Health-care reform

Reforming the expensive German health-care system is a key objective for the German government. One of Health Minister Philipp Roesler's proposals is to tackle the relationship between the pharmaceuticals industry and Germany's numerous health insurers.

At present, drugs firms can set their own prices for new and potentially crucial, patented medication, which the insurers can either take or leave. The system is unique in Europe, making the German market particularly lucrative for the industry.

Roesler now wants to introduce compulsory price negotiations between industry and health insurers.

"Medicine is quite often far too expensive in Germany," Roesler told German daily Bild-Zeitung. "That's why we will force drugs firms to negotiate contracts with health insurers."

Huge cost savings

Germany's health insurers spend 30 billion euros ($41 billion) on medication a year, a fifth of their budget. Roesler wants to save 2 billion euros annually by forcing negotiations to ensure drugs companies cannot continue to dictate prices for patented medicine.

Representatives from the pharmaceuticals industry are not against negotiating prices, but they point to the huge investment in research and development that each new medication eats up - 590 million euros on average, it reckons.

"Our proposal is to start negotiations straight after the drug has been put on the market," Cornelia Yzer from the German association of research-oriented pharmaceutical firms (VFA) said.

Yzer says, ideally, companies need to agree a price with at least 50 percent of insurers for each new product within two years. If such an agreement cannot be reached in that time, they "could then agree to a fixed price after an independent assessment," according to Yzer.

The VFA represents the big names in the industry in Germany, companies like Bayer and Merck.

The wider German Association for the Pharmaceuticals Industry (BVI), which represents drugs makers but also chemists and other industry professionals, has similar views.

"The government wants patients to get new treatments as fast as possible. To ensure that, we need to set a price at the beginning of any negotiations to be able to launch the drug," said Henning Fahrenkamp, director general at the BVI.

Investing hundreds of millions of euros into a new drug is risky, as there is no guarantee of a return if the drug does not sell. "If you're really unlucky, it's about $800 million down the drain," Fahrenkamp added.

Independent assessments

The government wants more independent evaluations of new drugs to be in a position to ascertain if they can deliver added value. It is not always apparent from the companies' own tests if the drug in question is different to what is already on the market.

In 2004, the government created the Institute for Quality and Economic Viability in Health Care (IQWiG) to help with the assessments.

Some opposition politicians would like to see assessments carried out before the drug is even put on the market and avoid negotiations altogether. Karl Lauterbach, healthcare spokesman for the Social Democrats in parliament, told Cologne daily Koelner Stadtanzeiger that he does not believe price negotiations will reduce costs.

"The pharmaceuticals firms will simply start negotiations with a price already in mind, prices that already have a discount factored in," he said.

But consumer associations believe assessments prior to the launch of a drug could be counter-productive.

"We believe an assessment should happen as soon as possible after the drug has been released, but demanding it before it is launched is unrealistic," Susanne Mauersberg, healthcare expert at the German federal consumer association, told Deutsche Welle.

"Negotiations are fine, but if the parties cannot agree on price, it should be set by an independent institution like IQWiG and pretty quickly," she added.

Roesler under fire

Roesler's plans are not just contentious among opposition parties. Roesler is a Free Democrat and his party is the junior partner in a governing coalition with Chancellor Angela Merkel's Christian Democrats.

His proposal for a flat rate for health-care contributions, instead of the current system where the rate is based on income levels, is not universaly popular in the coalition. Many even say the proposal runs counter to Germany's cherished principles of social solidarity.

Equally, his latest suggestions on drugs pricing have drawn criticism from his colleagues, the Christian Democrats.

Author: Nicole Goebel
Editor: Andreas Illmer/jen