US May Need to Look to Germany to Reform Drug Pricing

August 19, 2020
Skylar Jeremias

US administrative and legislative efforts are moving the United States and Germany more into alignment on drug cost management philosophy, according to a review.

As prices for even long-established biologics rise by double digits in the United States, Germany has found success in controlling its prices through pricing restrictions, negotiations, and an abundance of biosimilar competition, according to a comparative article by James C. Robinson, PhD, MPH, the Leonard D. Schaeffer Professor of Health Economics and director of the Berkeley Center for Health Technology at the University of California, Berkeley.

Senate Finance Committee legislation that would limit a manufacturer’s ability to raise drug prices after launch and a House of Representatives bill that would enable Medicare to negotiate drug prices would equip the United States with price controls that Germany has long employed, Robinson said.

President Trump, meanwhile, has pushed for lower-cost drug imports, pegging drug prices to international standards, and eliminating rebates used by manufacturers to gain preferential treatment for their drugs. Given that this is an election year, it’s unclear how far these efforts will go.

Manufacturers have license to continuously raise their prices in the United States, whereas in Germany, manufacturers price increases are subject to strict review. Robinson cited an analysis indicating that prices for top-selling drugs in the United States increased more than 50% from 2012 to 2017 for over three-fourths of drugs available since 2012 “and more than doubled for half of them.”

Other US hurdles standing in the way of biologics price control include the ability for reference biologic manufacturers to create patent thickets and file lawsuits against biosimilar developers to keep lower priced competitors off the market for as long as possible, Robinson said.

As a result, the 2 biosimilars for reference etanercept (Enbrel) and the 6 adalimumab (Humira) biosimilars have to wait years before entering the US market after receiving regulatory approval despite being available in Germany immediately following approval from the European Commission. “After only 3 years on the German market for etanercept and 1 year for adalimumab, biosimilars accounted for more than 60% and 40% of prescriptions for these drugs, respectively,” Robinson said.

He said that in the absence of biosimilar competition, prices for reference etanercept and adalimumab have more than doubled in 6 years in the United States.

Germany’s Pricing Restrictions

In Germany, manufacturers receive the list price for a drug for the first year after market launch, and each drug during the first year is subject to clinical review and comparison with other treatments for the indicated conditions. After this, a price is negotiated among manufacturers and a health plan association that represents individual health plans.

In the United States, manufacturers are free to increase prices annually or semiannually, whereas in Germany, unilateral price increases after the initial phase of clinical assessment and price negotiation are prohibited.

Manufacturers in Germany may request an increase in price on the basis of new data; however, a new clinical analysis must be conducted by the Joint Federal Committee and prices are still subject to negotiation with the insurer association.

“A statutory framework that creates incentives for agreement, limits price increases not justified by new evidence, and [avoids] heavy burdens on physicians and patients ensures that public interests are represented in private negotiations,” said Robinson.

Additionally, to ensure that the financial burden of drug payments doesn’t fall on patients, all payers in Germany cover all prescriptions and limit cost sharing to a maximum of €10 per prescription, which can even be waived for children, low-income adults, and people with multiple chronic illnesses.

“Limits on insurer interference reflect the recognition by health insurance plans that moderation in drug spending is to be pursued by means of control over prices rather than control over physician prescribing and patient adherence,” said Robinson.

Payers in German cannot exclude drugs from coverage as is done in the United States, where the lowest cost biosimilars may not be on formulary, and payers cannot demand prior authorization as a condition of paying for a drug. They can audit physicians whose prescribing patterns do not conform to established guidelines for treatment.

US’ Change in Attitude

Robinson said although the United States has previously been dismissive of the experiences of other countries, US policymakers have shown a growing preference for European-style drug price controls as the 2020 presidential election approaches and the cost of medicine becomes a hot-button issue.

In March 2020, CMS launched a Part D Senior Savings Model that would lower Medicare beneficiaries’ out-of-pocket co-pays for insulin products, which are now regulated as biologics, to a maximum of $35 for a month’s supply.

Currently, there are also bills awaiting next steps in both chambers of Congress that are working to increase biosimilar access by either implementing a shared savings model or by waiving out-of-pocket costs for Medicare Part B beneficiaries who are prescribed biosimilars.

In a recent “scorecard” created by IQVIA for Germany’s policies on biosimilars, the country got top marks for biosimilar competition, although the report noted variability across Germany for biosimilar uptake. It said the country is planning to initiate pharmacy substitution policies for biologics in August of 2022, as well as that the linkage to list prices provides an incentive for use of less cost-efficient drug options.

Reference

Robinson JC. Lower prices and greater patient access—lessons from Germany’s drug-purchasing structure. N Engl J Med. 2020;382(23):2177-2179. doi:10.1056/NEJMp2000341

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