Germany has enacted significant changes to its pharmaceutical pricing landscape through the Medical Research Act (Medizinforschungsgesetz, MFG), marking a fundamental shift in how drug prices are determined and disclosed in Europe's largest pharmaceutical market.
Key Reforms in Drug Pricing System
The reforms, effective January 1, 2025, introduce two major changes: the option for confidential discounted reimbursement prices and the elimination of international reference pricing (IRP) from price negotiations. These changes aim to enhance pricing flexibility while potentially securing better deals for the German healthcare system.
Confidential Pricing Framework
The new confidential pricing option comes with substantial restrictions. Manufacturers must meet specific eligibility criteria, including:
- Maintaining R&D departments in Germany
- Engaging in research collaborations with public institutions
- Accepting a mandatory 9% discount
- Managing additional administrative costs related to trade surcharges and sales tax reconciliation
Industry experts, including those from Pharma Fakten, have described these conditions as "an irrelevance," suggesting limited industry adoption due to the burdensome requirements and associated costs.
Impact on International Reference Pricing
The removal of IRP from Section 130b of the German Social Code (SGB5) represents a significant departure from previous pricing mechanisms. The Federal Ministry of Health justified this change as a logical consequence of introducing confidential pricing. However, with the expected low uptake of confidential pricing, questions remain about the practical implications of this policy shift.
Price Negotiation Framework
Future price negotiations will focus on:
- Annual costs of comparable therapies
- Manufacturer's benefit assessment dossier
- Gemeinsamer Bundesausschuss (G-BA) benefit assessment decisions
The National Association of Statutory Health Insurance Funds (GKV-Spitzenverband) has supported these changes, particularly noting Germany's position as an early-launch market where reference prices are often unavailable during initial negotiations.
Implementation Timeline and Transition
The new pricing framework's full impact won't be evident until mid-2025, as ongoing benefit assessments initiated before 2025 will follow previous regulations. For the majority of new therapies, reimbursement prices will remain public, with only a select few qualifying for confidential pricing arrangements.
Market Implications
The reforms create a complex dynamic for both domestic and international markets. While Germany aims to secure better pricing through these changes, the limited adoption of confidential pricing may result in minimal immediate impact. However, for those therapies that do qualify for confidential pricing, the implications for international markets could be significant, potentially leading to higher prices in countries that traditionally reference German prices.
