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Germany approves drug price cut bill

Germany has approved a bill requiring drugmakers and insurance companies to negotiate the price of prescription drugs based on cost-effectiveness

As part of its austerity measures, the German cabinet yesterday approved a bill requiring drugmakers and insurance companies to negotiate on the price of prescription drugs based on their cost-effectiveness.

This move is part of a wider package of €80bn in budget cuts outlined in early June by Chancellor Angela Merkel to stabilise the country's finances by 2016. The aim of the bill is to reduce prices and save the German healthcare system around €2bn a year.

The bill states that drugmakers can set prices unilaterally if an agreement is not reached after 15 months.

Parliament will vote on the bill later this summer and it is set to come into force by the end of the year. The lower house, the Bundestag, approved the first part of Merkel's proposed health care reforms, earlier in June. These are designed to increase the rebate to drugmakers for patented medications, while capping the prices of these drugs.

Both measures will be in place until 2013.

Head of the Association of Statutory Health Insurers, Doris Pfeiffer, told German magazine, Der Spiegel: "The insurers' situation is dramatic. This year the health funds are standing on the edge of the abyss. Next year, they will take a step even closer."

As Germany is a reference market for other European countries' drug prices, its drug price cuts could have wider ramifications across Europe.

Key points in the bill:
• Drugmakers will be subject to cost-benefit assessment for each drug, followed by price negotiations with public health insurers
• A central arbitration body will settle any negotiations that extend six months beyond the cost-benefit assessment
• 'Me-too' drugs – drugs that have only minor differences from already well-known drugs – will be included in the reference pricing system, without any limitation in terms of therapeutic class
• Patients will be able to be treated with non-discounted drugs if they agree to pay the difference
• Wholesalers will be subject to new performance-based remuneration
• Pharma companies will be obliged to publish all clinical trial results.

30th June 2010

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