In April 2024, I wrote a guest post for Market Access Today.
Introduction
Entering the dynamic realm of pharmaceutical pricing in Germany, we find ourselves immersed in a landscape defined by regulations, negotiations, price setting, and reference price groups. To comprehend the intricacies of this system, we must navigate through a web of complexities unique to the German system. So, let us embark on a journey to explore the mechanisms that govern drug pricing in Germany, shedding light on its nuanced and sophisticated framework.
Launch and Initial Pricing Freedom
As a new chemical entity (NCE) is launched in the German market, the pharmaceutical company has initial pricing autonomy. This pivotal phase, spanning the first six months post-launch, allows companies to set prices independently, strategically navigating market dynamics.
Price Negotiation and Arbitration
Following the declaration of the additional benefit of the product by the German Federal Joint Committee (G-BA), negotiations unfold between manufacturers and the National Association of Statutory Health Insurance Funds, the GKV-SV. Behind the veil of confidentiality, a meticulous negotiation process ensues, with both parties evaluating various factors to reach a mutually acceptable reimbursement price. These price negotiations have to be concluded within 12 months after the product’s launch (see Figure 1).
In instances where the pharmaceutical company and the GKV-SV cannot reach an agreement on the reimbursement price, the dispute is escalated to an arbitration board. This independent entity reviews the positions of both parties and makes a binding decision on the reimbursement price within the next 3 months (see Figure 1). The arbitration process is designed to be impartial and is seen as a critical backstop aiming to ensure market stability and fair access to new therapies.
The final price is retroactively applied from month 7 after launch onwards (see Figure 1). Thus, manufacturers are required to hold back reserves to pay back the differences between the freely set and the finally agreed reimbursement price to the SHI funds.
Pricing Rules
While there is no transparent pricing algorithm, multiple factors play into the final price. Arguably, the most important one is the level of additional benefit awarded by the G-BA.
With the introduction of the Act to Tackle Drug Shortages and Improve Supply (ALBVVG) in 2023, only the prices of drugs with a “major” or “considerable” additional benefit are freely negotiated based on factors such as
- the expected size of the target population
- the annual costs of appropriate comparator therapies
- the prices of comparative pharmaceuticals within the same indication
- European prices in reference countries.
For the remaining outcomes, the ALBVVG defines a strict link between the additional benefit level and the price (see Figure 2).
The annual therapy costs of products with a “minor” or “not-quantifiable” additional benefit cannot exceed those of the most economical appropriate comparator therapy (ACT) or have to even lie at least 15% below these costs, depending on patent and G-BA assessment status of the ACT. Products offering “No additional benefit (proven)” or a “lesser” additional benefit are subject to reference pricing (see Figure 2).
Reference Pricing
For all products within a reference price group, the GKV-SV determines one reference price. This reference price dictates the maximum price that SHI funds will pay for drugs within that reference price group. Manufacturers of such a drug should reduce the price down to the reference group price or assess the impact of either patients having to cover the price difference themselves, or physicians prescribing a therapeutic alternative.
The G-BA determines if a product falls into an existing reference price group or whether a new group should be formed, as follows:
- The groups only include the names of active ingredients, not branded products.
- Products can only be classed into a reference price group when medically needed alternatives are available.
- Patent-protected drugs with a novel mode of action or which offer a significant therapeutic improvement cannot be classed into a reference price group.
Price Transparency
Once the final negotiated or arbitrated price, or the reference price is determined, it is published in the Lauer Taxe, the public price database of pharmaceutical entities, e.g. drugs, medical devices, and remedies, available on the German market.
International reference pricing (IRP) involves using published prices from countries like Germany as benchmarks to negotiate or set drug prices in other markets.
Therefore, pricing in Germany often impacts the pricing structure in many key markets.
In situations, where manufacturers felt that the prices achieved in Germany were not allowing for sufficiently high prices internationally, they withdrew their products from the German market to remove the IRP link.
To avoid market withdrawals and protect patient access to crucial products, the possibility of introducing confidential price discounts is currently under discussion.
Conclusion
From the initial pricing autonomy granted to pharmaceutical companies to the intricate negotiations with the GKV-SV, every step in the pricing journey is marked by complexity and strategic decision-making. The introduction of the Act to Tackle Drug Shortages and Improve Supply (ALBVVG) in 2023 ushered in a new era of pricing rules, emphasizing the importance of the additional benefit level determined by the G-BA. Moreover, the publication of the launch, reimbursement, and reference prices allows for international reference pricing (IRP) in shaping pricing structures beyond German borders. As Germany’s pricing decisions echo across international markets, discussions around confidential price discounts have been started as a potential avenue to maintain market stability and safeguard patient access to essential medications in an ever-evolving pharmaceutical landscape.
Further Information
For a deeper understanding of the German HTA, market access and pricing system and more detailed insights into early benefit assessments and pricing strategies, refer to the resources available at German Market Access Simplified and consider accessing the Free Guide to the German HTA System.