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Contents lists available at SciVerse ScienceDirect
Health Policy
journal homepage: www.elsevier.com/locate/healthpol
Structural changes in the German pharmaceutical market: Price
setting mechanisms based on the early benefit evaluation
Cornelia Henschke ∗ , Leonie Sundmacher, Reinhard Busse
Department of Health Care Management, Technische Universität Berlin, Berlin, Germany
a r t i c l e
i n f o
Article history:
Received 16 August 2012
Received in revised form 7 December 2012
Accepted 9 December 2012
Keywords:
Pharmaceuticals
Pricing and reimbursement
AMNOG
German reform
a b s t r a c t
In the past, free price setting mechanisms in Germany led to high prices of patented pharmaceuticals and to increasing expenditures in the pharmaceutical sector. In order to control
patented pharmaceutical prices and to curb increasing pharmaceutical spending, the Act
for Restructuring the Pharmaceutical Market in Statutory Health Insurance (AMNOG) came
into effect on 1st January 2011. In a structured dossier, pharmaceutical manufacturers have
to demonstrate the additional therapeutic benefit of the newly approved pharmaceutical compared to its appropriate comparator. According to the level of additional benefit,
pharmaceuticals will be subject to price negotiations between the Federal Association of
Statutory Health Insurance Funds and the pharmaceutical company concerned (or assigned
to a reference price group in case of no additional benefit). Therefore, the health care reform
is a first step to decision making based on “value for money”. The process of price setting
based on early benefit evaluation has an impact on the German as well as the European pharmaceutical markets. Therefore, these structural changes in Germany are of importance for
pricing decisions in many European countries both from a political point of view and for
strategic planning for pharmaceutical manufacturers, which may have an effect on insured
patients’ access to pharmaceuticals.
© 2012 Elsevier Ireland Ltd. All rights reserved.
In Germany, like in most other countries of the European
Union, public spending on health care has exceeded GDP
growth. Pharmaceutical spending of the Statutory Health
Insurance (SHI), which covers more than 85% of the German population, increased from D 21.8 billion in 2000 to
D 33.8 billion in 2010 [1]. Patented pharmaceuticals were
accountable for almost D 14.2 billion of pharmaceutical
spending in 2010, of which D 3.5 billion were allocated to patented pharmaceuticals without demonstrated
additional therapeutic benefits1 [2]. The share of sales for
patented pharmaceuticals increased from 11.2% in 1993 to
47.8% in 2010 [2].
Many European countries counteract increased pharmaceutical spending by introducing a regulatory framework and regulatory instruments for pricing or reimbursement. Although structural and organizational details differ
widely in country-specific pharmaceutical systems, some
problems seem to be similar. Particular critical issues in
assessing patented pharmaceuticals include (1) how therapeutic innovations are evaluated [3] and (2) how their
prices are set. Evaluation relevant to pricing and reimbursement decisions of pharmaceuticals is used to appraise
∗ Corresponding author at: FG Management im Gesundheitswesen,
Technische Universität Berlin, Strasse des 17. Juni 135 (H80), D-10623
Berlin, Germany. Tel.: +49 30 314 28703; fax: +49 30 314 28433.
E-mail address: [email protected] (C. Henschke).
1
This data on patented pharmaceuticals without demonstrated additional therapeutic benefits is based on a classification system, which was
developed by Fricke and Klaus.
1. Introduction
1.1. Background
0168-8510/$ – see front matter © 2012 Elsevier Ireland Ltd. All rights reserved.
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the additional value of a new pharmaceutical relative to
the standard therapy [4]. In contrast to other countries
such as France and Sweden that have introduced a postlicensing benefit assessment and governmental decision
making or negotiations on reimbursement based on these
assessments [5], in Germany benefit assessments, in general, have been of minor importance for reimbursement
decisions.
1.2. Brief review of patented drug policies
Since the late 1980s different kinds of regulations,
including reference pricing, price reductions, pharmacy
rebates for sickness funds, co-payments, substitution
schemes, parallel import quotas and regional drug budgets for office-based physicians, have been introduced in
Germany. Since the introduction of drug budgets in 1993,
drug prescriptions with disputed effectiveness decreased
whereas generic substitution increased [6]. However,
regional drug budgets were abolished in 2001 due to ongoing legal battles and the fact that these budgets could not be
properly enforced. This led to a sharp overall drug expenditure increase. In 2002, individual physician prescription
target volumes were introduced [7].
