Smaller German Drugmakers Outline Health Reform Woes

April 1, 2005

Reforms introduced last year to Germany's pricing and reimbursement structures have led small-to-medium-sized drugmakers' revenue and profit levels to fall by as much as 20%, according to industry association BPI.

The group claims that many of its members have already relocated out of Germany to offset lost earnings from the country's new fixed-level pricing structure, which groups drugs together in wide categories according to a single price, regardless of whether any given product is a generic or an innovator product. Indeed, generics makers have complained that the effective end of free pricing has brought even them little benefit, as government attitudes toward cost control have been ruthless.

While small generics makers may have reason to complain, multinational ethical drugmakers' criticism has been the most vociferous in recent months. Reports that German health funds had posted a EUR4.0bn (US$5.35bn) surplus in 2004 recently prompted the government to add four groups of active pharmaceutical ingredients to the pricing structure. The new additions included cholesterol-lowering statins, and US drug major Pfizer refused to align prices of its Lipitor (atorvastatin) product with that demanded by the new price framework. The drug is now understood to have lost significant market share in recent months.