A growing consensus in Germany on the need for market access to support pharmaceutical innovation?

Representatives of the pharmaceutical industry and three of Germany’s leading political parties have called for measures to support the pharmaceutical industry by easing the relentless pressure on drug prices in the country. They were speaking at an event organised by the Bundesverband der Arzneimittelhersteller (BAH; Federal Association of Pharmaceutical Manufacturers), one of the three leading research-based industry associations in Germany, in Berlin on 22nd October 2019.

The German market access landscape presents particular challenges for small and medium-sized drug manufacturers. Dr Norbert Gerbsch, Senior Director, Healthcare Management at G. Pohl-Boskamp GmbH & Co. KG, remarked that “mid-sized pharmaceutical companies, in particular, find themselves caught in a vice of rising demands and costs on one side, and capped prices and revenues on the other side.”

Speakers noted that policies such as a twelve-year price freeze, mandatory rebates, reference pricing and voluntary rebate contracts have contributed to shortages of some drugs by driving manufacturers out of the German market. Reinhard Houven, the economic spokesman of the Freie Demokratische Partei (FDP; Free Democratic Party), suggested that production of some medicines has moved from Germany to low-wage economies. He argued that guaranteeing the security of the pharmaceutical supply system in Germany will require politicians and health insurance funds to engage differently with the industry.

Dr Hermann Kortland, the Deputy Managing Director of the BAH, offered some specific suggestions of pricing reforms the government could adopt to support a beleaguered pharmaceutical industry. He identified a need to set a minimum level, based on European pricing, for reference prices. He additionally argued that reference prices should take account of the higher costs of producing certain dosage forms, such as juices for paediatric preparations. Furthermore, he called for voluntary rebate contracts to be negotiated with a minimum of three providers to reduce the risk of product shortages. (At present, health insurance funds may negotiate exclusive contracts with a single manufacturer.) Kortland also expressed the view that voluntary rebate contracts should be prohibited for essential drugs, as is already the case for vaccines.

How politicians can help

Politicians can make a significant difference to the business environment for the pharmaceutical industry. In Gerbsch’s experience, regional governments tend to be much more positive than the federal government about working with the pharmaceutical industry. The reason for their enthusiasm is that they are keenly aware of the contributions that a thriving industry makes to their regional economies. It is more difficult for companies to have a dialogue with the national government.

The politicians present at the BAH meeting generally agreed on the need for federal government to do more to support the pharmaceutical industry. Volker Ratzmann, a Green member of Parliament, commented that the health economy is the second-largest economic sector in his home state of Baden-Württemberg. He believes that a strategic dialogue that the regional government in that state has had with the pharmaceutical industry could offer valuable lessons to the federal government.

Gabriele Katzmarek, a spokeswoman on the health economy for the Sozialdemokratische Partei Deutschlands (SPD; Social Democratic Party of Germany), highlighted a need for drug pricing policy to take account of socioeconomic factors such as workplace productivity, return to employment, speed of rehabilitation and avoidance of hospitalisation. In support of a flourishing pharmaceutical manufacturing sector in Germany, she made the case that the industry must be a “cornerstone of the working society—we don’t want to be a service economy.” At the same time, she reminded industry representatives in the room of the benefits they derive from a large pharmaceutical market backed by the stability of a government-sponsored healthcare system.

Reinhard Houven of the FDP reflected that, “for the last 20 years, the industry has been [seen as] the classical problem child. But we’ll solve our future problems only by working with the industry.” He believes the constant focus on curbing high drug prices is too short-sighted, and the role of health insurance funds and patients must also be taken into account. He posed the contentious question: “Can’t drugs also rise in price?”

What will the federal government do?

The comments made by the politicians on the programme at the BAH meeting were striking because the speakers represented a range of parties from the centre and left of the political spectrum—not all traditionally the strongest advocates of the pharmaceutical industry. Their remarks are also interesting because they came just several weeks after the federal government announced its intention to use the presidency of the EU Council in the second half of 2020 to promote access to pharmaceutical innovation across Europe, a very different approach from the focus on price cutting prioritised by other countries that have recently held the presidency. The German government notes that prices in some European countries are so low that they deter companies from launching their products in those markets. The proposed solution is concerted action to ensure that drug prices strike a balance between rewarding innovation and guaranteeing affordable access in all the EU’s disparate healthcare systems. Germany also plans to make the case for bringing the production of more active pharmaceutical ingredients (APIs) back from China and India to Europe. One suggestion is to set a minimum share for European-manufactured APIs.

In addition, it is worth noting that Germany was one of only three countries to dissociate itself from a resolution adopted at the 72nd World Health Assembly (WHA) in May 2019 that called for much greater transparency around the pricing and costs of medicines. Taken together, these developments may give the industry cause for hope that Germany recognises the need to pursue policies that support pharmaceutical innovation. Time will tell if these ambitions translate into concrete reforms in Germany—and if other countries will be persuaded to follow suit.