A recent issue brief, published by the Commonwealth Fund, described Germany’s approach as an alternative to the current US model that imposes high cost-sharing on patients.
The high cost of prescription drugs for US patients has become a hot topic among policy and law makers, and the current administration has put forth a number of proposals to address ever-rising costs. Among the proposals is the administration’s plan to allow CMS to set prices for some drugs, including high-cost biologics, based on the prices paid in other nations.
Under the proposal, CMS would, beginning in 2020 and extending until 2025, use a reference pricing model that it calls the International Pricing Index (IPI) to align payment for selected Part B drugs with prices paid in other countries. An HHS report released alongside the announcement of the IPI compared US prices with those paid elsewhere, including Germany, a country with a healthcare system similar to that of the United States. Like the United States and unlike many other European nations, Germany uses multiple nongovernmental insurers rather than a single government payer.
As the United States further considers a move to a reference pricing model, it is worthwhile to consider how the German system operates and its system’s potential implications for the United States. A recent issue brief, published by the Commonwealth Fund, described Germany’s approach as an alternative to the current US model that imposes high cost-sharing on patients.
In the German system, new drugs are centrally assessed by the Federal Joint Committee, which includes providers, insurers, and hospital organizations (patient groups have nonvoting positions on the board). If a new drug does not have alternatives available, no patient cost-sharing is applied by the committee.
If a drug has alternatives available, and if the committee does not believe that a drug offers incremental benefits over other available treatments, the drug is assigned to a therapeutic class subject to reference pricing. In the brief, the authors explain that, in a reference pricing model, a healthcare purchaser establishes the maximum amount it will contribute toward a drug’s price and often takes into consideration the minimum or median price of drugs in a therapeutic class.
If a patient is prescribed a drug that is cheaper than the reference limit, the patient is responsible for a small co-payment. If the cost is higher than the limit, the patient pays a co-payment plus the difference in the prices between the limit and the product.
Approximately 34% of drugs in Germany, and 80% of prescriptions, are subject to reference pricing, with patients paying the difference in cost and potentially paying additional co-payments that do not count toward their annual out-of-pocket limit, which is set at 1% of gross income for patients with chronic diseases and 2% for all others.
For drugs determined to provide incremental benefits, prices are negotiated collectively by an umbrella organization that comprises all health insurers (rather than by insurers individually, as in the US).
If negotiations between the insurer umbrella association and the drug manufacturer do not result in an agreement, the drug is referred to a 3-person arbitration panel that will render a final decision on price. If the drug maker does not agree with the arbitration’s outcome, it can withdraw its drug from the market.
The German model, write the brief’s authors, offers an alternative to the US system, where the burden of cost-sharing on patients is high, especially for those with complex medical conditions.
“US payers often impose modest copayments on low-cost drugs with many direct substitutes but onerous coinsurance on high-cost drugs with few substitutes,” write the authors, adding that “coinsurance does not point the patient toward the most cost-effective drug choices.”
Budget Impact Analysis of Biosimilar Natalizumab in the US
Projected savings from biosimilar natalizumab were $452,611 over 3 years, driven by decreased drug acquisition costs and a utilization shift from reference to biosimilar natalizumab.
Biosimilars in America: Overcoming Barriers and Maximizing Impact
July 21st 2024Join us as we explore the complexities of the US biosimilars market, discussing legislative influences, payer and provider adoption factors, and strategies to overcome industry challenges with expert insights from Kyle Noonan, PharmD, MS, value & access strategy manager at Cencora.
Biosimilars Policy Roundup for April 2024—Podcast Edition
May 5th 2024On this episode of Not So Different, The Center for Biosimilars® glances back at all the major biosimilar policy updates from April, including 2 FDA approvals, 1 European approval, and several insights into possible policy changes from the Festival of Biologics USA conference.
Hesitancy in MENA Nations to Adopt WHO Biosimilar Guidelines Hinders Market Development
July 17th 2024The World Health Organization’s (WHO) new guidelines for biosimilar approvals aim to save time and money for manufacturers in the Middle East and North Africa (MENA), but hesitancy among nations to adopt the guidelines is stifling market development of biosimilars.
BioRationality: Time to Get Rid of PBMs if Biosimilars Are to Succeed
July 15th 2024Sarfaraz K. Niazi, PhD, discusses the challenges with pharmacy benefit managers (PBMs) that plague the biosimilar industry and new legislation that attempts to reform their practices and encourage biosimilar adoption.