One of the most important measures concerning the
reimbursement of pharmaceuticals was the introduction of
a system of reference pricing in 1989, which defined reimbursement limits from public sources. Reference prices are
set for groups that include pharmaceuticals with (1) the
same active ingredients (i.e. an off-patent branded original and generics), (2) comparable active ingredients and
effects, (i.e. original drug and their generics or related metoo drugs) or (3) different substances with comparable
effects [8]. The system of reference pricing could initially
affect all pharmaceuticals regardless of patent protection.
This changed in 1996, when patented pharmaceuticals
were excluded from the system of reference pricing in
order to encourage innovation.
Table 1 provides an overview of important policies
regarding patented drugs in Germany, including evaluation, reimbursement, and price setting mechanisms since
1996. Until 2003, these drugs were not evaluated in regard
to their additional benefit, all of them were included in the
benefit basket, and they were reimbursed by the sickness
funds at the price set by the manufacturers. As this situation encouraged the launch of me-too drugs without
clear additional benefits, the legislation to exclude them
from reference pricing was revoked in 2004 [9]. Since
then, patented drugs without additional therapeutic benefits, compared to existing pharmaceutical alternatives,
could (again) be included in reference-priced groups, provided that (1) the Federal Joint Committee (Gemeinsamer
Bundesausschuss, G-BA) decided to commission the Institute for Quality and Efficiency in Health Care (Institut
für Qualität und Wirtschaftlichkeit im Gesundheitswesen,
IQWiG) with an assessment, (2) the G-BA came to the
decision of no additional benefit, and (3) a reference
group consisting of at least three patented drugs could be
formed. However, pharmaceuticals associated with therapeutic improvements compared to standard treatments
(and those without comparators) continued to be explicitly
excluded from the scheme. Pharmaceutical manufacturers
were free to set their prices. In consequence, reimbursement for these pharmaceuticals was identical to the price
that was set by the manufacturer.
To address this problem of theoretically unlimited
prices for drugs with a therapeutic improvement over
standard therapy, the instrument of maximum reimbursement ceilings was introduced in 2007 – while the
other problem, namely that assessments had to be explicitly decided upon by the G-BA, remained. Maximum
reimbursement ceilings basically aimed at tying the reimbursement to incremental cost-effectiveness determined
on the basis of a cost-effectiveness evaluation. Such assessments were to be performed by IQWiG after they were
commissioned by the G-BA. Two assessments were commissioned in December 2009, more than two years after
the introduction of this instrument, but only one of them
has been preliminarily published in November 2012, while
the other one was withdrawn by the G-BA in October
2012. Accordingly, no reimbursement ceiling was determined on the basis of an economic evaluation while this
regulation was in force until the end of 2010 [12]. Consequently, manufacturers could establish their own prices
for patented pharmaceuticals whose demonstrable additional therapeutic benefit had not yet been assessed. In
other words, until 2010, it did not make any difference to
the price whether the pharmaceutical had a therapeutic
additional benefit or not.
Diverse instruments to achieve pharmaceutical cost
containment were thus established but no direct price regulation instrument was used until 2010. This is to say that
in principle, pharmaceutical manufacturers were allowed
to set their prices freely in Germany, except in the case
of temporary price freezes and compulsory rebates [7].
Not surprisingly, prices for pharmaceuticals in Germany
have been found to be among the highest in the OECD
countries, both for patented and generic pharmaceuticals
[8]. Since August 2010 to the end of 2013, manufacturers
are required to give SHIs a rebate of 16% on pharmaceuticals that are not included in the reference-pricing
scheme. Additionally, a price freeze with retrospective
effect from August 2009 to the end of 2013 came into
effect.
2. Structural changes
In order to control prices of patented pharmaceuticals
and to curb increasing pharmaceutical spending, the Act
for Restructuring the Pharmaceutical Market in Statutory
Health Insurance (AMNOG), which aims at strengthening
benefit assessment of pharmaceuticals, came into effect
on 1st January 2011. Pharmaceutical manufacturers are
required to produce a dossier demonstrating the additional
therapeutic benefit of the newly approved pharmaceutical
– specifically for new chemical entities and new indications
– compared to its appropriate comparator [13], which is a
condition that precedes reimbursement decisions.
