On 14 February 2023, the German Federal Ministry of Health (BMG) has presented the new draft “Act to Combat Supply Shortages of Off-Patent Medicines and to Improve the Supply of Paediatric Medicines” (Arzneimittel-Lieferengpassbekämpfungs- und Versorgungsverbesserungsgesetz or “ALBVVG”). Some commentators also refer to the new law as the “Generics Act” but this term appears too narrow given the broader scope of the ALBVVG.

The German government recognizes that the number of supply shortages for critical medicinal products has significantly increased over the past few years. This is especially true for off-patent medicines (generics), such as medicinal products for cancer treatment (Tamoxifen, Folinate) and antibiotics and medicinal products for children. The German government also stresses that additional financial incentives are necessary in the area of patent-protected drugs, especially to promote the development of reserve antibiotics, which are urgently needed for the treatment of infections caused by multi-resistant bacterial pathogens. It is a known challenge that due to their narrow indications, these reserve antibiotics can only generate low sales figures and thus insufficient revenues.

The draft act is envisaged to amend a number of German laws and regulations and will likely have broad implications for the pharmaceutical industry as well as for other stakeholders in the healthcare sector. Some of the key amendments that the new law proposes are summarized as follows:

  • Main amendments to the Medicines Act (AMG) include the establishment of an early warning system to identify potential supply shortages. The federal regulator BfArM will be charged with this task and shall publish supply shortages on its website.  Pharmaceutical companies, wholesalers and, in the future, also mere contract manufacturers have to inform BfArM about available stocks, source of supply, sales volumes and impending shortages.
  • The German Social Code (SGB V) will be amended to incentivize the development and supply of certain medicines, in particular critical paediatric medicines and reserve antibiotics. The rigid reference pricing system will be lifted for these medicines. The reference price is a reimbursement cap and companies are practically forced to reduce their prices to the level of the reference prices. The prices for these products can be raised by 50% of the latest reference price. Similar mechanisms are envisaged for the so-called “supply-critical active pharmaceutical ingredients”. The list of these active ingredients is prepared and published by the German agency BfArM on its website. It is quite a long list.
  • Reserve antibiotics with new active pharmaceutical ingredients against multi-resistant bacterial pathogens will also be significantly privileged under the revised pricing and reimbursement laws. The pharmaceutical company’s freely set sales price at market launch shall continue to be reimbursed.
  • The possibility to substitute medicinal products by the pharmacies will be extended in case of supply shortages.
  • The current reimbursement laws that govern patient surcharges for medicines will also be slightly amended to reduce the price pressure on pharmaceutical companies (in the future, exemption from surcharge if the product price is 20% lower than the reference price while currently this price threshold is still 30% below the reference price).  
  • In the widely used rebate agreements, health insurers and pharmaceutical companies shall agree to a minimum available supply-stock of medicines of the average 3 months’ quantity. The rebate agreements, and subsequently the dispensing pharmacists, shall take into account whether a medicine was produced in the EU/EEA so that manufacturing in the EU/EEA is incentivized.
  • The draft act shall also change several other laws like the German Pharmacy Act, the Drug Pricing Ordinance and the Healthcare Products Advertising Act (Heilmittelwerbegesetz or “HWG”) which we do not discuss in detail in here.

Overall, the ALBVVG will be highly relevant for the distribution of medicines and it will also create new obligations for all stakeholders. Pharmaceutical companies should carefully monitor the legislative process and analyse its implications for their businesses and products.

The Covington & Burling LLP Life Sciences team in Frankfurt, Germany, is following these developments and will provide updates as the legislation process moves forward. 

Tags: Germany, life sciences, Medicinal Products, medicines shortages
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Photo of Dr. Dr. Adem Koyuncu Dr. Dr. Adem Koyuncu

Adem Koyuncu is double qualified as a lawyer and medical doctor and a partner in our Brussels and Frankfurt office. He is a chair of the firm’s “Food, Drug & Device” practice group and also a member of our Compliance practice. Adem is…

Adem Koyuncu is double qualified as a lawyer and medical doctor and a partner in our Brussels and Frankfurt office. He is a chair of the firm’s “Food, Drug & Device” practice group and also a member of our Compliance practice. Adem is recognized as a “leading lawyer for pharma and medical devices law” (JUVE 2021).

Adem helps clients on a wide range of EU and German law issues, including regulatory, compliance, privacy and liability matters. He also provides strategic advice. He knows the life sciences sector also from his earlier work in the pharmaceutical industry and as a medical doctor. He represents clients before courts and authorities and assists them in contract negotiations, investigations and transactions. For years, Adem is listed in various lawyer rankings.

See some Accolades from Clients and Surveys:

  • “He is one of the most detail-oriented and client-focused partners I have ever encountered.” (Client, Chambers 2021)
  • „Great professional and human competence, good team player.“ (Client/Adverse Party, JUVE 2022)
  • “I find him to be one of the most pragmatic regulatory lawyers. He was a doctor before a lawyer, has been in-house, worked on lots of stuff that I have to handle in-house, which helps when getting advice. He is really good at saying it’s a complex situation and your best option is to do this.” (Chambers 2022)
  • “He always comes through with extremely helpful advice. He brings a unique understanding and experience to his practice as both a lawyer and medical doctor.” (Chambers 2021)
  • “Adem Koyuncu is not only a lawyer but also a doctor and has worked in industry. He knows the perspectives that also move in-house lawyers.” (Legal 500 2022)
  • “He is very sharp and quick, while at the same time having a good sense of humor and nerves of steel. Very pleasant to work with.” (Legal 500 2022)
  • He is described as “versatile competent, reliable and high quality” (JUVE 2021) and “incredibly fast.” (JUVE 2018)
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  • “Very strong negotiation skills.” (JUVE 2011)
  • Clients appreciate his “very broad knowledge and long-standing expertise” (JUVE 2021/22) and that “he is approachable, knowledgeable and really easy to talk to over the various issues. He is calm and has seen most problems before.” (Chambers 2020)
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Adem is the author of numerous publications (e.g., in leading books on pharma law, product liability and clinical trials) and frequent speaker at different events. As such, he will soon speak at following events:

  • “Medical Device Liability and Risk Transfer 2.0 | A liability issue for the Management?!,” BVMed, Webinar (3/24/2023)
  • “Data Protection Requirements and Open Issues in the Pharma Sector – Status quo,” Speech at conference, 26. Marburger Gespräche zum Pharmarecht, Marburg (3/16/2023)
  • “Vendor Oversight & Vendor (Quality) Management in the Pharma Industry,” FORUM-Institut, Online Seminar (4/19/2023)
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Sophie Herold is an associate in Covington’s Frankfurt office and a member of our Food, Drug and Device Practice. She advises clients on a broad range of regulatory and compliance matters.

Sophie counsels clients on all aspects of pharmaceutical and medical device regulation…

Sophie Herold is an associate in Covington’s Frankfurt office and a member of our Food, Drug and Device Practice. She advises clients on a broad range of regulatory and compliance matters.

Sophie counsels clients on all aspects of pharmaceutical and medical device regulation, clinical research, therapeutic product advertising, data protection and other regulatory issues over the entire product lifecycle. She also assists clients with legal, contractual and privacy issues that affect digital health products and services, including medical apps and AI-based devices.

Sophie’s practice includes advisory work. She also represents clients before authorities and in court.

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