German parliament passes drug price reforms

“We are breaking the price monopoly of the pharmaceutical industry,” said a government health spokesman, after the German parliament this week passed a drug price reform package to bring down the prices of new branded prescription medicines, which have hitherto been decided mainly by the pharma sector.

The government hopes to save the state health insurance system 2.2 billion euros ($3.09 billion) a year from next year, when the new law takes effect. State health insurers, which cover over 70% of the population, spent 32 billion euros on drugs last year, an overall increase of 5.3%, while the outlay on newly introduced drugs has been rising especially rapidly, according to the Health Ministry (The Pharma Letters passim). The public health insurance system as a whole faces a deficit of 11 billion euros next year.

The government has already clamped down on branded drug prices by raising the mandatory discount for state insurers from 6% to 16% and freezing prices until December 31, 2013. These measures have been in force since August. Medium-term changes to keep a lid on prices after 2013 were at the center of this week’s legislation. They comprise a new system of drug vetting to gauge whether a new drug is an improvement on existing treatments.