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Bayer warns planned German price curbs may restrict drug access

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Bayer AG, Roche Holding AG and other drugmakers are warning that a German government proposal to tighten price controls on prescription drugs could end up restricting access to new medicines in Europe's biggest health-care market.

[BERLIN] Bayer AG, Roche Holding AG and other drugmakers are warning that a German government proposal to tighten price controls on prescription drugs could end up restricting access to new medicines in Europe's biggest health-care market.

The proposal "lacks a fair balance between measures to foster innovation and cost-containment," said Dieter Weinand, pharmaceuticals chief at Bayer.

"Incremental innovation is not recognised and rewarded adequately."

At the heart of the plan is a 250-million euro (S$381.74 million) revenue ceiling for medicines in their first year on the market.

Once companies reach that threshold, controls would kick in to restrict the price. Currently, drugmakers can charge whatever they want in the first year a medicine is on sale regardless of how much they earn.

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Drugmakers are finding themselves under pressure to lower costs as aging populations and costly new therapies leave governments around the world struggling to contain health-care spending.

While pharmaceutical stocks soared after US President-elect Donald Trump's victory eased concerns about price controls in that market, executives at AstraZeneca Plc and GlaxoSmithKline Plc have warned that cuts are ahead there and elsewhere.

"We need to put the brakes on prices precisely when an especially expensive medicine is aimed at a large number of patients," German Health Minister Hermann Groehe told lawmakers in the country's lower house of parliament late last week. Short-term measures must be combined with "long-term price curbs," he said.

Three new drugs would have last year bumped into the proposed ceiling: Gilead Sciences Inc's Harvoni and Solvani medicines for hepatitis C, and Biogen Inc's multiple-sclerosis pill Tecfidera.

The government's proposal would also extend existing caps on price increases for some older medicines - set to expire next year - until 2022. Together, the two measures could save as much as about 1.9 billion euros annually, with the bulk of the savings coming from extending the restrictions on older drugs, according to a draft version of the new law, which Chancellor Angela Merkel's coalition aims to pass in February and have take effect later in 2017.

One proposal currently in the draft that drugmakers like is under threat from the Social Democrats, Ms Merkel's junior coalition partner.

That portion would prohibit prices negotiated between insurers and drugmakers from being published, which would give pharmaceutical companies more bargaining power in other European countries that currently use Germany's published prices as a reference for setting their own limits.

The Social Democrats argue that the proposals are too generous to drugmakers overall, and are calling for a lower ceiling on new-drug revenue and pushing to keep the prices public.

"Industry says that publishing the discounts would make it harder to set prices abroad," SPD lawmaker Edgar Frank said.

German patient spending shouldn't become a political tool to strengthen the pharmaceutical industry's bargaining position elsewhere, Mr Frank said.

German spending on medicines rose 3.9 per cent to 18 billion euros in the first half of this year, according to the National Association of Statutory Health Insurance Funds, an umbrella organisation that helps determine what's covered in the public plans used by about 90 per cent of the population.

Insurers helped push through the country's first controls on prescription-drug prices five years ago. While drugmakers can set their own price in the first year a new medicine is on the market, they must undergo an assessment during that time to determine whether their medicine beats what's already available. That assessment, which usually takes about six months, is the basis for talks on the price going forward at the end of the first year.

Instead of a revenue threshold, insurers are pushing for a set price for a new drug as soon as the review is done.

"It's not logical," said Ann Marini, a spokeswoman for the insurers' association.

"If there's no additional benefit, it doesn't make sense to pay the full price another six months."

Insurers argue they need to find way to lower costs. In Europe, only Belgians spent more per person on medicine in 2012, the most recent year for which data was available, according to a study conducted by Berlin's Technical University last year and sponsored by insurers.

The tradeoff for consumers has been that new medicines come into the market in Germany faster than elsewhere in Europe. The country's open initial pricing is one reason for that speed, Roche, the world's biggest maker of cancer drugs, said in a statement.

Roche said it opposes the revenue ceiling in principle but doesn't expect to be affected at this point.

Companies have already pulled 17 medicines from the German market, including drugs for diabetes and cancer, since the price negotiation requirement for innovative drugs went into effect. For example, Bayer pulled its cancer medicine Stivarga in April after receiving a negative result in the cost-benefit review.


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