Germany: German government announces bill to drastically slash drug reimbursement

Orphan drug firms will probably be significantly affected

In short

On 8 July 2022, the German Well being Ministry has formally shared the second version of a brand new invoice known as the Act for Monetary Stability of the Public Well being Insurance coverage (GKV-Finanzstabilisierungsgesetz, “GKV-FinStG“). The invoice continues to be topic to discussions with stakeholders and several other rounds of congress hearings. If finally applied, which is a possible situation, pharma firms will face a number of painful cutbacks on the statutory reimbursement of prescription-only (“Rx“) medicinal merchandise. The dawning world financial crises, foreshadowing diminished funding obtainable to the German statutory medical health insurance (SHI) funds, might speed up the momentum for signing the invoice into regulation.

Pharmaceutical firms ought to brace themselves for but extra strain on revenues, and wherever potential take proactive actions to get adequately ready.

• EUR 1 billion “solidarity cost” imposed on pharmaceutical firms promoting patent-protected or orphan medicine

Pharmaceutical firms which were commercializing, in 2021 or earlier, Rx medicine topic to patent safety or authorized as an orphan medicinal product, will probably be charged an annual “solidarity” levy of EUR 1 billion within the combination. The quantities will probably be payable in 2023 and 2024, respectively. The federal lead group of the German SHI funds (“GKV-Spitzenverband“) will probably be tasked with calculating the share of the EUR 1 billion to be borne by every affected pharma firm, proportionally primarily based on its attracts from SHI finances. Pharma firms might apply for exemptions in the event that they display that the fee obligation causes them an unreasonable hardship or burden.

It’s nonetheless unclear what substantive causes might underpin the unreasonable hardship or burden exemption. Arguably, small and medium enterprises could also be in a greater place to invoke this exemption. Orphan drug firms might already now begin making ready a monetary impression evaluation together with eventualities the place as a result of foreseeably small affected person inhabitants at the side of significantly excessive R&D prices to be recouped, the solidarity cost might probably put sustained provide of the orphan drug in danger, and accordingly deprive sufferers of non-substitutable therapeutic choices.

• Freeze on reimbursable retail costs prolong

Based mostly on a statutory prize freeze (value moratorium), pharma firms have already for 13 years been prevented from rising costs for reimbursable prescription-only medicine which aren’t topic to mounted costs. Solely inflation changes could also be claimed retroactively. The prize freeze primarily applies to medicine with legacy lively substances which have remained stand-alone in a particular indication and due to this fact had escaped mounted reimbursement costs imposed on teams of lively substances which have the identical of comparable indications in frequent. Pharma business associations have been pushing for selective exemptions from the prize freeze, e.g., for brand spanking new and therapeutically related indications authorized for affected medicine. The result of lobbying efforts must be awaited.

• Elevated strain on reimbursement costs for medicine with new lively substances
  negotiated with regulators throughout the “AMNOG” framework of HTA (well being know-how evaluation)

Since 2011, the established AMNOG course of compels firms launching patent-protected medicine with new lively substances to display upon market launch a scientifically confirmed further therapeutic profit relative to established therapies. Relying on the allotted further profit rating decided by the competent federal regulator, the extent of the reimbursement value is negotiated (or within the absence of settlement between the corporate and the payer affiliation, unilaterally decided by an arbitration board). Till now, throughout the first

post-launch yr, the pharma firms have been allowed to freely set their value charged, which have been absolutely reimbursed, earlier than the (decreased) AMNOG-guided costs kick in initially of the second post-launch yr.

1. Shortening of free value setting interval from one yr to 6 months

As a centerpiece of the deliberate GKV-FinStG regulation, the one-year interval of free price-setting and warranted reimbursement is to be shorted to 6 months. This implies, for example, if the corporate expenses a value of 100 within the first post-launch yr, and through the next yr AMNOG introduces a obligatory reimbursement value of solely 40, the corporate must compensate the medical health insurance for six months’ value of 60% of the associated fee which the well being insurers had reimbursed in extra of the AMNOG value (i.e., not solely the corporate’s gross sales value, but additionally the statutory markup of the distribution chain). “Sensible” setting of preliminary costs, decided by quite a few elements, will even change into more difficult.

2. Additional restrictions for figuring out the allotted HTA reimbursement value

Different AMNOG-related measures proposed by the GKV-FinStG purpose to decrease the reimbursement value to be negotiated or decided, thus representing additional hurdles to undertaking profitability. These measures embrace:

• A tiered system of “guardrails” that hyperlinks reimbursement value limits to the extent of demonstrated further advantage of the brand new drug over the drug used as comparator within the HTA course of. Specifically, new medicine with are discovered to supply no further profit over the comparator drug are penalized by a reimbursement value that leads to annual remedy prices of 10% lower than the annual remedy value of essentially the most economical non-generic commonplace remedy.
• The place essentially the most economical non-generic commonplace remedy serving as value ceiling reference was itself not AMNOG-assessed, such value ceiling is decreased by 15%.
• New medicine with allegedly uneconomical bundle sizes or for dosages inflicting a discarding of non-administered extra portions of drug substance will probably be topic to additional value markdowns.

Current medicine with a negotiated reimbursement value usually are not grandfathered. Fairly, every celebration to a reimbursement value settlement can have a particular termination proper within the first three months after GKV-FinStG takes impact, triggering a re-negotiation of the reimbursement value underneath the brand new guidelines.

3. AMNOG exemption for authorized orphan medicine reduce, solely obtainable if annual revenues keep under EUR 20 million

To this point firms launching orphan medicine with new lively substances authorized pursuant to EU Regulation 141/2000 have been exempted from the obligatory AMNOG value adjustment, and left free to set reimbursement costs, offered annual income realized with the German SHIs fell under EUR 50 million. The brand new regulation goals to cut back this threshold to solely EUR 20 million.

• Obligatory rebate imposed on co-medications prescribed as mixture therapies

One other new mechanism goals to understand financial savings on branded medicine which aren’t topic to the HTA profit evaluation and value regulation, however authorized as co-medications to new medicine that endure AMNOG evaluation. Such second medicine prescribed and administered together with AMNOG-regulated medicine are speculated to be hit with a obligatory rebate (payable by the corporate advertising the co-medication) within the quantity of 20% of the decreased AMNOG reimbursement value granted for the primary drug. The extent of a retroactive impact of this instrument usually are not but identified. Firms advertising mixture remedy medicine might already now intently observe related AMNOG assessments and value fixing of mixture accomplice medicine, and look at the advertising approval standing associated to mixture therapies. This may be a preparatory effort conducive to any obtainable authorized complaints towards the obligatory 20% low cost, as soon as imposed.

The draft GKV-FinStG invoice should be modified on account of the present discussions and the following parliamentary course of. However, it’s probably that many if not all price-reduction measures will finally stay within the invoice and finally change into regulation.

Pharmaceutical firms ought to due to this fact analyze the impression of those measures on their product launch, pricing, commercialization and life cycle methods within the German market in addition to the potential implications for different markets the place the German reimbursement value might function reference value. Firms with excessive R&D value ought to put together a monetary impression evaluation of the “solidarity cost” to finally discover the prospects of making use of for an exemption of the solidarity cost. Moreover, pharmaceutical firms commercializing orphan medicine ought to start making ready for the AMNOG HTA course of if annual revenues of the orphan drug exceed EUR 20 million.

If in case you have questions concerning the new invoice, or curiosity in submitting feedback, please contact any of these attorneys listed on this alert or your ordinary Baker McKenzie contact.