Until now, pharmaceutical companies in Germany have been allowed to set their own prices for prescription drugs. As a result, public health insurers spent more than 32 billion euros on medicine last year - which is one of the main reasons for their 11 billion euro deficit.

New laws passed on Thursday in the German parliament will limit the amount that pharmaceutical companies are allowed to charge for prescription drugs - and, hopefully, bring the Germany's public health insurers back in the black.

The health minister, Philipp Roesler, said that the government "doesn't want to allow prices for medicine in Germany to be significantly higher than in other countries in Europe."

According to the new rules, the benefits of new medicines must be verified and the manufacturer must negotiate a final price with the insurers and a board of doctors and insurance representatives. If a new drug is found to have additional medicinal benefits, the manufacturer and the insurers will negotiate a price within a year.

Don't reinvent the wheel

But if a new drug is not found to have any additional benefits over an existing drug, the public health insurance scheme won't pay for patients to obtain it. However, critics have argued that it won't be easy to prove that a drug has no benefits.

Prof. Gerd Glaeske of the University of Bremen told the website of German public broadcaster ARD, "This uselessness is impossible to prove."

Rather, explains Glaeske, if the drug-makers cannot submit evidence of additional medicinal value, the board can request more studies. If those aren't submitted, then the medicine can be disallowed.

Excluded from the new pricing regulations are so called "orphan drugs," those that are used to treat rare diseases and bring in less than $50 million euros a year.

An attack on the industry?

Pharmacies and wholesalers, who already have to refund part of the price of every package of medicine to the insurers, will have to pay more in future, bringing in an expected 200 million euros per year for the compulsory health insurance fund.

The Federal Union of German Associations of Pharmacists (ABDA) described the law as an "attack" on the industry. ABDA President Heinz-Günter Wolf warned that the existence of many pharmacies is at risk as a result.

The overhaul is part of a wider reform of the healthcare system, where costs are running way ahead of the insurance premiums which workers and employers pay. Members of the main party in the governing coalition, the Christian Democrats, praised the pharmaceutical savings package.

"We're breaking the price monopoly of the pharma industry," said Christian Democrat health expert Jens Spahn.

Others say the reform doesn't go far enough. Kathy Vogler of the Left Party opposed the legislation, saying it "does not bring the industry firmly enough under control" by allowing companies to continue charging "astronomical prices" for one year after they bring the medication on the market, before the various commissions have examined it.

The health expert for the Greens, Birgitt Bender, criticized the law as bringing "no reorganization of the pharmaceutical market," but rather "more clutter."

Author: Sarah Harman (AFP, dpa)
Editor: Michael Lawton