Drugmakers warn German pricing is killing innovation

As economies have wilted in Europe, Germany has been all about austerity and how that is the only way to cure the E.U.'s financial woes. But the backlash from drugmakers to German drug pricing has become so significant that, for its own consumers, drugmakers warn the cure may be becoming worse than the disease.

Novartis ($NVS) pulled its blood pressure medication Rasilamlo from the German market three months after introducing it to Germany. Eli Lilly ($LLY) simply bypassed Germany with its launch of Trajenta, the diabetes drug it's launching in Europe with Boehringer Ingelheim. Lilly CEO John Lechleiter feels so strongly about the turn of events in a country that was known to be a leader in new drugs that he went on a barnstorming tour there to voice his objections. "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.

In a joint release, the European Federation of Pharmaceutical Industries and Associations (EFPIA) and the German Association of Research Based Pharmaceutical Companies (VFA) this week warned the German government that things will only get worse for its own consumers. "The path chosen by the German government poses a challenge to patient health and to the reputation of Germany as a home of innovation,"  it says in a press release on its website.

Of course, drug pricing pressures are being felt all over Europe as different countries try different courses to deal with debt problems. In Greece, many public health agencies have stopped paying. France is being stricter, as is Spain.

The system, which the industry groups say is "punitive" to innovation, includes a 16% rebate to public health insurers initiated in August 2010, reports PharmaTimes. But it also includes a price-referencing system that links to such countries as Greece, which artificially depresses the prices of new drugs, the group says. It is pressing prices toward the cost of generics that are cheaper only because they piggyback of the development costs of others.

"The decision by the arbitration panel to include Greece in the basket of countries is hard to understand," Richard Bergström, EFPIA director general, says in the release. "The pharmaceutical industry accepts short-term sacrifices in Greece to support the country at a crisis moment."

- read the EFPIA and VFA release (PDF)
- get the PharmaTimes story
- here's more from IHS Healthcare and Pharma blog