In an earlier blog, we noted that the German drug pricing and reimbursement laws are among the most complicated legal areas in the entire field of life sciences law. Now, these laws and the respective German market access rules are becoming more complicated. A new law will come into effect in the next few weeks.
In November 2022, Germany enacted amendments to the drug pricing and reimbursement laws with the Act on the Financial Stabilization of the Statutory Health Insurance System (GKV-Finanzstabilisierungsgesetz – „GKV-FinStG“) (we discussed that in this blog). In February 2023, the government proposed additional legal changes to prevent supply shortages and to incentivize the development and supply of certain critical medicines (we reported about these in this blog). These deliberations have now come to an end. So, what is coming up next?
Now, at the end of June, the German Parliament (Bundestag) passed the “Act to Combat Supply Shortages and Improve the Supply of Medicines” (Arzneimittel-Lieferengpassbekämpfungs- und Versorgungsverbesserungsgesetz – “ALBVVG”). The ALBVVG amends several laws and will have significant implications for the pharmaceutical industry.
One of the triggers for the ALBVVG were recent supply shortages of almost 500 medicines in Germany. For example, there was a massive shortage of fever juice for children for several months. The shortages caused quite a shock in Germany since the country used to be called the “pharmacy of the world”. The government acknowledged that the shortages were also caused by price pressures and some dis-incentivizing reimbursement laws. Therefore, the ALBVVG takes several measures to improve this situation. However, the ALBVVG goes beyond the rules for preventing supply shortages but also enacts additional laws that directly affect the AMNOG market access process and other pricing and reimbursement laws. Here are some key points from the ALBVVG:
- Amendments to the German Medicines Act (AMG) include the establishment of an early warning system for supply shortages. The German Federal Institute for Medicines and Medical Products (Bundesinstitut für Arzneimittel und Medizinprodukte – “BfArM”) can request and publish information from pharmaceutical companies, wholesalers and manufacturers on available stocks, supply sources, sales volumes and impending shortages.
- The German Social Code Book 5 (SGB V) that governs the pricing and reimbursement of medicines will be amended to incentivize the development and supply of certain medicines, in particular critical paediatric medicines and reserve antibiotics. For paediatric medicines, the reference prices and rebate contracts, i.e., two heavy cost containment measures, will no longer apply. The reference price means the maximum reimbursement amount for a medicine. Pharmaceutical companies can increase their sales price once by up to 50% of the last applicable reference price (Sec. 130b (3d) SGB V).
- “Reserve antibiotics” will be privileged. These are antibiotics that are effective against infections caused by multidrug-resistant bacterial pathogens for which only limited alternative treatment methods are available and which are subject to strict indication with new active ingredients. Pharmaceutical companies will be allowed to charge the sales price they set when launching the reserve antibiotic if it is first placed on the market before 1 January 2031. Further, the production of antibiotics in the EU will be incentivized.
- Price instruments for other supply-critical medicines can also be adjusted. If there are not enough suppliers of important medicines, the reference price can be raised by up to 50% (Sec. 35 (5b) SGB V). These new rules are obviously based on the assumption that the current cost-containment measures have contributed to the supply shortages. It remains to be seen whether the effects of these pricing measures will be sufficient to resolve the supply problems.
- Rebate agreements between health insurances and pharmaceutical companies must contain a provision securing a continuous supply of generic medicines. Companies must commit to a minimum supply-stock of the average six months’ demand. This imposes new burden on pharmaceutical companies, especially since it creates additional financial and logistical expenses that are at odds with the original intent of the ALBVVG to secure economically viable conditions for the industry.
- The AMNOG pricing rules will also be amended. The Joint Federal Committee (Gemeinsamer Bundesausschuss – “GBA”) which is in charge of the early benefit assessment (HTA) of new medicines will be entitled to consider the off-label use of another medicine as the comparator therapy for the new product. This amendment comes as reaction to the recent decision of the German Supreme Social Court in the Regadenoson case pursuant to which the GBA could not apply the off-label use of another drug as the comparator when assessing the benefits of a new medicine. The industry welcomed that decision which obviously was particularly relevant for so-called “soloist” medicines for which no approved comparator exists. The government is now changing this. However, the new possibility to apply an off-label use as comparator during the AMNOG assessment is subject to certain qualifiers. Affected companies should carefully review these.
- A significant issue in the ALBVVG will be a new financial burden for pharmaceutical companies after the AMNOG process. This is linked to the retroactive effect of the agreed reimbursement price from the seventh month after market launch. Due to the mechanics of the AMNOG system, companies are required to reimburse the health insurers the difference between the (lower) agreed reimbursement price and the (higher) sales price that applied from that seventh month until the agreed reimbursement price is charged. Under the ALBVVG, this reimbursement obligation should also encompass the overpaid portions of the wholesaler and pharmacy fees as well as VAT. In other words: pharmaceutical companies have to reimburse the health insurances for fees and taxes that the companies did not receive but which went to the wholesalers, pharmacies and the tax authority. It will be interesting to see when (not “if”) this provision will be challenged in court as it raises significant question marks.
- The ALBVVG also amends the recently introduced rules that require a mandatory 20% markdown payment from pharmaceutical companies for medicines used in certain combination therapies. For details on the combination therapy markdown, see our earlier blog on the GKV-FinStG.
Beyond these amendments, the ALBVVG also introduces several other changes to other laws. In conclusion, this act goes beyond preventing supply shortages but impacts the pharmaceutical industry more broadly. Pharmaceutical companies should therefore analyse how the new rules will affect their products and how they can react to these developments.
The legislative process for the ALBVVG is almost complete. The act still needs to pass the German Federal Council (Bundesrat) and be signed by the German President, which is expected later this month. The ALBVVG is therefore expected to come into force at the end of July or in early August 2023.
The Life Sciences Team of Covington & Burling LLP in Frankfurt (Germany) will monitor the next steps and report about further developments.