A little-reported fact about Germany’s new early-benefit assessment system (AMNOG to most people) is that the current law requires making public the rebates agreed to between drug firms and the country’s sick funds association (GKV).
That’s a huge departure from the current cozy situation, where only ‘list’ prices are revealed. (That’s the case in most other key markets, too). And it matters to drug firms, since close to 30 countries in the world, including 19 in Europe, currently refer to published German prices in order to determine their own.
Thus, transparent rebates will mean lower prices in other markets. But that’s not all. Here’s another little-reported fact about AMNOG: if the first-in-kind negotiations between the sick fund association and drug firms don’t lead to an agreed price, then an arbitration committee is summoned, and pricing is determined on the basis of…yes, a European reference price. (This flow-chart helps illustrate the steps in the process.)
Details of just how that European reference price will be calculated are still being debated. But whatever the outcome, the potential for a downward price spiral in European drug prices “is more than an idle threat,” notes Maarten Meulenbelt, a partner at Sidley Austin in Brussels.
There’s still a chance that the part of the German law obliging transparency on rebates will be repealed. Certainly the industry association, the VFA, which has long rejected the use of a European reference price in the arbitration process, is requesting as much.
But it’s only a slim chance. Moreover, even if it and the statutory funds aren’t obliged to publish the rebates, one well-placed commentator predicts the information will still be readily available. That’s because net prices will appear on receipts issued by Germany’s private sick funds, which have a right to the same discounts as their statutory counterparts.
What does all this mean? Apart from lower prices, it means drug firms will have to radically rethink their European launch tactics, which typically involve launching in Germany first. Many already are.
It also makes negotiations with the German payers’ association more crucial than ever, and likely tougher too. Knowing that the agreed upon rebate will be published, companies will have a harder back-stop below which they may refuse to move, making it harder for German payers to pull out any concessions. (By the same token, firms may concede rebates more easily in other countries where discounts aren’t transparent.)
AstraZeneca is one of the first drug makers testing Germany’s new process with its blood thinner Brilique. Greg Rossi, VP of Payer Evidence in R&D at the drug maker, emphasizes that German pricing transparency “creates a dynamic in the European space that has to be managed.”
Image courtesy of Flickrer Gnal under creative commons.