Are German Drug Pricing Regulations Chasing Some Drug Makers Away, Causing Them To Withdraw Products From The Market?

Germany’s pharmaceutical market is the most important one on the European continent. Not only is this due to the size of the country, but also because the prices of products are often referenced by other countries.

Once a bastion of relatively free market pricing, over time German drug pricing regulations have become increasingly stringent. This appears to be causing some drug manufacturers to drop out of the German market.

Following its European Medicines Agency (EMA) approval last year, Bristol Myers Squibb (BMS) has decided not to launch the cancer drug Opdualag in Germany, citing price pressure. Opdualag is a combination of Opdivo (nivolumab) and a new antibody relatlimab. It is used to treat advanced melanoma in certain adults and adolescents aged 12 years and older. BMS’s marketing withdrawal follows bluebird bio’s departure from the German and European markets, when it failed to reach price agreements for its beta thalassemia drug, Zynteglo.

In Germany, prices for newly approved drugs are established in a bilateral monopoly, through negotiations between a single purchaser (an umbrella organization representing insurers known as Sickness Funds) and a single seller, the drug manufacturer.

In 2011, a law reforming the German pharmaceutical market took effect. The legislation allows free market pricing of pharmaceuticals at a drug’s launch and for a period of 12 months. But a recent revision shortened the period from 12 to six months.

After six months, only companies with branded products that offer sufficient levels of incremental benefit relative to comparators have flexibility to negotiate prices.

To determine drugs’ comparative effectiveness, the law stipulates that a systematic and formal assessment of each drug’s therapeutic value must commence within three months after launch. Drug manufacturers are obliged to submit a dossier with the necessary data to the German Joint Federal Committee (GBA). The dossier includes evidence to support the proposition that the medicine has “added therapeutic benefit” relative to an appropriately chosen comparator.

Next, the GBA’s remit is to evaluate claims as to whether the new medicine in fact yields added therapeutic benefit over a comparator. It does this invariably by commissioning the Institute for Quality and Efficiency in Healthcare (IQWiG) to perform an assessment. IQWiG is the German agency responsible for assessing the quality and efficiency of medical treatments, including prescription drugs.

Subsequent to the assessment, if a new drug has at least some added therapeutic benefit over existing standards of care, a reimbursement price is negotiated based on the prices of appropriate comparators. If no additional therapeutic benefit is found, the new drug is included in a reference price cluster, where possible. Each cluster has a pre-determined maximum reimbursement level.

For all drugs with new active substances that are used in combination – in the case of Opdualag, the relatlimab component – the German Sickness Funds shall receive from the respective pharmaceutical company an additional 20% rebate off of the sales price. The only way to avoid this mandatory 20% markdown is when GBA concludes that the product has a significant added benefit.

In the case of Opdualag, BMS used progression-free survival (PFS) to measure the product’s efficacy. A BMS spokesperson said that the drug demonstrated statistically significant PFS over anti-PD-1 monotherapy in patients with advanced melanoma. However, the GBA does not consider PFS a “patient-relevant endpoint.” Rather than wait for a completed GBA-commissioned assessment, BMS said it saw “no possibility of achieving a benefit assessment for Opdualag that would reflect the value of this medical innovation compared with the comparator therapy.” The company subsequently withdrew Opdualag from the market.

From 2011 to 2019, the German system conducted pricing assessments for 238 drugs. Of these, 28 drugs were withdrawn from the market by manufacturers.

While we don’t know the reason for each of these withdrawals, it’s safe to assume that in many cases price was a factor. Notably, drug manufacturers haven’t withdrawn any drugs that were shown to offer incremental clinical benefit over their closest comparators.

A unique feature of the German system of drug pricing is that the final negotiated and arbitrated prices are not confidential. And so, any other jurisdiction will know the price and behave accordingly in negotiations with drug manufacturers. Together with the fact that many countries in Europe reference German prices, this may have also spurred BMS’s decision not to market Opdualag in Germany. The low price in Germany could have undermined the ability to charger higher prices elsewhere.

In another high-profile decision, in August 2021, bluebird bio announced it was withdrawing the beta thalassemia product Zynteglo from the German market after failing to reach agreement with health authorities on the treatment’s price. Bluebird bio representatives have said the price proposed by German regulators, in particular, didn’t “reflect Zynteglo’s value as a one-time treatment for a disease that typically requires lifelong blood transfusions.”

It’s clear German drug pricing regulations are a bridge too far for some manufacturers. Disputes over value assessments and the ensuing imposition of lower prices create conditions for the perfect storm, if you will, in which rather than accede to authorities’ demands some companies are heading for the exits.

A higher market access (pricing and reimbursement) hurdle is now par for the course throughout Europe, and becoming so even in the U.S., though to a much lesser extent. This is especially pertinent with respect to drug makers that have developed new products considered by reimbursement authorities to be marginally beneficial or not offering incremental benefits compared to existing treatments.