Peter Mansell explores what Germany’s Act to Reform the Market for Medicinal Products means for market access
If one piece of legislation can be said to embody the harder line pricing and reimbursement systems in Europe are taking on wringing value out of new medicines, Germany’s Act to Reform the Market for Medicinal Products (Arzneimittelmarkt-Neuordnungsgesetz/AMNOG)must be a frontrunner.
Rather than imposing a cost-benefit threshold, such as the QALY formula used as a gateway to NHS coverage by the UK’s National Institute for Clinical Excellence (NICE), the provisions under AMNOG draw a direct line between therapeutic benefit and price. The system that took effect on 1 January 2011 allows new drugs six to 12 months of free pricing from launch.
During that time, Germany’s Institute for Quality and Efficiency in Healthcare (IQWiG) conducts an early benefit assessment versus a comparator specified by the Federal Joint Committee (G-BA) and scores the drug on a six-part scale. This includes four added therapeutic benefit categories (the highest being a major added benefit) and two scores denoting either no added benefit proven or a benefit inferior to the selected comparator.
Only medicines given a score of 1-4 can go forward to negotiate a premium price with the National Association of Health Insurance Funds. Otherwise, they are subject to therapeutic reference pricing; in other words, the maximum price that will be paid by Germany’s statutory health insurers (SHIs). (For more on reference pricing, see Market access: China and international reference pricing.)
Low prices, high anxiety
These more stringent demands, while in line with global trends, need to be seen in context. Germany is a substantial market for pharmaceuticals, the largest in Europe. Along with the UK, now thrashing out details of a new value-based pricing (VBP) system, it has also been one of the last holdouts for free pricing of prescription drugs in the EU. (For more on VBP, see Market access and the need for stakeholder-centricity and Is value-based pricing an aid to market access?)
The discomfort AMNOG has caused the research-based pharmaceutical industry is exacerbated by fears that the legislation will have a knock-on effect beyond Germany if lower prices are picked up in international drug price referencing.
This factor is already affecting the trajectory of product launches in Europe. Boehringer Ingelheim and Eli Lilly, for example, decided not to delay the introduction of their diabetes treatment Trajenta (linagliptin) in Germany, subject to the outcome of IGWiG’s assessment, which turned out to be ‘no added benefit proven’, throwing a German launch into doubt.
Industry has already voiced its displeasure over aspects of the AMNOG process, including the timing of the assessment (i.e., before the product has a chance to gather ‘real-world’ evidence of value) and the appropriateness of G-BA-specified comparators. For the payer community, subject to its own significant cost pressures in Germany, the AMNOG provisions should at least serve the purpose of reining in drug costs and making sure potentially expensive new therapies earn their price tag.
But as Dr Cornelius Erbe, head of product management at Germany’s third largest SHI, DAK Gesundheit, explains, the real problem with drug cost inflation may lie elsewhere.
Drug cost inflation
As of February, Erbe notes, 29 drugs in total had entered the benefit-assessment procedure, with final decisions to date consigning three products to reference pricing and finding additional benefits in three more. The real crunch, though, will come with pricing negotiations for these latter three drugs, which should be completed by the start of July.
All of this, Erbe points out, is taking place against a backdrop of growing challenges for SHIs.
The pressure is coming from a number of quarters, including macroeconomic factors such as an ageing population with an escalating burden of chronic disease; structural shifts in the provider network (e.g., increasing emphasis on outpatient care); more price sensitivity among the insured; and market competition that has seen the number of health insurance companies in Germany fall from over 400 in 2000 to fewer than 150 now.
There has also been pressure from health reform, such as the transfer of morbidity-related risks from care providers to the SHIs as of 2009.
Under the German system, health insurance contributions from salaries and employers are pooled in a central health fund and distributed among the SHIs according to a risk-adjustment formula that incorporates factors such as age, gender and, latterly, various morbidity classifications.
While theoretically the new orientation towards morbidity should make for more equitable distribution of money from the central pool, the allocation of morbidity-related funds is undertaken prospectively, rather than on the basis of current/actual treatment costs.
