(Bloomberg) — Germany, Europe’s largest market for drugs, is emerging as a new front in the battle on drug pricing for pharmaceutical companies already engaged in skirmishes with U.S. health insurers and legislators.
Roche Holding AG’s Chief Executive Officer Severin Schwan praised Germany for giving patients speedy access to critical new medicines without stopping to haggle over prices, signaling that he isn’t bracing for a dispute as he prepares to introduce two new treatments with blockbuster potential.
Other drugmakers are less sanguine: Denmark’s Novo Nordisk A/S in January withdrew its newest insulin Tresiba from Germany after price negotiations that would be the basis for rebates and discounts offered to state-run health insurers fell through. Bayer AG stopped the sale of its cancer drug Stivarga this month after German authorities determined that it needn’t be covered by insurers.
Both sides are watching closely as the nation now prepares to tighten rules further, following a public outcry over Gilead Sciences Inc.’s breakthrough hepatitis C medicine Sovaldi in 2014. The treatment made more than $10 billion in its first year for Gilead, though its price incensed health authorities and payers. The German health ministry laid out plans this month for new legislation that would cap reimbursements for drugs in the first year.
“There is a lot of emphasis on making innovative medicines available to patients immediately” in the European nation, Schwan said in an interview on Tuesday. “I am absolutely sure we’ll find ways to make those medicines available to patients in Germany, irrespective of the ongoing discussion about the system overall.”
Drugmakers are free in Germany to choose the price of a new prescription drug that is patent-protected for an initial period that typically lasts a year. Public insurers, who cover some 90 percent of the population, pick up the cost. During that time, a drug assessment body — the Institute for Quality and Efficiency in Health — determines whether the new product is better than existing ones. Using that recommendation, the Federal Joint Committee then makes a decision on reimbursements and discounts given to the insurers.
In Novo’s case, the company argued that German authorities were failing to recognize the medical advances delivered by its ultra-long acting Tresiba basal insulin, administered to help manage blood sugar levels in diabetics.
“We were offered a price at the level of ordinary human insulin, a product which was launched in the 1980s,” CEO Lars Rebien Soerensen said in Novo’s annual report in February. “We had to make the difficult decision to discontinue the product.”
The launch of Sovaldi exacerbated tensions between drugmakers and Germany’s health authorities. Gilead, which won approval from the European Medicines Agency in January 2014 for the medicine, began selling the treatment in Germany for about $68,000 for a 12-week course. Public health authorities pushed back, and eventually won some discounts.
In response to continuing criticism of the high costs of that drug, health minister Hermann Groehe aims to bring in new laws to ease the burden on the state insurers until a discount can be negotiated, and will introduce a draft proposal this summer.
Meanwhile another Swiss drugmaker, Novartis AG, is already working with German authorities on how to price its heart failure medicine Entresto after that first year. The company proposes linking the drug’s cost to its track record of reducing hospital stays, and the new regulations probably won’t derail that, Chief Executive Joe Jimenez told reporters on Thursday.