Drug Charge Changes In German Health System Considered

Drug Charge Changes In German Health System Considered

In a move that could mean the German health system takes charge of the amount it pays for drug therapies and medicines in the future, the government has said it may introduce new price controls in the future. The central European state currently has one of the world’s more generous health-insurance systems. Extremely popular, it is made use of by around 90 per cent of the population and it is universally acknowledged as one of only a handful of health care systems that provides its members with full access to the newest and most expensive drugs to have been developed, no matter what their cost might be.

Germany funds its five star health care system by collecting what is basically a tax of employees at payroll. Contributions to the system are therefore based on an individual’s earnings. The revenue that is generated from this tax is then set aside for state health insurers. It is the government's own insurers which negotiate the prices that are charged from pharmaceutical firms but only year after they have been released. By buying in bulk, the system can generate some cost savings. After all, the country is the world’s fourth leading market for pharmaceuticals when measured by revenue. However, the government now thinks that it can get an even better deal by controlling the price it pays for drugs even further.

Despite the discounts which are negotiated by the state insurers, the German government currently pays the full price levied for the newest drugs that come on to the market in their first year. The full price is therefore paid in the twelve months after a particular drug wins regulatory approval. This policy has long had the desired effect of encouraging pharmaceutical firms to research new therapies and to make them available rapidly in the country. The so-called 'one-year window' of opportunity for the drugs companies has allowed for boosted profit in the new medicines market. For the drugs companies, it has allowed them to gain a significant early doctor take-up in a large and developed market, helping certain drugs to be accepted into other countries' health care systems. As such, the system has often been crucial for the commercial success of innovative drug therapies.

However, Germany's politicians have felt the need to tinker with the system, largely due to the demographics of a rapidly ageing population in the country with fewer and fewer people paying into the system whilst access to drugs increases in demand. Between 2011 and 2015, spending in Germany’s statutory health sector went up to exceed the £150 billion mark. The number of drugs that were prescribed by medical professionals rose over 27 per cent in the last five years, too.

As a result of this increase in expenditure, the German health ministry said it would draw up a scheme to limit the prices charged for new drugs. Crucially, it said that it would do so following consultations with pharmaceutical companies and that a full proposal would be expected later this year. It is expected that the new system will allow companies to continue to price new drugs at a higher level. However, the period of one year may be waived before negotiation can be started, perhaps when sales of a certain drug reaches a certain level, based on the amount of revenue it has generated.

Whilst the proposal is yet to be finalised, some in the pharmaceuticals industry have been critical of the changes, claiming that it would penalise innovation and send, “the wrong signal for Germany as a health care location.” Whether the changes will make Germany's once supremely attractive market for new drugs less appealing to the large pharmaceutical companies remains to be seen. However, Germany would not be the only European state to try to limit the amount it spends on drugs, particularly new one, each year.