German healthcare reform: what’s the impact on Europe’s pharmaceutical industry?

Germany, one of the most attractive EU markets for pharmaceuticals and often the first-to-launch market for innovative therapies in Europe is adopting cost-containment measures that will negatively impact the industry and all relevant stakeholders.

Germany has a healthcare model where the majority of the German population (approximately 90% or 70 million citizens) are insured via statutory health insurance. The German health insurance system is based upon a dual statutory and private health insurance systems (named GKV[1] and PKV[2], respectively). As such, the GKV is one of the cornerstones in providing access to healthcare for the German population. However, the financial outlook for GKV is looking dire. For 2023 alone, a deficit of 17 billion euros was expected, caused by the pandemic, the current energy crisis, expenditures to buy medicines and inflation. 

To alleviate this burden on the health insurance system, a new bill coined GKV-Finanzstabilisierungsgesetz (‘Bill on the Financial Stabilisation of the Statutory Health Insurance System’) has been adopted. On 20 October 2022, the bill passed the Bundestag and a week later, the Bundesrat

According to Germany’s Federal Health Minister Karl Lauterbach, the bill aims to distribute the financial burden across all healthcare players without reducing patient benefits. As such, the bill will affect almost all players within the German healthcare system, including health insurance, healthcare professionals, hospitals, pharmacies and, not least, the pharmaceutical industry. Several of these stakeholders, as well as speakers from the opposition, have voiced their concerns that the bill is a short-term fix and not a long-term solution to solving the financial problems of statutory health insurance in Germany. 

How the bill will impact the different stakeholders

Impact on the pharmaceutical industry

  • With this bill, the reimbursement price for new medicines will apply already seven months after product launch/market entry. This reduces the period during which a pharmaceutical company is free to set its price for a new drug from 12 to 6 months. 
  • According to the new bills explanatory memorandum, the German government expects that future price negotiations will also consider price-volume components.
  • In the future, orphan drugs will be subject to the full AMNOG[3] process including a full HTA assessment if their annual revenue exceeds €30 million (instead of €50 million currently).
  • With regards to combination therapies, the new section § 130e will introduce a 20% discount on products which are used in combination with other innovative products. The G-BA[4] will provide a list of the existing combination therapies based on the SmPCs of the products. § 130e will cover substances where a reimbursement price has been or will be negotiated, and health insurance funds shall receive a markdown payment of 20% of the company’s sales price.
  • The mandatory markdown payment (the “mandatory discount”) is currently at 7% of the company’s sales price and will temporarily increase to 12% for the year 2023.
  • A price freeze on medicines has been in effect in Germany since August 2010 (so-called “price moratorium”, where pharma companies have been prevented from increasing prices for drugs with a specific stand-alone indication, that have not been subject to the fixed reimbursement prices normally imposed on groups of active substances for the same or comparable indication). This price freeze was originally scheduled to expire on 31 December 2022, the GKV-FinStG extends the price freeze until the end of 2026.
  • Several provisions of the GKV-FinStG also aim to strengthen the local production of medicines in Germany by considering this as a factor in the evaluation of the new AMNOG provisions.

Impact on patients in Germany

  • Removal of the “new patient regulation”.  By removing the honoraria for clinicians to accept new patients, the wait-time for patients to get access to diagnosis and treatment could be further delayed.
  • The “new patient regulation” was introduced in May 2019 under the previous administration (Health Minister Jens Spahn – CDU) aiming at financially incentivising general practitioners and specialists to receive new patients on top of their regular budget.

Impact on Health Kiosks in Germany

  • Health Minister Karl Lauterbach announced in May 2022 plans for the development of health kiosks.
  • These health kiosks should be placed in underserved areas and become part of standard care. Most of this is already well prepared and plans for a nationwide introduction is expected shortly.
  • The health kiosks are to provide fast and simple access to health advice and treatment to people with and without health insurance, to people without a family doctor or to patients with language barriers.
  • The health kiosks are to operate in multiple languages with the Hamburg-Billstedt Health Kiosk serving as a model for the nationwide implementation. The financing is expected to be covered by statutory health insurance companies (74.5% of the costs), private health insurance companies (5.5%) and the municipalities (20%). Both public and private health insurance associations have contested the financing model calling for municipalities to take a bigger share in the coverage of the costs.

Impact on healthcare providers in Germany

  • Removal of “new patient regulation”. The removal of this regulation was strongly criticised by healthcare professional associations, as the incentive of 10 EUR for every new patient is a critical part of the honoraria.
  • The National Association of SHI-accredited Physicians (KBV) raised concerns that the removal of the “new patient regulation” contradicts the agreed coalition treaty of the new German government (the so-called Ampel Coalition).

