The law, backed by the lower house today, gives companies a one-year window to negotiate prices with insurers after introducing new drugs, potentially affecting Novartis AG’s multiple sclerosis treatment Gilenya and AstraZeneca Plc’s blood thinner Brilinta among other medicines that haven’t been approved yet in Europe. If no agreement is reached, the Health Ministry would set a maximum price, and the drugs would undergo a cost-benefit analysis by a semi-state agency.
“We are breaking the price monopoly of the pharma industry,” Jens Spahn, a lawmaker with Chancellor Angela Merkel’s Christian Democratic Union party who sits on parliament’s Health Committee, told the lower house, or Bundestag.
The deals that drugmakers strike with German insurers may put pressure on sales elsewhere, because other countries use German prices as a reference, said Elmar Kraus, a Frankfurt- based analyst for DZ Bank AG. Today’s curbs come on top of temporary rebates and price freezes on drugs that the government imposed last summer. Those measures will cost drugmakers 2.7 billion euros next year, according to the VFA, a Berlin-based group representing 45 drug producers.
“Everyone is trying to save,” Kraus said in an interview. “Some are waiting for the Germans. German drug prices have a certain reference function for a range of other countries.”
Companies now generally can set prices for medicines that offer an additional benefit for patients over similar treatments or lower-priced generics.
Merkel’s Plan
The changes make up a central element of Merkel’s reform of the health-care system in Germany. The government, faced with an aging population and ballooning costs, is seeking to ward off an estimated 11 billion-euro shortfall in the public insurance system next year.
Drug spending by the statutory “sick funds” that insure more than 70 percent of the country’s population rose 5.3 percent to 32 billion euros last year as companies increased their prices for patent-protected medicines by 8.9 percent, Health Minister Philipp Roesler has said, describing plans to reduce drug costs as a “paradigm shift” for Germany. The drug pricing plan will save 2 billion euros, the ministry has said.
Prices for generic drugs, many of which are already fixed through mandatory discount contracts, fell 2 percent last year.
Germany, the world’s third-biggest drug market after the U.S. and Japan, was one of the last countries in Europe in which drugmakers were allowed to set prices for their products. Today’s law will only affect drugs not yet approved for sale.
Bayer’s View
Bayer AG, Germany’s biggest drugmaker, is already selling its anti-clot drug Xarelto for European hip and knee surgery patients but has yet to win regulatory approval for people with irregular heartbeats, the biggest part of what the company has said could amount to more than 2 billion euros a year in sales.
It’s not clear how the law will affect Bayer’s new drugs, Rolf Ackermann, a spokesman for the Leverkusen-based company said in a telephone interview yesterday. The law being voted on today would require drugmakers to negotiate with an association that represents Germany’s public insurers, rather than negotiating with each insurer individually. That puts pharmaceutical companies at a disadvantage, he said.
“The coalition has promised market-oriented reforms and more competition in the health care system,” he said. “This is exactly the opposite -- a monopoly. It doesn’t have anything to do with competition.”
‘Open to Dialogue’
Also awaiting approval in Europe is AstraZeneca’s Brilinta, set to compete with the $9.8-billion-a-year blood thinner Plavix from Sanofi-Aventis SA and Bristol-Myers Squibb Co. A European Medicines Agency panel recommended the medicine be cleared on Sept. 24.
Laura Woodin, a spokeswoman for London-based AstraZeneca, declined to comment yesterday on what impact the law might have, saying the drug hasn’t yet been approved and the measure hasn’t become law. Brilinta will be sold as Brilique in Europe.
“AstraZeneca is open to dialogue with all participants of the German health care system to guarantee patient access to innovative medicines,” Woodin said in a telephone interview.
It’s too soon to tell whether Novartis’s Gilenya, approved in the U.S. in September and still under review in Europe, will be affected, Eric Althoff, a spokesman for the company in Basel, Switzerland, said in an e-mail yesterday. The pill may take 13 percent of the market within the next year, analysts at Leerink Swann & Co. said yesterday.
Insurance Premiums
Today’s step is among the final measure for a health reform that was a pledge of Merkel’s campaign for re-election last year. Merkel can also rely on her lower-house majority to back an increase in health-care premiums to be voted on tomorrow.
The two laws are a scaled-back version of changes originally proposed by Roesler, a member of Merkel’s Free Democratic Party coalition partners. He championed a plan to decouple premiums from income by introducing a single flat-fee payment.
That plan was quashed by the Christian Social Union, the Bavarian sister party of Merkel’s CDU. Instead, the government plans to limit a supplemental contribution that insurers can charge to 2 percent of wages, with any amount exceeding that to be paid through tax revenue.
To contact the reporters on this story: Naomi Kresge in Berlin at nkresge@bloomberg.net; Patrick Donahue in Berlin at at pdonahue1@bloomberg.net.
To contact the editors responsible for this story: Phil Serafino at pserafino@bloomberg.net; James Hertling at jhertling@bloomberg.net
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