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The Introduction in January 2011 of the Act on Reform of the Market for Pharmaceutical Products (AMNOG) has transformed the
German pharmaceutical business like no law before, with significant long-term implications for the way companies develop and
commercialize their products, not only in Europe (where 19 countries use Germany as the reference point for local pricing)
but globally as well. Prior to last year, pricing for new drugs was basically free at time of launch; AMNOG drastically changed
the equation by introducing an administratively-complex pricing system based on evidence of a new drug's additional benefit
over established, often generic therapy. Now that we have nearly two years of practical exposure to the law, with more than
30 drugs assessed under the new rules, it's useful to examine some key precedents that will shape the pricing environment
going forward.
Different path to profits
The government expects the new law to generate savings for the statutory health insurance system of up to €2 billion annually.
This objective illustrates the pricing pressures now facing research-based pharmaceutical companies. The new framework for
price negotiations is widely forecast to reduce industry revenues, not just for drugs under review but across the entire therapeutic
portfolio. Achieving a raise in net income for a drug by a few percentage points will require significant long-term investments
in infrastructure around a new model for establishing and maintaining market access—one that depends less on marketing savvy
aimed at patients and providers than on the capacity to build evidence and establish outcomes with direct appeal to a small
community of payers.
Progress of the law to date is not encouraging. The first assessments under the new law had hardly begun when two big multinational
drugmakers announced that because of the evidence requirements their products would not be made available to the German market.
Novartis withdrew its antihypertensive drug Rasilamlo (Aliskiren/Amlodipin) after only four months, while Boehringer Ingelheim
and Eli Lilly acted to forgo the price negotiation for their new anti-diabetic agent Tradjenta (Linagliptin). The decisions
seemed to confirm the initial apprehension of industry about how AMNOG would hinder pharmaceutical innovations, especially
if a negative assessment caused other countries to adopt the same position, thus depressing global sales projections. Actions
by the three companies were subsequently echoed by Pfizer and GSK, who after a negative assessment decided not to negotiate
and withdraw the hand contracture drug Xiapex and the anti-epileptic Trobalt, respectively.
What the record shows
Nevertheless, over 30 benefit assessments have been published to date. At least four launch prices have so far been negotiated,
of which two are known—and these are 19 percent and 27 percent below list price. The net result is more clarity about how
the law will actually work, giving industry the opportunity to evaluate what factors lead to better outcomes. But more clarity
has not changed the misgivings the industry has about the law, while some unanticipated political controversy surrounding
the assessment of individual products is making for increased discomfort around what is supposed to be a purely technical
exchange among authorized experts.
Indeed, what the assessment process has exposed is a deep fault line between the expectations of the pharmaceutical companies
and those of the statutory health insurance system. In the assessment, a drug's additional benefit over the comparator is
rated along a grid of one out of six grades, ranging from a "major," "significant," or "marginal" additional benefit, on the
one end; to "not quantifiable," "no," or "smaller" additional benefit, on the other. In their dossiers submitted to regulators
for review, pharmaceutical companies allocated the highest grade of "major additional benefit" to more than 75% of subgroups.
In contrast, this grade was not allocated once by the formal assessment review body, the Institute for Quality and Efficiency
in Health Care (IQWiG). Instead, "marginal" and "no" additional benefit have been the most common outcomes of IQWiG assessments.
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