Opinion: Negotiating drug costs with out limiting affected person entry: classes from Germany

In the continued dialog about excessive drug costs in the USA, some loud voices argue that the answer is to permit Medicare to barter costs immediately with producers. The Congressional Funds Workplace and others say this might result in the exclusion of some medicine from protection, require physicians to acquire prior authorization extra usually than they already do, and impose extra value sharing on sufferers — methods that may hold sufferers from accessing medicines they will profit from.

That doesn’t need to be the case. Germany’s strategy to negotiating drug costs reveals that it may be executed efficiently with out limiting entry.

The medical health insurance and pharmaceutical buying system of Germany builds on 110 well being plans, known as illness funds, that cowl well being bills for 90% of the inhabitants, plus 48 indemnity insurers, who cowl the rest. As we wrote within the journal Well being Affairs, these funds collectively negotiate costs with drug producers. The negotiations, carried out after a drug has acquired market authorization by the European Medicines Company (EMA), are based mostly on an evaluation of the scientific profit supplied by the brand new drug in comparison with therapies already in use.


The scientific assessments are carried out and commissioned by a federal committee referred to as the Gemeinsamer Bundesausschuss (G-BA), a quasi-public entity ruled by the nationwide associations of physicians, dentists, hospitals, illness funds, and affected person advocates. A statutory precept of the German system is that there might be no incremental worth with out incremental profit. The G-BA’s assessments are based mostly on patient-relevant scientific endpoints equivalent to general survival, practical potential, and discount in signs, somewhat than on intermediate endpoints equivalent to lowered tumor dimension or a change in biomarker ranges.

As soon as the umbrella group of illness funds negotiates the value of a drug, the producer is prohibited from unilaterally elevating the value in subsequent years. Costs may be adjusted over time provided that the G-BA conducts a brand new comparative effectiveness evaluation, adopted by a brand new spherical of negotiations.

All well being plans pay the identical collectively negotiated costs.

Since its implementation in 2011, the German system of drug evaluation and negotiation has achieved internet costs decrease than these within the U.S. The German system is amongst these cited by the Trump administration and by legislators from each the Democratic and Republican events as a benchmark for charges that may very well be paid by Medicare. But the costs are excessive sufficient to draw producers considering launching medicine into the German market.

Within the U.S., personal payers extract worth concessions from producers by threatening to limit physicians’ prescribing (by requiring prior authorization and step remedy) and affected person adoption (by imposing coinsurance and deductibles). The German system doesn’t depend on these instruments. The G-BA gives steerage to physicians on high-cost new medicines that features the scope of the EMA market authorization, the G-BA’s evaluation of patient-relevant scientific advantages, security precautions to be used, and the value of the drug in comparison with these for obtainable alternate options.

Physicians are free to prescribe any EMA-authorized drug that has been assessed by the G-BA with out receiving prior approval from their sufferers’ well being plans. Regional doctor associations develop share targets for prescription of generic over branded medicine and for biosimilars over branded biologics, with the purpose of decreasing expenditures. Client value sharing is capped at a really modest 10 euros per prescription, with caps on out-of-pocket value sharing for low-income sufferers and people dwelling with a number of continual circumstances.

The carrots for producers

The German pharmaceutical market has a number of options which can be fairly engaging to drug corporations and retains them considering making certain a long-term presence in Germany.

By statute, all medicine are lined and obtainable for doctor prescription in Germany instantly upon receiving market authorization by the EMA. In a drug’s first 12 months available on the market, it’s obtainable at a worth unilaterally decided by the producer. Throughout that 12 months, the G-BA conducts comparative assessments and the illness fund affiliation negotiates costs, that are utilized within the second and following years.

As soon as the insurer affiliation has negotiated a worth, it can not intervene with doctor prescription by means of prior authorization or with affected person entry by imposing extra value sharing.

Pharmaceutical producers can rely on the precise quantity of gross sales approximating pre-launch estimates that derive from demographic and epidemiologic elements. This contrasts with the frequent gross sales shortfalls skilled in the USA as a result of prior authorization and price sharing.

The sticks for producers

From the producer’s perspective, entry to the German market is an all-or-nothing case. Failure to succeed in settlement with the insurer affiliation reduces revenues to zero. Within the U.S., against this, failure to succeed in settlement with one payer doesn’t preclude settlement with others, and producers will extract the best costs from their least refined negotiating adversaries.

Drug worth negotiations in Germany perform as a repeated recreation, since every producer can anticipate to barter with the identical purchaser for a number of merchandise. Even small single-product pharmaceutical corporations sometimes have signed co-marketing agreements with, and have their costs negotiated by, massive multi-product producers with a considerable presence on the German market. A producer’s repute for cheap pricing on one product will carry over to subsequent negotiations below the watchful eye of the illness funds, the doctor associations, affected person advocacy organizations, and the Ministry of Well being.

The negotiation course of is extremely structured, with a statutory proper to 4 confidential periods and a constrained alternative for extension to a fifth. Failure to agree throughout these periods leads to the drug being referred to an impartial arbitration board. This board conducts its personal evaluation and doesn’t merely cut up the distinction between the insurers’ and producer’s last worth provides. The board doesn’t negotiate, however unilaterally decides on a worth it feels finest accords with the drug’s scientific worth and society’s want for value management. From the institution of the collective worth negotiations construction from 2011 by means of March 2019, 230 medicine have gone by means of comparative profit evaluation and 35 of those have had their last worth determined by arbitration somewhat than negotiation.

Producers of medicine assessed by the G-BA as providing no incremental profit should negotiate a worth with the insurer affiliation below a ceiling set by the value of the comparator remedy.

From 2011 to the tip of 2018, the G-BA determined that 43% of latest medicine supplied no incremental profit, 18% supplied constructive however “non-quantifiable” advantages (primarily orphan medicine with out comparator arms of their scientific trials), 17% supplied solely a minor incremental profit, 23% supplied a reasonable profit, and simply 1% supplied a serious profit.


The German well being care system achieves worth moderation with out the formulary exclusions, prior authorization necessities, and shopper value sharing utilized by insurers in the USA. Its construction and processes supply probably important insights for drug coverage discussions, and for Medicare worth negotiations, in the USA.

James C. Robinson, Ph.D., is professor of well being economics and director of the Berkeley Heart for Well being Know-how on the College of California, Berkeley. Dimitra Panteli, M.D., is senior analysis doctor and fellow on the Berlin College of Know-how. Patricia Ex, Ph.D., is the chief government officer of the German Managed Care Affiliation.