According to Erbe, this makes the process susceptible to “political discussion.” Whereas last year saw a relatively generous allocation to the SHIs, factors such as next year’s general election in Germany may see the prognosis for morbidity-related expenditure swayed by the need for votes from other parts of the healthcare system.
What it means for SHIs
What this means for the SHIs is uncertainty and instability, in the absence of more comprehensive financial reforms that would really tackle issues such as the growing ranks of the elderly and the decline in the working population, Erbe says.
The healthcare system should be addressing fundamental problems such as too little emphasis on prevention, fragmentation of care, quality management and inadequate co-ordination among general practitioners, he believes.
Meanwhile, drug costs continue to rise. While the value-related pricing emphasis of the AMNOG procedures is clearly designed to arrest this trend, Erbe is not inclined to lay all of the blame at the door of industry.
In fact, he says, industry is supplying the healthcare system with drugs that are high quality and mostly innovative. And companies may struggle to prepare a convincing value dossier for IGWiG if they are not given sufficient notice about details such as the comparator drug to be used in the evaluation.
There is leeway for companies to request a meeting with the G-BA during the drug development process and discuss the kind of studies that would be relevant for benefit assessment. According to Erbe, though, there is no binding framework for these meetings, nor is the G-BA’s advice legally binding.
As things stand, it is “really difficult for industry,” he comments. Payers, for their part, want innovation and quality for their customers but are obliged to use those instruments available to them. They regard the new pricing and reimbursement arrangements under AMNOG “rather as outsiders,” Erbe adds. “We are the recipients of assessments.”
This kind of centralization has taken away much of the incentive for SHIs to conduct their own cost-benefit assessments and for industry, now preoccupied with the consequences of AMNOG, to enter into that sort of discussion, Erbe suggests.
There may be some room left to negotiate with companies over coverage of well-established medicines, such as those within three years of patient expiry, he adds. As far as new products go, though, “we are out of the game.”
Pricing and reimbursement
What makes this particularly frustrating is that DAK has some quite advanced tools at its disposal to evaluate measures such as the total cost of a treatment in active versus control groups or to analyze claims data for ‘real-world’ insights, Erbe notes.
But, he stresses, this reflects DAK’s resources as one of the larger funds, while most SHIs have to rely on the data supplied to them. As such, they are more likely to be happy with the G-BA getting tough on therapeutic benefit.
DAK is trying to fill this vacuum to some extent by focusing on the overuse, underuse or misuse of medical care, an issue it sees as more pressing than unmet medical need in the German system.
Pharmaceutical companies would be in a better position vis à vis pricing and reimbursement if drugs were reaching tightly defined patient populations in which these therapies generated proven and successful clinical outcomes, Erbe contends.
For example, DAF analyzed claims data on an unidentified drug in Germany between March 2006 and January 2010, looking at all of the healthcare sectors in which the product was used. The company then used its database to establish a control group with a similar risk profile and tracked expenditure trends in both cohorts after treatment started.
Among the 6.5 million patients followed, the data showed that DAK was paying significantly more for patients on the unidentified drug than for those on conventional therapy, a disparity not just explained by price differentials. According to Erbe, companies shown these data are “very much incentivized” to do something about inappropriate costs.
This gives DAK leverage to come to arrangements with companies on ways of optimizing the cost effectiveness of their products, such as making sure the right patients get the right medicine or improving compliance (e.g., through trilateral contracts between the payer, the pharmaceutical company and the healthcare provider).
This can be a win-win situation for all parties concerned, DAK insists, including faster access to safe innovations; individualized care for patients; higher quality and associated cost savings; better co-operation among service providers; better awareness among prescribers; improved market shares; and enhanced customer loyalty.
But very often the pharmaceutical companies will take some convincing, as they are not used to getting involved in the design and implementation of healthcare-service provision, Erbe points out. Doctors, for their part, may have concerns about limitations on their prescribing freedom. All the same, Erbe comments, “We all know that if we don’t do anything, then nothing will change.”
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