In contrast to the former situation in which manufacturers were able to set prices at their determined price level,
AMNOG aims to define an amount of reimbursement that
reflects the additional benefit of a pharmaceutical based
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Table 1
Important policies regarding patented drugs in Germany since 1996.
Evaluation of
additional/comparative
benefit
1996–2003
2004–2006
No
Upon application of Ministry of Health or parties in G-BA
2007–2010
Since 2011
Mandatory for all new
drugs/indications except
orphan drugs a,b
Price-setting
Free by manufacturer
Reimbursability
(benefit basket)
All patented drugs included
in benefit basket
Drugs without proof of effectiveness or with
proven inferior effectiveness or with more efficient
alternatives may be restricted or excluded (such as
insulin analogues) [11]
Only drugs with proven
inferior effectiveness or with
more efficient alternatives
may be restricted or
excluded
Reimbursement price
in case of no additional
benefit
Reimbursement = price
(possibly temporarily
lowered by a certain %)
Drugs are grouped and a reference price is determined
per group; patient pays difference between price and
reference price (example: atorvastatin [Sortis])
New drugs are grouped as
well and are liable to
reference price; if grouping is
impossible, price may not
exceed that of existing
alternative
Reimbursement = price
(possibly temporarily
lowered by a certain %)
Maximum reimbursement
ceiling may be set
following
cost-effectiveness analysis
(not done in a single case);
in other cases
reimbursement = price
Country-wide rebate on
manufacturer price is
negotiated between Federal
Association of Statutory
Health Insurance Funds and
manufacturer (→fixed
reimbursement price from
month 13 after launch)
Reimbursement = price
(possibly temporarily
lowered by a certain %)
As before (concerns only
patented drugs with market
launch before 2011 and
orphan drugs)
May be commissioned by
G-BA for drugs with
additional benefit (two
analyses commissioned)
If negotiations fail and if one
side challenges the result of
the arbitration, a
cost-effectiveness analysis is
commissioned by the G-BA
Reimbursement in case
of additional benefit
Officially free by
manufacturer, but de facto
only for 12 months after
launch
Unevaluated drugs
Cost-effectiveness
analysis
No
No
a
Although the additional benefit is deemed to be proven for orphan drugs, a dossier has to be submitted, and price negotiations will follow. The dossier
does not have to present proof of the medical benefit and additional benefit. However, the dossier must include information on the groups of patients for
whom there is significant medical additional benefit and on the extent of this additional benefit [10]. If the business volume of an orphan drug reached
the amount of 50 million EUR during the last 12 months, a second (and full) dossier demonstrating additional benefits will have to be submitted within 3
months of its request by the G-BA.
b
Patented pharmaceuticals that were approved before 2011 are also assessed in the AMNOG process, if it is initiated by the G-BA.
on an early benefit assessment. The benefit evaluation of
newly approved pharmaceuticals consists of the assessment and price setting periods (Fig. 1).
2.1. The assessment period
At the point of market authorization, manufacturers
are required to provide a comprehensive dossier, which
demonstrates the additional therapeutic benefit compared
to the appropriate comparator, which finally is determined
by the G-BA [15]. Pharmaceutical manufacturers could utilize the advisory service of the G-BA concerning the choice
of an appropriate comparator. The appropriate comparator must be chosen by considering the following criteria:
Pharmaceuticals as a comparator must be approved for
the therapeutic indication. Non-pharmaceuticals as a
comparator must be included in the benefit basket of the
SHI. Comparators with confirmed patient-relevant benefits
by the G-BA have to be privileged. The chosen comparator
should be a part of the appropriate treatment in therapeutic areas within the scope of generally accepted state of
medical knowledge. If several alternatives exist, the more
economic should be chosen, particularly those comparators that are included in the reference-pricing scheme [16].
According to German law, the benefit of pharmaceuticals
is the patient-relevant therapeutic outcome in terms of:
improved health status or quality of life; reduced duration
of illness or side effects; extended length of life [15].
