On January 1, 2025, Germany ushered in a new era of pharmaceutical pricing with the Medical Research Act (Medizinforschungsgesetz, MFG) amendments coming into effect. These changes, particularly the introduction of confidential reimbursement prices and the removal of International Reference Pricing (IRP), have sparked debate within the industry.
Confidential Reimbursement Prices: A New Option
One of the most discussed amendments is the inclusion of confidential reimbursement prices for therapies undergoing benefit assessment procedures. Proponents argued that manufacturers would offer substantial discounts if their reimbursement prices remained undisclosed, preventing use in international reference pricing. This argument influenced Federal Minister of Health Karl Lauterbach. However, pressure from the German statutory health insurance (Gesetzliche Krankenversicherung, GKV) resulted in provisions less attractive than initially anticipated.
Industry-backed news site Pharma Fakten proclaimed confidential pricing arrangements as “an irrelevance.” The mandatory 9% discount on confidential prices is only applicable to companies with R&D departments in Germany that collaborate on pharmaceutical research with public institutions. Manufacturers opting for these confidential prices face extra expenses, including overpaid trade surcharges and sales taxes associated with initial higher list prices paid by the GKV funds, complicating the settlement process.
The Disappearance of IRP
Another significant alteration is the removal of IRP as a criterion in price negotiations. Section 130b of book five of the German Social Code (Sozialgesetzbuch Fünftes Buch, SGB5), governing price negotiations between the pharmaceutical industry and the National Association of Statutory Health Insurance Funds (GKV-Spitzenverband), no longer considers sales prices in other European countries. The Federal Ministry of Health (FMoH) asserted this change as a logical consequence of permitting confidential pricing.
However, the FMoH’s reasoning faces scrutiny given the anticipated low adoption rate of confidential pricing. Without substantial references to German prices, IRP’s role in setting EU-wide prices becomes diminished, potentially leading to higher costs for manufacturers and higher inflation risks for countries that depend on Germany as a pricing reference.
A Transitional Framework
No new framework agreement on price negotiations has been finalized. The current framework agreement from 2022 still lists IRP as one of the main criteria. A German pharmaceutical industry insider confirmed that only provisions consistent with the new law remain valid, making IRP irrelevant in the context of future negotiations.
The GKV-Spitzenverband supported eliminating IRP, believing it essential due to confidential pricing. They stressed that Germany often serves as the first market for new therapies, lacking a reimbursement hurdle and enjoying an initial free-pricing period, making price references elsewhere scarce. Even though IRP is no longer a legal criterion, its legacy in setting Germany as a price benchmark remains significant.
Perceived Concerns and Benefits
The GKV-Spitzenverband’s stance suggests they are confident that eliminating IRP will not undermine their savings objectives. Historically, the Pharmaceutical Market Restructuring Act (Arzneimittelmarkt Neuordnungsgesetz, AMNOG) system has led to discounted prices in Germany moving closer to the European average, even amid partial or delayed price sharing commitments from some manufacturers.
Despite these assurances, early assessments indicate that the impact will not be immediately apparent. Currently ongoing benefit assessment procedures are unlikely to deviate from previous rules, ensuring IRP remains a factor in price negotiations for the next five to six months. The industry awaits clarity on how these changes will affect future drug costs and healthcare savings.
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By GlobalData
Industry Perspective
The GKV-Spitzenverband’s justification for eliminating IRP hinges on most manufacturers adopting confidential pricing, which they anticipate will occur. However, the stringent conditions and substantial costs associated with confidential pricing mean industry leaders doubt its widespread use.
Moreover, the historical usage of IRP has proven beneficial. Since 2011, Germany’s drug pricing system led by the AMNOG has ensured that prices remained competitive compared to European norms. This trend may continue, especially for ongoing benefit assessment procedures initiated before January 1, 2025. New therapies will still face public price negotiations, maintaining transparency and potential cost regulations.
Implications for the Future
For the immediate future, IRP will continue to influence price negotiations as ongoing benefit assessment processes conclude. These negotiations are based on historical provisions, not the new regulatory framework. Therefore, any full impact of these changes will not be realized until mid-2025.
Future negotiations will prioritize alternative criteria such as the annual costs of therapy compared to existing treatments, the clinical benefits as documented in the manufacturer’s dossier, and the decision of the Gemeinsamer Bundesausschuss (G-BA). The GKV-Spitzenverband’s support for these changes suggests they are confident these factors can maintain price control without IRP.
Nevertheless, the implications for the small segment choosing confidential pricing are significant. The absence of these discounted prices in public databases could lead to inflated costs in countries that reference Germany’s drug prices. This creates complexity in international price harmonization and potential economic ramifications.
