Following much opposition from drugmakers, Germany has scrapped its plan to install a program that would have reduced the price of branded pharmaceuticals through a variable structure, according to a report from Reuters.
The country’s discount initiative was part of a proposed healthcare reform plan designed to save 16.3 billion euros ($19.1 billion) in 2027, with cuts in drug spending accounting for savings of 1.9 billion euros ($2.2 billion) next year.
According to the plan, drugmakers would have been required to pay an increased markdown to German health insurers on the list prices of their products, in addition to other measures intended to reduce drug prices. Now, instead of using its variable discount plan, Germany will opt for a fixed plan, Reuters said, citing comments from an unnamed government source. Details of that plan are not yet available.
After the original plan was unveiled in April, industry leaders were quick to respond, with some saying that they would slash their investments in the country. Among those protesting were Eli Lilly and Germany-based Boehringer Ingelheim, each of which said earlier this month that they would cut their planned outlays there by at least $1 billion. Pfizer CEO Albert Bourla added around the same time that his company was considering a similar pullback.
During Novartis’ first-quarter earnings call with reporters, CEO Vas Narasimhan blasted the reform plan.
“Policies like this send the wrong signal to a high-innovation industry like ours, where we see U.S. and China actively investing in the biotech ecosystem to make it highly competitive,” Narasimhan said.
Despite the criticism, German Health Minister Nina Warken, who proposed the legislation, doubled down late last week on her push to install the initiative, telling the German newspaper group Funke that “every sector must play its part in this reform.”
Germany traditionally is one of the first European countries to launch new drugs, largely due to its quick reimbursement turnaround, supporting faster market entry.
The pressure the industry applied to Germany is similar to that faced last year by the U.K. as Lilly and other companies such as Merck, Sanofi and AstraZeneca reduced their presence or planned outlays in the country, citing the unwelcoming business environment for biopharma.
Earlier this year, the U.K. made an industry-friendly deal with the U.S., which will free it from tariffs on pharmaceutical products exported to America in exchange for the U.K. adjusting the thresholds under which it assesses the value of new drugs.