Furthermore, the dossier primarily based on phase III
studies has to include information on approved indications for the drug, the anticipated number of patients who
will obtain relevant additional benefits, the requirements
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Fig. 1. Procedure for reimbursement of patented pharmaceuticals source: based on IQWiG [14].
for quality-assured applications of the drug, the cost of
therapy, and the impact on SHI’s expenditures. Generally,
the IQWiG working on behalf of the G-BA will review the
dossier submitted by the pharmaceutical company and
evaluate the additional benefit of the new pharmaceutical within three months. Nonetheless, the G-BA itself or
third parties commissioned by the G-BA can assess the
dossiers. Taking into consideration hearings with experts
and the pharmaceutical manufacturer, the G-BA will make
a decision and publish its assessment report at the latest six
months after market authorization. In this context, there
are six classifications concerning the degree of the additional benefit: (1) major additional benefit, (2) considerable
additional benefit, (3) minor additional benefit, (4) unquantifiable additional benefit (5) no additional benefit and (6)
less benefit. Based on this classification, one of two courses
of action concerning the price setting of a pharmaceutical
will follow (see Fig. 1) [15].
2.2. The price setting period
Pharmaceuticals that do not provide evidence of
additional therapeutic benefits compared to appropriate
comparator will be directly included in the referencepricing system. Reference prices for the costs reimbursable
by the sickness funds are determined by the Federal
Association of Statutory Health Insurance Funds (GKVSpitzenverband, GKV-SV) [9], which also enters into
negotiations with particular manufacturers if pharmaceuticals cannot be classified into existing reference price
groups. For this purpose, the level of reimbursement shall
not exceed costs of the standard treatment. Furthermore,
if dossiers are not submitted on time or are incomplete,
pharmaceuticals will be included into the reference pricing
scheme regardless of any potential additional benefit.
According to the level of additional benefit, pharmaceuticals will be subject to price negotiations between
five participants each of the GKV-SV and the pharmaceutical company concerned. The Association of Private Health
Insurance Companies attends the negotiations but does not
have a voice. The amount of reimbursement – more precisely, the rebate on the manufacturer price – will apply to
both the statutory and the private health insurance as of
month 13 after market authorization. The G-BA’s decision
regarding the degree of the pharmaceutical’s additional
benefit and criteria such as prices of pre-determined European countries are relevant for the negotiations between
the GKV-SV and the pharmaceutical company. Therefore,
manufacturers have to publish specific country prices of
the pharmaceutical [17].
If negotiations fail during the post launch-first year,
an arbitration body – consisting of representatives of
the GKV-SV, the pharmaceutical industry and neutral
members – sets the price within the following three
months. The pricing decision of the arbitration body
has to consider prices of the pre-determined European
countries. Price setting applies to all health insurers with
a retrospective effect starting 13 months after market
authorization and is valid for at least one year. Individual sickness funds are allowed to arrange selective
contracts with individual pharmaceutical manufacturers,
complementing or modifying the collective price negotiation scheme.
If the GKV-SV and/or the manufacturer of pharmaceuticals do not accept the price set by the arbitration body,
both parties have the possibility to appeal the decision
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by asking the G-BA for a cost-effectiveness assessment,
which, in turn, might lead to a different price [13]. Based
on the cost-effectiveness assessment, new price negotiations follow between the GKV-SV and the manufacturer of
pharmaceuticals. Within the first 12 months after pharmaceuticals’ market authorization, manufacturers are free to
set their prices. Nonetheless, they are required to give SHIs
a 16% rebate on these pharmaceuticals.
Preconditioned by the fact that the G-BA initiates proceedings, a benefit assessment can also include
patented pharmaceuticals that were approved before 2011
and not subject thus far to the German reference pricing
scheme.
2.3. Status quo
From January 2011 to June 2012, the G-BA had to manage 30 pharmaceuticals under the new legislation. A total
of 18 assessments were published as of the middle of
June 2012, three of them in 2011. However, the only full
assessment in 2011 that included hearings with experts
and pharmaceutical manufacturers was published for Ticagrelor (Brilique), which was approved for the treatment of
acute coronary syndrome. The G-BA assessed Ticagrelor in
combination with aspirin versus the current standard of
care in acute coronary syndrome (clopidogrel plus aspirin)
for unstable angina pectoris/non-ST elevation myocardial
infarction (NSTEMI) and recognized a considerable additional benefit. Ticagrelor in combination with aspirin has
also been compared to clopidogrel in combination with
aspirin in patients with medical treatment after STEMI,
prasugrel in combination with aspirin in patients with PCI
after STEMI, and to ASS in patients with CABG after STEMI.
