German pharma criticizes new AMNOG vetting procedure

Until recently, pharmaceutical companies could set prices for new drugs in Germany. But now their “monopoly is broken,” says the journal Pharmazeutische Zeitung. The government Act on the Reform of the Market for Medicinal Products (AMNOG) has erected a series of hurdles for drugmakers hoping to bolster revenues with new drugs and thus made the German regulatory environment a great deal more arduous and uncertain for the industry.

Under AMNOG, which came into effect last year, pharma firms introducing a new drug must submit a dossier showing that it constitutes an improvement on existing treatments. A Federal Joint Committee (GBA) delivers a verdict after the Institute for Quality and Efficiency in Healthcare (IQWiG) has evaluated the drug. This takes up to three months.

Drugs are graded on their added therapeutic benefit using a six-stage scale ranging from “considerable added therapeutic benefit” to “no added benefit.” If the drug adds no value, it is assigned a price under Germany’s reference-pricing system. If it is deemed an improvement, the pharma company and state health insurers negotiate the price and the rebate for the health system. An arbitration board can step in if the two parties cannot agree. The whole process is supposed to be completed within 15 months.

Mixed results so far

Over 20 drugs are undergoing vetting under AMNOG and while several have been deemed to add some value, the industry has criticized the IQWiG’s methodology and assumptions in several cases where it feels the assessment is unfair. It noted, for instance, that the IQWiG decided that the orphan drug pirfenidone (Esbriet, from US biotech firm InterMune) provided no additional benefit (The Pharma Letter December 18, 2011). Yet the industry points out that orphan drugs are supposed to be exempt from the vetting procedure as their added value is legally endorsed by their successful completion of the European approval process.

Another example is the breast cancer drug eribulin (Eisai’s Halaven; TPL February 17)). This is supposed to be administered when initial therapy no longer works, but the drug it was compared to is used in the first phase of the illness, which is, unsurprisingly, cheaper. This is a case of comparing apples and pears, according to the director-general of the German pharma association VFA. AstraZeneca’s Brilique (ticagrelor, also marketed as Brilinta), fared rather better, becoming the first drug to be cleared under the AMNOG procedure (TPL December 16, 2011). It received a favorable opinion in one indication, allowing AstraZeneca to negotiate a price with the country’s public healthcare organization rather than be subjected to reference pricing.

Price referencing key area of conflict

Recurrent procedural disputes are, however, being overshadowed by the question of establishing a framework for negotiating prices for drugs that add value. A study conducted for the VFA by health economist Juergen Wasem of the University of Duisburg-Essen notes that Germany has a huge influence on international drug reference prices. Germany directly or indirectly influences drug prices in 31 countries, his study shows. So the fear is that lower prices in Germany are likely to undermine revenues across Europe.

So when it comes to establishing  a framework for determining drug pricing under AMNOG, Pharma is clearly hoping that the arbitration board, which is soon to finalize the criteria for assessing European prices in order to create reference prices for AMNOG drugs, leans towards countries where prices would tend to be comparatively high.  

But this issue does not seem to be going Pharma’s way either. The arbitration board is putting too much emphasis on population size, notes a joint statement by various German industry associations, and not enough on whether the countries whose prices are set to be included in the benchmark are economically comparable to Germany: they include Greece, Portugal, Slovakia and the Czech Republic.

The full extent to which AMNOG is set to clip German pharma’s wings will only begin to emerge over the next few months. But with bureaucratic hurdles mounting and prices under constant pressure, the industry, as Pharmazeutische Zeitung puts it, is being squeezed into “an unusually tight corset.”