Impact on the hospital sector in Germany

  • The hospital sector was set not to bear any cost cuts. However, a few areas around staffing and payment for nursing staff have been identified as something that needs to be revisited to support overall cost saving.
  • The German Hospital Federation (DKG) strongly reacted to the proposal, flagging that this is a critical time for hospitals, and not a time to propose any budget cuts.

Five key takeaways from the reform

1. A stress test for the coalition

This cost-containment bill, and further cost-containment measures expected in the coming years, will put the “traffic light coalition” under pressure. The coalition has already shown itself to disagree on several issues in the past, future cost-containment measures will test the coalition partners’ resilience and ability to compromise. Besides the social democratic Health Minister Karl Lauterbach (SPD), the liberal Finance Minister Christian Lindner (FDP) is playing a central role. Mr. Lindner has already severely restricted the financial leeway of the Health Minister for the current bill and it is not expected that the financial leeway for Health Minister Karl Lauterbach will be greater next year. With this reform, Health Minister Karl Lauterbach is left with little space for maneuver on future reforms, where the pressure to cut costs is high.

2. Auf Wiedersehen German biopharma innovation?

For smaller pharmaceutical companies in the area of rare diseases, the changes introduced with the cost-containment bill will have a significant impact on their revenue and future investments in R&D. The fact that this reform happens in Germany, the country of two mRNA pioneers BioNTech and CureVac, that were critical to exit one of the worst health pandemics, questions the vision and leadership that Germany wants to play in the EU and globally in bringing future healthcare innovation to patients. The United States will likely continue to attract both Germany’s and Europe’s most innovative and promising biotech companies.

3. Time to rethink advocacy strategies

Trade associations representing the pharmaceutical industry rightly but unsuccessfully argued that the cost containment bill could lead to a reduction in innovation in Europe and restrict access to most innovative treatments and rare diseases therapies. The lack of traction of the biopharma industry’s position in the German reform, which echoes similar reforms in the United States and upcoming ones at EU level, with the revision of the General Pharmaceutical Legislation and OMP regulation, questions the efficacy of traditional advocacy strategies. It is more than ever time to rethink how the biopharma industry engages with stakeholders and get its messages across to key decision-makers.

4. Short term financial gains versus long-term socioeconomic impact

The GKV-FinStG will only be a short-term solution to avoid a large deficit in 2023. The German Government will therefore have to introduce further reforms already next year to stabilise GKV finances. The short term and step by step approach to reforms will only lead to creating further uncertainty for all stakeholders at a time where the COVID-19 pandemic highlighted that investing in health yields long term benefits overweighting short term savings.

5. Spillover effects in Europe and beyond

The bill will likely impact innovative therapy pricing far beyond Germany as German price is often used by other EU and non-EU countries to set national price (reference pricing). Germany is used as a reference country by other European countries and markets outside of Europe, such as Canada, South Korea, and Japan.

Authors: Antoine Mialhe, Senior Managing Director head of Life Science & Healthcare practice in Brussels; Angela Velkova, Senior Director Germany; Nikolas Lemke, Senior Director Germany; Sandra Dang, Senior Consultant Brussels; Ryan Murray, Senior Consultant, Brussels; Katja Murray, Senior Director Brussels and Copenhagen.

FTI Consulting is an independent global business advisory firm dedicated to helping organizations manage change, mitigate risk and resolve disputes: financial, legal, operational, political & regulatory, reputational and transactional. Individually, each practice is a leader in its specific field, staffed with experts recognized for the depth of their knowledge and a track record of making an impact. 

FTI Consulting Strategic Communications Healthcare and Life Sciences bring together over 100 experts across the globe with in-house experience in biopharma and MedTech, former executives in international, EU, U.S. and national politics, and former executives from leaders from trade associations and patient advocacy organizations. We take a holistic view to help companies build, grow and defend their reputation, identify and address policy and regulatory hurdles, support complex product launches across various geographies and build company reputation with key stakeholders at a global scale.

[1] Gesetzliche Krankenversicherung (GKV), Statutory Health Insurance

[2] Privat Krankenversicherung (PKV), Private Health Insurance

[3] Arzneimittelmarktneuordnungsgesetz (AMNOG), Act for the Restructuring of the Pharmaceutical Market in Statutory Health Insurance

[4] Gemeinsamer Bundesausschuss (G-BA), Federal Joint Committee

Share this :