Reforms to the federal drug reimbursement system introduced last year are accentuating the importance that Germany plays in
Big Pharma's new product pricing strategies, with a number of prominent players, including Eli Lilly and Boehringer Ingelheim,
questioning the rationale for introducing new medicines in Germany due to the uncertainty of the new process and the adverse
impact of low administered prices on listing decisions taken by other countries. Such concerns make a launch in Germany a
risky proposition, write Pharm Exec Editorial Advisory Board member Ed Schoonveld and Johann Meyer-Christian—and a far cry
from the days when Germany led Europe as a reliable source of high margins and steady revenue growth.
Getty Images / Ralf Hiemisch
The reform program—Arzneimittelmarktneuordnungsgesetz, or AMNOG for short—was approved on November 12, 2010. It marked the
end of free pricing of new pharmaceuticals in Germany. Pushed through at very short notice, the legislation was designed principally
to cut costs to the drugs bill, for an estimated €2 billion ($2.78 billion) in annual savings. The sick funds and legislators
have every reason to be happy, as AMNOG has generated more than €1 billion ($1.4 billion) in savings through compulsory rebates
in its first four months. Those savings occurred before negotiations on prices for new drugs had even started.
The law has left industry reeling, with companies now waiting for clarifying case studies that will determine how far German
prices drop in line with other EU countries, a trend that could force companies with global pricing exposure to withhold launching
new drugs in Germany. Six cases are now under review through the new system, but results are unlikely to be known until sometime
in 2012. Hence, the bad news is that the ambiguous nature of the new legislation appears to complicate planning both for the
short- and long-term success of drug company investments. The 'good' news is it seems to be fertile ground for revenue-seeking
lawyers involved in litigation and administrators handling all the extra bureaucracy involved in implementing the program.
AMNOG pricing process
Under AMNOG, the Federal Joint Committee (Gemeinsamer Bundesausschuss/G-BA), with the help of the Institute for Quality and Efficiency in Health Care (IQWiG), will analyze whether a new drug offers
additional benefits in comparison with an "appropriate and established therapy." A drug's level of innovation will be rated
in a similar way to the better-known French ASMR system. Price premiums over standard of care need to be justified in line
with their innovativeness rating, although the mechanism through which this is happening is only defined as "negotiation."
For drugs that are deemed less innovative, prices will be tightly linked to existing treatment options.
The AMNOG process and its various decision steps are illustrated in the graphic on page 36. For any new drug launched after
Jan. 1 and for subsequent new indications, a pharmaceutical company needs to submit a dossier to the G-BA, which then conducts
a benefit assessment. If the G-BA concludes that the drug does not offer an additional benefit, it will be transferred into
a reference pricing cluster that includes low price generics or, if no reference group exists, subjected to reimbursement
negotiations. In the reimbursement negotiations the price for the drug will not be allowed to exceed the costs of "comparable"
drugs, including generic equivalents.
If the G-BA decides that the drug offers an additional benefit, the manufacturer will be allowed to sell the product at a
freely set price for one year, commencing from market launch. At the same time, price negotiations for the future Statutory
Health Insurance (SHI) reimbursement price will take place. If no agreement on the SHI reimbursement price can be reached,
a central arbitration board will decide the price. Every party is allowed to appeal the decision and ask for a formal cost
effectiveness analysis. In this case the G-BA would ask IQWiG to perform the analysis, which could take up to three years—a
long time to wait.
AMNOG apparently requires evidence of a new drug's cost-effectiveness to secure a reasonable price at launch. Absent this,
a company cannot be confident that the process will yield an acceptable price. However, EMA rules for approval of market authorization
are not compatible with real-life performance tests of drugs that must demonstrate real value. Interestingly, France seems
to be moving towards implementation of cost-effectiveness reviews at a later stage of a drug's life cycle. This seems much
more reasonable, as a company has a chance to prove a drug's value in a naturalistic treatment setting. The biggest problem
for industry in this context is that payers insist on setting price first, rather than deciding whether they will fund it,
as price has international implications. In any other industry, customers simply do not buy a product they don't like; they
don't insist on a lower price.