Why are branded drugs so expensive

Drug savings plans: Why drugs are so expensive in Germany

The pharmaceutical industry and politics are arguing about the drug savings plans of Health Minister Philipp Rösler (FDP) - while insured people are wondering why they have to pay so much more for drugs in Germany than in other countries. t-online.de explains why this is so.

Expensive drugs

Medicines in Germany cost far more than abroad. The pharmaceutical companies are particularly good at drugs in the so-called "innovative segment". These are mostly special preparations for which there are no therapeutic alternatives. Vaccines against cervical cancer, for example: Basic immunization with agents such as Gardasil or Cervarix costs 477 euros from the manufacturer in Germany, according to the current drug prescription report, 247 euros in the USA and 314 euros in Switzerland.

900 euros more for the same cancer drug

Another example: The cancer drug Glivec costs 2,700 euros in Germany, says pharmaceutical expert Gerd Glaeske, who is among other things a member of the Advisory Council on the assessment of developments in the health care system. In Great Britain you only pay 1800 euros from the manufacturer. "New drugs impress here with a particularly high price," Glaeske is quoted in the "Frankfurter Rundschau".

No legal restriction on prices

So far, the pharmaceutical giants in Germany have been able to set the prices for patented drugs on their own. If a drug is approved, the health insurance companies have to pay - there are no statutory maximum limits.

Pharmaceutical industry: the state and pharmacies also skim off profit

The pharmaceutical industry justifies the high prices in Germany, among other things, with the high value added tax and the trade margins of the pharmacies. Manufacturers accounted for only 60 percent of the annual costs for the supply of pharmaceuticals, said the chairman of the board of the Federal Association of the Pharmaceutical Industry (BPI), Bernd Wegener, of the newspaper "Rheinlandpfalz am Sonntag". "The remaining 40 percent go to pharmacies and wholesalers as well as into the pockets of the state". In fact, prescription drugs are not subject to the full VAT rate in almost all EU countries, while 19 percent VAT is charged in Germany. In Lithuania, Malta and Sweden these preparations are even tax-free.

VAT only marginally relevant to the price

In the dispute over drug costs, however, it is about expensive drugs - and it is precisely with these that the tax does not play a major role, says the publisher of the industry-independent
"arznei-telegramms", Wolfgang Becker-Brüser, in conversation with t-online.de. The discussion about VAT is only a diversionary maneuver for the pharmaceutical industry. "The pharmacies' sales margin for expensive drugs is also relatively low in an international comparison," the doctor continued.

High development costs and risk of failure

The industry also argues with high development and research costs: According to the Association of Research-Based Pharmaceutical Manufacturers, it takes an average of twelve years from the idea to the approval of a drug. The costs amounted to up to 800 million euros - with no guarantee of success. "Before you can earn money with drugs, you have to invest a lot of money and only one of 10,000 projects comes to the patient as a drug," says association spokesman Jochen Stemmler to "tagesschau.de".

The market determines the price

Becker-Brüser contradicts this. "Even the production or research costs have nothing to do with setting the price," said the doctor and pharmacist. "The manufacturers take what the market has to offer". Take Viagra, for example: The pharmaceutical company Pfizer was actually researching a cardiovascular drug. By chance, the steadfast side effect was noticed and the drug became a bestseller. According to Becker-Brüser, the expected cost of the preparation was one to two euros per day. The patient pays 11 to 15 euros per dose. In addition, the industry reintroduced the same active ingredient, this time for pulmonary hypertension - and raised the price level again. Becker-Brüser makes it clear: "The more serious and threatening the disease, the higher the industry sets the prices."

Price negotiation proposal not new

Central price negotiations could help here, recommended the authors of the drug prescription report back in September. In Switzerland, for example, these are commonplace, writes Professor Ulrich Schwabe, co-editor of the report. The market price of the vaccines against cervical cancer there was originally 546 euros - after central negotiations between the cantons and the manufacturer, it was reduced by 43 percent to 314 euros. And even in German law for three years there could be such negotiations, Schwabe told "tagesschau.de". "According to the legal text, however, the prerequisite is a cost-benefit assessment - and it has been hanging for three years."

More expensive prices only with proof of the better effect

The assessment of how much better a new drug, for example for lowering blood pressure, compared to an older one in preventing strokes, usually takes place years after approval. "For approval, the pharmaceutical company usually only examines the active ingredient in comparison with a placebo, so it is only examined whether the active ingredient works at all and whether the drug is tolerated," explains Klaus Koch, a spokesman for the Institute for Quality and Efficiency Healthcare (IQWiG). Among other things, the institute prepares expert reports on pharmaceuticals on behalf of the Federal Joint Committee and the Federal Ministry of Health. It is only during the cost-benefit assessment that the drug is compared directly with the drug currently on the market and the actual additional benefit is thus determined. This can then be compared with the costs. Nevertheless, the pharmaceutical company charges a higher price as soon as it is approved, although the added value of the new drug has usually not yet been proven. "As long as a drug is not proven to be better, a company should not be able to freely determine the price," says Koch to t-online.de.

Studies are based on studies in the pharmaceutical industry

Since the beginning of 2011, direct negotiations between health insurers and industry have been required by law. The benefit assessment also takes place earlier. "This is progress for the time being," says Koch: "But now it is important to observe the effects of the law". Interesting detail: Institutes such as IQWiG also access data from pharmaceutical companies for cost-benefit assessments. "There is a lack of funds to carry out independent studies," said Koch. He weighs down fundamental concerns due to a lack of neutrality: "The studies by the pharmaceutical companies are not untrustworthy from the outset". The clinical examinations would be carried out according to standardized methods "which are regularly checked by neutral scientific supervisory bodies". A much more serious problem is that not all results are published after the study is completed. "It must be ensured that all study results are available during the price negotiations," says Koch.

German prices are benchmarks for other EU countries

Another aspect also plays an important role in the fight for cheaper drugs in Germany: The drug prices in Germany are the reference prices for negotiations in most other EU countries. For the pharmaceutical industry, it is not just about possible losses in Germany should prices fall.

Opaque discount agreements

However, the publisher of the "arznei-telegram", Becker-Brüser, is certain that if there are actually negotiations between the health insurance companies and the companies, the official price lists will not be touched. "There are already discount agreements for off-patent drugs that are not public and for which the list price remains the same". In fact, the cash registers pay less than was officially determined. However, the reference prices for foreign countries remain the same.

Pharmaceutical industry is ready to negotiate

This would certainly be an acceptable solution for the pharmaceutical industry, which is not fundamentally opposed to Rösler's proposal: The Association of the Pharmaceutical Industry is "in principle for the introduction of price negotiations for patented drugs". However, the minister's statements are immature, says association chief Wegener. The minister let himself be driven by the pressure of the health insurance companies and full-time pharmaceutical critics.

Around 30 billion euros for pharmaceuticals

It remains to be seen how the negotiations will proceed in detail. In the fight against the pharmaceutical lobby, other health ministers failed before Philipp Rösler. The fact is: According to the current drug prescription report, the statutory health insurance funds spent 29.2 billion euros on drugs in 2008. This corresponded to a plus of 5.3 percent compared to the previous year - and was thus the expenditure block with the highest rate of increase among the health insurers. If the regulations are not changed, the insured will have to be prepared for the fact that healthcare costs will continue to rise and that innovative, sought-after drugs will remain more expensive than in other countries.