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Pharmaceutical Prices Continue Downward Trend on German Market
9 Jan 08
An increasing gulf is being felt in Germany between the prices of drugs at the ex-manufacturer level and those on pharmacy shelves.
Global Insight Perspective | | Significance | Drug prices in Germany are declining at the ex-manufacturer level but rising at the consumer level, according to the Association of Research-Based Pharmaceutical Companies (VFA). | Implications | The VFA is using the statistics as back-up for its case that drug-makers are not responsible for growth in spending on pharmaceuticals. Rises in taxation as well as the medical demands of a growing elderly population have been cited as more logical explanations for the rise. | Outlook | A tax increase in 2007 certainly contributed to a rise in public spending on drugs, but with R&D costs also rising, pharma companies have little choice but to support higher prices for their newest products. This will jar with the GKV's attempts to lower expenditure through promoting greater use of generic drugs. |
Many medicines on sale in Germany have seen their price lowered in 2007, and the trend looks set to continue into 2008. While the rate of decline is not steep—an average 1% drop is expected for January compared with December—pharma industry association the VFA predicts that the protracted slide in drug prices will translate into a spending cut of 200 million euro (US$294.1 million) per year for the country's public health insurers. The decline in drug prices in Germany is being felt most noticeably at the manufacturer level, where the VFA says prices contracted by as much as 2.2% year-on-year (y/y) over the course of 2007, based on reports from its member companies. By contrast, consumer prices of those same medicines actually rose over most of the same period, expanding by 2% y/y over January-October. For 2008, a lowering in ex-manufacturer prices can still clearly be seen, affecting some 3,800 out of a total of 37,000 prescription (Rx) drugs available in Germany in January alone. Only 460 Rx medicines will see any level of increase in ex-manufacturer price this month, according to the VFA. The high volume of pharmaceuticals affected by the ex-manufacturer price cuts will offset the negligible projected 0.1% y/y rise in prices of over-the-counter (OTC) drugs at the producer level. VFA director Cornelia Yzer has said the findings show that criticism of the medicines industry for selling "me too" drugs at ever-higher prices is unjustified, and that market forces, including higher taxes, are more realistically behind the country's rise in pharmaceutical expenditure. This was certainly the case in 2007, when a hike in the rate of value-added tax (VAT) from 16% to 19% contributed significantly to a rise in public spending on drugs (see Germany: 10 May 2007: VAT Largely to Blame as GKV Spending on Pharmaceuticals Rises 4.1% Y/Y During Q1). Germany's ageing population—19.3% of Germans were aged 65 or over in 2005—and its growing need for innovative medical treatments is also putting considerable pressure on public healthcare spending. Outlook and Implications If the VFA's estimates prove accurate, the 200 million euro in annual savings will be added to the 500 million euro projected to be recouped each year through the generic rebate scheme, implemented at the start of this month (see Germany: 28 December 2008: Generic Substitution Poised for Launch in 2008 Under Germany's Rebate Scheme). The GKV public health insurance funds are continuing their drive to reduce costs and become profitable under the watchful eye of the Ministry of Health, which has partially reformed the system through higher patient contributions, but still has one eye on reducing the total number of GKV funds operating throughout the country. The seemingly widening gap between ex-manufacturer and end-user prices of pharmaceuticals is not yet cause for concern, but will no doubt be used as a powerful weapon by the pharmaceutical industry in arguing its corner against cost-effectiveness watchdogs such as the Institute for Quality and Efficiency in Healthcare (IQWiG). However, it is worth remembering that numbers alone are insufficient to define the situation, and while many drugs may be seeing their prices decline, those that are increasing are likely to be more expensive to begin with, due to their innovative status or use in treating chronic illnesses.
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