Germany’s Proposal to Report Drug Prices Raises Concern at Roche

Feb 17, 2014 9:51 am ET

Feb. 17 (Bloomberg) -- Germany is considering legislation this week that would force drugmakers to report the reduced prices they negotiate with insurers, potentially pressuring prices lower elsewhere in Europe.

Pharmaceutical companies would have to report rebated prices, instead of their original list prices, to databases such as IMS Health, said Ina Klaus, a Health Ministry spokeswoman in Berlin. The revised law will make it clear that the list price isn’t what’s paid in Germany, she said. German prices are influential because other countries use them as a reference.

While incremental, the change would add to the pressure on drugmakers, which have faced a series of moves by European companies to keep medicine prices down in the wake of the economic crisis.

“Some people think it’s pure semantics, but it’s a huge difference,” Hagen Pfundner, head of Basel, Switzerland-based Roche Holding AG’s German business, said at a press conference last week in Frankfurt.

The change was approved by a majority of the parliamentary health committee on Feb. 12. Parliament is scheduled to vote Feb. 20 on the proposal, which would become law by April 1.

The provision is part of a law that would also scrap a plan to conduct cost-benefit analysis -- and negotiate prices -- for drugs that are already on the German market. Bayer AG’s blood thinner Xarelto and Amgen Inc.’s Prolia for osteoporosis were among the first categories of older drugs targeted for review.

Negotiating Rebates

Drugmakers have had to negotiate rebates on new innovative medicines with German insurers for the past three years. Now instead of referring to rebates negotiated between drugmakers and insurers, the law will refer to reimbursement. The shift may seem small, but it means the talks are really about price, not discounts, Pfundner said.

The change would also strip some of the flexibility in the system from drugmakers, Pfundner said. A rebate is often good for a limited time or volume and is renegotiable, he said. Not so for a price.

Other countries look to Germany for reference prices for their drugs, he said, meaning that reimbursement levels in Germany have influence outside the country’s borders.

Countries including Spain, France and Italy have reduced the number of drugs for which they will reimburse patients, mandated the increased use of generic medicines and lowered the amount they will pay for some products since the economic crisis.

List Price

This week’s revision in Germany would put into law a position that the Health Ministry has held for the past two years, said Ann Marini, a spokeswoman for the National Association of Statutory Health Insurance Funds.

Drugmakers are allowed to set a list price for a new innovative medicine for the first year it’s on the market; the association negotiates rebates after a cost-benefit assessment run by the Federal Joint Committee, the German body that makes drug reimbursement decisions. That process started this month for Roche’s latest breast cancer medicine, Kadcyla.

“Practically speaking, it’s the same thing that we’ve been doing for years,” Marini said.

Some pharmaceutical companies have kept medicines off the market after an unsatisfactory cost-benefit assessment meant they’d have a poor negotiating position on price. German drugmaker Boehringer Ingelheim GmbH made two applications for its diabetes medicine Trajenta before deciding not to sell the medicine in its home market.

The revisions to the law also uphold a price freeze on drugs introduced in 2010 and reduce a mandatory discount on drug sales to 7 percent from 16 percent.

--Editors: Phil Serafino, Robert Valpuesta