Eli Lilly ($LLY) CEO John Lechleiter (photo) wasn't kidding when he took German officials to task about new drug-pricing rules. The Indianapolis-based drugmaker announced today that Trajenta, the diabetes drug it's launching in Europe with Boehringer Ingelheim, won't be made available in Germany. And the country's new pricing scheme is to blame.
Under Germany's new scheme, drugmakers will no longer have the power to set prices. Companies have one year to set prices on new drugs, while negotiating a long-term price with the government. The negotiation will include cost-benefit analysis by government health officials. If a new drug isn't deemed more valuable than existing treatments, its price will be pegged by the government. And it goes without saying that the government-determined price won't be very high.
Last month, Lechleiter went on a barnstorming tour of Germany, aiming to make pharma's objections to the pricing plan known. "In no other place in the world has the environment for innovative pharmaceuticals changed more in the last 12 months than it has in Germany," Lechleiter said at the time.
Now, Lilly and Boehringer say the price-setting process is likely to unfairly undervalue Trajenta. The mechanisms Germany plans to use in its cost-benefit analysis "will lead to an inadequate consideration of the therapeutic benefits and positive properties of the drug," the companies said in their statement, released to the German market.
The companies will consider launching Trajenta in Germany if the government offers "more transparency" in the drug-evaluation process. But for now, from a business perspective, it makes no sense to roll it out, they said. It will be interesting to see how Germany responds.