Germany is the third biggest drug market in the world, with $42 billion spent on pharma products in 2012. Germany allows its insurers to work together to negotiate with pharmaceutical companies to create one price for all Germans. There’s the official list price, which is made public, and the proprietary discounted price. The German public price list is used widely in Europe and Japan for drug pricing and negotiations.
The German government is looking to make the discounts public knowledge as well. This is designed to reduce margins for suppliers and pharmacies, so that they base their margins off of the true prices, rather than list. The pharmaceutical companies are concerned that the release of the discounts will eat into their revenue from the other countries that use the current public list, which seems to me to be tacit admission that the discounts offered elsewhere aren’t as aggressive as the ones Germany’s pooled insurers can get.
This comes after the aggressive actions of Germany’s Institute for Quality and Efficiency in Healthcare, which is the equivalent of Britain's National Institute for Health and Care Excellence (NICE). They’ve been aggressive about looking for deeper value before allowing products access to the German market, which seems largely cost driven.
My concern is how this affects the U. S. market.
It is widely believed that the American health care system subsidizes the markets where access is more limited and prices are set. For example, Britain just worked with pharms to hold the NHS spend on brand drugs flat over the next two years, so growth in that market is limited. The pharma companies' need for growth means that they will be raising prices elsewhere to support flat trend in the UK.
That why it seem inevitable to me that the US government will step in. The global pharma market is far from free. It is a messy amalgam of single-payer, third party payers, supplemental plans, private insurers and the U.S. Centers for Medicare & Medicaid Services. As health care costs continue to rise in the U.S. a convenient target will be drugs that are available in other countries for a fraction of the American price.
Neil Minkoff, MD, is medical director of MediMedia Managed Markets and also an independent health care consultant