused by price pressures, the ALBVVG introduces several measures to address this, causing the bill to go beyond supply shortage prevention and amend several laws, including the German Medicines Act (AMG) and impact pricing and reimbursement.
Under the new bill the code governing the pricing and reimbursement of medicines will be amended to incentivize the supply of critical paediatric medicines and reserve antibiotics. German manufacturers of these medicines will have more pricing freedom as existing reference prices and discount contracts for these medicines will be eliminated.
In addition, drug makers will be able to raise their prices once by up to 50 percent of the last reference price, or the maximum reimbursement amount and German health insurance funds will have to cover the additional costs.
Reactions
While these amendments could be seen as positive developments for the pharma industry, other measures set forth in the ALBVVG have not been well received. Under the new bill, rebate agreements between health insurers and companies will have to provide for a continuous supply of generic medicines and companies must commit to a minimum stock of the average six months’ demand.
“Under the current supply situations in the market, it will take a while to build up such an inventory,” argued Julian-Kai Ellermeier, Head of Tender Management at generics manufacturer Aristo Pharma. “Production capacities are tight and it is also questionable whether sufficient storage space will be available for this regulation. Not to mention that this regulation will tie up enormous capital.”
In a statement (in German) Pro Generika, the German generics industry association asserted that the bill “is not enough to counteract supply bottlenecks in the long term.” The statement further objected that “only very few product groups are taken into account and the price regulation mechanisms are not flexible enough and are not coordinated with one another.”
Another issue for companies is the added burden created by the ALBVVG of having to pay the overpaid portions of wholesaler and pharmacy fees as well as VAT. This is in addition to the existing reimbursement they have to pay health insurers for the difference between the reimbursement price and the sales price from the seventh month after a drug’s market launch until the agreed reimbursement price is charged.
While the VFA, Germany’s association for research-based pharmaceutical companies, initially welcomed the prospect of reform and president Han Steutel stated that “there is an enormous need for reform in the healthcare system,” the organisation issued an entire point-by-point statement (in German) objecting to the measures set forth in the ALBVVG.
Health insurance providers have also expressed concerns that the bill will not achieve what it set out to do. “The expectation to combat supply bottlenecks in the long term is not being met,” said Dr Carola Reimann, Chairwoman of the Board of AOK-Bundesverbund (AOK), Germany’s largest health insurer. “This is because the legislator has used unsuitable instruments that do not get to the root of the problem, but generate large additional economic expenses for statutory health insurance.”
Moreover, health insurance funds have complained that the ALBVVG is short-sighted and does not take into account crucial issues such as the implementation of a database with daily updates on medicine availability and does not contemplate greater stockpiling obligations across the healthcare ecosystem, including pharmaceutical wholesalers and pharmacies supplying hospitals.
From a doctors’ standpoint, the National Association of Statutory Health Insurance Physicians (KBV) said the measures could prevent delivery and supply bottlenecks but that “legal clarification is required that these and other additional expenses to be expected from the law do not lead to a higher risk of recourse for contract doctors.”
