The german healthcare system is on its 14th overhaul in just over two decades. Yet, still, no one seems satisfied.
The system was overhauled as recently as 2003, but further changes were inevitable after a new government took power in 2005
and announced plans for widespread reform. The reform proposals, introduced last July by Chancellor Angela Merkel, were designed
to increase competition among Germany's 250 statutory health funds, thereby reducing costs. Merkel's suggestions were met
with widespread criticism from health experts, the pharma industry, economists, and even members of her own Christian Democrat
Germans pay for their healthcare through an insurance system. Both employers and employees make contributions to insurance
schemes, with employees putting on average about 14 percent of their salaries into the health funds. Higher earners can opt
out in favor of private health insurance, which is often cheaper. The result? The eight million richest Germans contribute
nothing to the system that pays for the remaining 70 million insured people.
The costs of healthcare are escalating: Insurers are now paying about $185 billion a year, which represents an increase of
more than 1,000 percent over 1970 levels. Only the United States spends a greater proportion of its GDP on healthcare. Still,
the German funds struggle to cover healthcare costs. And there are concerns that the spiraling cost of employers' healthcare
contributions is deterring companies from creating much-needed jobs.
After much argument over appropriate reforms, a compromise solution was agreed upon that doesn't really suit any of the political
players. Substantial reform hasn't happened—the current system of employer and employee contributions is expected to continue.
Major tax funding will not happen. And the costly bureaucratic duplication of the many health funds isn't being addressed,
Even a central health fund, which most constituents considered a sure thing, failed to materialize. Its creation was postponed
until 2009, on the basis that other changes need to be made first. And even the central fund—intended to give tax money to
the health funds, primarily to pay for children's healthcare—has a hang up: The proposed amounts fall well short of the actual
cost of children's healthcare.
Many in the pharma industry believe that Germany's latest reforms are fundamentally flawed. "We are in constant contact with
the authorities, and we explain to them what our position is and why we cannot agree to the healthcare reform as it is designed
at the moment," says Werner Wenning, CEO of Bayer, the country's largest pharma company.
One of the biggest problems the pharma industry has with the reforms is the proposed cost-benefit analysis for innovative
drugs, which executives say is not in line with international standards. Rather than evaluating the drugs once they are being
used by patients outside of a trials setting, the system is set up so that the Institut für Qualität und Wirtschaftlichkeit
im Gesundheitswesen (IQWiG), Germany's version of NICE in the United Kingdom, makes a secondary evaluation of their effectiveness—a
process that German pharma trade association Verband Forschender Arzneimittelhersteller (VFA) says is a duplication of the
VFA also takes the position that IQWiG should look at medicines in the context of the savings they can create in other areas,
such as reducing hospitalizations. "The practical use of most new medicines is only proved after broad application in everyday
life, and not under the artificial conditions of a clinical trial," according to a VFA spokesperson.
Pharma also has issues with pricing—notably, a plan to introduce reimbursement limits for innovative drugs, which could put
an end to market-based pricing. On the contrary, VFA believes that interference in the setting of market prices should be
diminished. Rather than government interference, it would prefer that pharma companies be able to work directly with the health
insurance funds to set prices and arrange discounts, which VFA says would lead to genuine competition.