The G-BA recognized no additional benefits in all three
cases (exception: unquantifiable additional benefit for two
patient groups) [18].
In June 2012, the first price negotiations between a
company and the GKV-SV were finalized for Ticagrelor
(Brilique). The manufacturer price was D 2.48 per day of
treatment. The GKV-SV and the pharmaceutical company
agreed on a rebate of D 0.48 (19.3%). Thus, the reimbursement price of D 2.00 per daily therapy costs was made
retrospectively valid from 1 January 2012 for 3 years. The
rebate of 19.3% has to be compared with the rebate of 16%,
which is applied to all drugs not included in the reference
pricing scheme or without a negotiated reimbursement
price, i.e. the additional rebate was only 3.3% in this case
to date. However, the rebate of 16% is set to expire in 2013.
The GKV-SV expects cost savings at least in the millions
within these three years [19].
3. Stakeholder positions
Early assessment and the price setting of newly
approved pharmaceuticals involve and affect various
stakeholders who strongly differ in their opinions: the
pharmaceutical industry and their associations; patients;
social and private health insurers; institutions at the federal
level (for example G-BA, IQWiG), as along with the ruling
coalition in Parliament and the opposition parties.
5
The new coalition government expects savings for
the SHI of up to D 2 billion annually due to the early
assessment of pharmaceuticals and a more efficient distribution of pharmaceutical spending [20]. However, some
experts from the opposition parties would like to see
cost-effectiveness assessments carried out before pharmaceuticals are even put on the market. They do not expect
that price negotiations in terms of rebates on the manufacturer price will reduce costs significantly. This is because
they believe that pharmaceutical manufacturers might
start negotiations with a price that already factors in a
discount.
An expected strong impact on prices of newly licensed
drugs and therefore on manufacturers’ revenues causes
strong resistance within pharmaceutical industry. Not surprisingly, manufacturers argue that their high prices are
required to amortize costs of pharmaceutical research
development (R&D) and therefore, incentives for R&D
are reduced. Furthermore, manufacturers’ representatives
suspect adverse effects on research and development activities, which may have an effect on employment politics.
The German Association of Research-oriented Pharmaceutical Companies (Verband forschender Pharmaunternehmen,
VFA) and Pro Generika, which represents the interest of the
generic pharmaceutical industry, complain that the GKVSV has too much power in the centralized negotiations
(“demand monopoly”) and therefore German sickness
funds are in favour of the cost-control measures [20].
Additionally, pharmaceutical manufacturers fear that
published reimbursement prices of their assessed pharmaceuticals trigger potential prices spirals in countries using
Germany as a reference for pharmaceutical price setting.
However, the GKV-SV generally has a positive view on the
structural changes of early assessment of pharmaceuticals
and the binding price decisions. They prefer a system based
on transparency concerning the announcement of negotiated prices.
One area of contention was the generation of the
country basket. According to the social code book V,
pharmaceutical manufacturers have to consider prices
(including potential rebates) of pre-determined European
countries. Therefore, manufactures demanded a basket
consisting only of countries in a comparable economic situation. On the other hand, the GKV-SV postulated a country
basket that included a large number of regions. Finally, an
arbitration body determined a country basket consisting of
15 countries: Austria, Belgium, Czech Republic, Denmark,
Finland, France, Greece, Ireland, Italy, the Netherlands,
Portugal, Slovakia, Spain, Sweden and the UK [17].
4. Discussion
Since patented pharmaceuticals are known as cost
drivers in Germany because of free price setting mechanisms, they are of major importance for policy makers
concerning potential pharmaceuticals’ cost savings. From
a social and economic point of view it seems questionable
whether a specific, often limited therapeutic additional
benefit for patients justifies very high pharmaceutical
prices, as was the case before the reform. In the worst
case scenario, a higher price was accompanied by no
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additional benefit for the patient as most drugs were
not even evaluated. Not surprisingly, the recent reform
act for pharmaceuticals preliminary targets producers of
patented pharmaceuticals.
