Last-minute tweaks to Germany's pharmaceutical sector restructuring laws (AMNOG) require drug firms to provide evidence of a product's value within 12 months of launch – or risk having it struck off the reimbursement list.

A previous draft of the laws – expected to be passed by parliament later in November – required the country's reimbursement agency, G-BA, to gather evidence of drugs' additional benefit over existing therapies. Now the onus has shifted onto manufacturers to provide that evidence ("Germany's IQWiG Calls for Wider Availability of Comparative Effectiveness Data," The Pink Sheet DAILY, Oct. 13, 2010).

Both versions of the draft law mark a change from the current situation, where not all new drugs are automatically subject to effectiveness analysis, and certainly not within a defined timeframe.

Currently, drug firms enjoy free pricing in Germany – similar to the UK (see sidebar) – but only up until G-BA does conduct an assessment, which determines whether the product merits reimbursement. A guide price is then set, together with the statutory health insurance funds, based on a reference pricing system. There's a fixed price ceiling for drugs that don't show added benefit over what already exists, although manufacturers have limited scope to negotiate final pricing with the country's health insurance funds.

Under the new law, the G-BA is required to specify a time limit within which the manufacturer must present evidence. If the manufacturer meets that timeline and the evidence is sufficient to convince G-BA of added effectiveness, then the drug will continue to be reimbursed by the statutory health insurance funds. The free price will apply for up to a year from the initial marketing of the product, after which a price will be negotiated between the G-BA, the health insurance funds and the manufacturer. However, if no evidence is provided, or if it is unconvincing, the G-BA will be permitted to remove the drug completely from the reimbursement catalog.

Though welcoming the change, the G-BA is not wholly satisfied, criticizing the fact that the amendment focuses on the “effectiveness,” rather than on the “additional benefit” of the drug over existing therapies.

The last minute tweak to the legislation came amid concerns that having the G-BA do the benefit analyses would have been too great a burden, and that the authority would not have been able to complete assessments of new medicines' additional benefits within the 12-month timeframe. Since drug companies are becoming accustomed to generating and presenting post-marketing data for pricing and reimbursement authorities across the globe, it makes sense for them to take the lead. Indeed, the German pharmaceutical industry association VFA appears comfortable with the year time-limit but warns against tightening it any further.

Likewise, most drug firms don't appear unduly worried – nor surprised – about these changes. Shifting the onus onto the companies to provide and present effectiveness data rather than have G-BA do it may even be good news for the industry, since it gives firms control over how the evidence is presented. And anyway, the sector has far worse changes to worry about from AMNOG, most notably the increase in obligatory rebates to health insurance funds from 6% to 16%.

Another facet of the AMNOG is that it will allow patients to opt for a medicine of their choice rather than automatically having to settle for a generic that is the subject of a discount contract. Health insurers claim that this will destroy the discount contract system, but their objections have failed to sway the government and it has retained this provision in the draft law (“German Rebate Contracts Under Threat From Legislation Promoting Patient Choice,” The Pink Sheet, Sept. 27, 2010).

Confusion Over Orphan Drug Requirements

A further amendment to AMNOG requires producers of orphan drugs to prove the benefit of their product over existing therapies, when turnover for the drug exceeds €50 million ($70 million) per year.

This change came about due to pressure from the G-BA, the Institute for Quality and Efficiency in Healthcare (IQWiG) and the Drug Committee of the German Doctors’ Association, who maintained that manufacturers would try to misappropriate orphan drug status for their products. For example, pharmaceutical companies might find a rare form of cancer, develop a drug for this so that it qualifies for orphan drug status and then encourage off-label use, they maintained.

Joachim Odenbach, spokesperson for the pharmaceutical industry association, the BPI, suggests that the amendment smacked of confusion. “First of all, orphan drug status has nothing to do with turnover,” he said. He added that the value of an orphan drug was already established once it had received this status from the European Medicines Agency. “What is the point then of having another evaluation by either the G-BA or the IQWiG?” he asked.

Pharmacies, Health Insurance Funds Unhappy

While the pharmaceutical industry has been unsettled by the AMNOG amendments, pharmacies are positively furious.

This is because the law increases the obligatory rebate that they are required to offer the statutory health insurance funds per pack of drugs from €1.75 to €2.05. At the same time, the amount of profit that pharmacies are permitted to make from a medicine remains fixed at just above 3% of the price of the net price of the product, plus a fixed fee of €8.10. The Federal Association of Pharmacies says that the rebate rise will cost its members some €400 million in 2011 and 2012 and will force some to close.

Meanwhile, changes to another law working its way through parliament, the statutory health insurance funds finance law, have brought joy – and extra cash – to hospitals and doctors. As a result of the improving economy, the government has agreed to increase funding to hospitals by €400 million and by €120 million to doctors contracted to the statutory health insurance service.

This move has caused some concern amongst the statutory health insurance funds, which must foot the bill for the increases. However, Doris Pfeiffer, chairman of the statutory insurance funds umbrella group (GKV) conceded that the government’s promised rise in the citizens’ contribution rate from 14.9% to 15.5% as well as an additional rise in supplementary citizens payment in the coming year, would save many funds from bankruptcy. The increased rebate from the drug firms also will help the funds.

The AMNOG is expected to be passed by the German parliament on Nov. 11. The finance law may have a rockier ride on the following day, but that too is expected to get the go-ahead from MPs. All being well, they should be both implemented on Jan. 1, 2011.

By Faraz Kermani

Tweaks To German Pharma Law Require Firms to Prove Drugs' Value Within a Year

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