The argument for high prices to amortize accrued R&D
costs is comprehensible to almost all stakeholders. Scherer
[21] shows a strong correlation between the gross margins
and R&D investments of firms in the USA between 1962
and 1996. Vernon [22] examined the relationship between
price regulation and pharmaceutical R&D investment in the
pharmaceutical sector and showed that expected profits
are essential determinants of R&D spending of firms. However, an efficient level of expenditures for R&D remains
ambiguous.
The introduction of early assessment with subsequent
price negotiations in Germany represents a major structural change in pharmaceutical policies and has potential
for long-term savings. Free price setting by manufactures
of patented drugs is radically constricted. Now the pharmaceutical industry has to (1) provide proof of additional
benefit and (2) offer rebates on their initially non alterable
prices of newly approved pharmaceuticals. The process of
early benefit assessment in Germany is highly transparent
as both the assessments and the dossiers are published on
the website of the G-BA.
In addition, because Germany is one of the most influential reference countries in Europe, the reform will have
an impact also in Europe, particularly in those states using
Germany as a reference country for price setting. Stargardt and Schreyögg [23] examined the impact of price
changes in Germany on EU-15 countries using reference
pricing. The authors showed that for every Euro the price
is lowered in Germany, the reimbursement price dropped
between D 0.15 in Austria D 0.36 in Italy. Approximately
two thirds of the country basket used in Germany consists of countries that use German pharmaceutical prices
as a reference for price setting in a direct or indirect manner. According to the framework agreement between the
GKV-SV and manufacturers’ representatives, the country
basket will be adapted annually if the following criteria are not met: (1) The country basket primarily has to
include countries of the European economic area with comparable economic capacities. (2) These countries have to
represent approximately 80% of the inhabitants of the European economic area (without Germany) [17]. Concerning
price setting, pharmaceutical manufacturers will act in a
strategic manner. Due to the uncertainty of the assessment by the IQWiG and finally the decision by the G-BA,
in some cases a manufacturer of newly approved pharmaceuticals with only minor additional benefits may decide
against submitting a dossier, because it might be more
efficient for them not to submit a dossier and have their
new product included in a reference price-group straight
away. However, this depends on the amount of the reference price and the price aimed for by the manufacturer. In
general, the inclusion of the pharmaceutical in the reference pricing scheme will result in a lower reimbursement
price than when manufacturers negotiate a rebate with the
GKV-SV.
Early assessment of newly approved pharmaceuticals
seems to be a first step in the right direction. However,
early assessment primarily is based on evidence of efficacy
(clinical studies). Nonetheless, a long term policy should
use effectiveness and cost-effectiveness assessment – evaluating care under routine conditions and evaluating care
compared to costs, respectively – as criteria for pricing as
the risks and benefits of pharmaceuticals rise over time. As
the AMNOG does not explicitly include cost-effectiveness
studies in their assessment, policy makers may miss an
important evaluation opportunity.
5. Conclusion
Early benefit assessment, and its subsequent price negotiations, is a first step that might improve the value for
money from the use of health care resources. In 2012, the
first price based on the early benefit assessment was negotiated between the GKV-SV and a pharmaceutical company.
Both parties were satisfied with the results. There is a broad
consensus that Germany has to regulate patented pharmaceuticals because of increasing expenditures. However,
early benefit assessment (with subsequent price negotiations) primarily based on evidence of efficacy as used in
Germany should be supplemented by an assessment of
the benefit of pharmaceuticals under routine care conditions (e.g. using pragmatic RCTs). This should be the basis
for pricing in the long term because data on costs and
effectiveness are not available at the time of market authorization. Ideally, the reimbursement price, which is based
on negotiated rebates between GKV-SV and the manufacturer of pharmaceuticals, should be linked to evidence
development. More precisely, pharmaceuticals should be
reimbursed according to the negotiated price while further
research is being conducted.
Conflict of interest
The authors declare no conflict of interest.
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Please cite this article in press as: Henschke C, et al. Structural changes in the German pharmaceutical market: Price setting mechanisms based on the early benefit evaluation. Health Policy (2013),
http://dx.doi.org/10.1016/j.healthpol.2012.12.005