German health funds' drug prices complaint

German public sector health funds have called on the government to intervene over action by drug companies in reducing the price of a wide range of products at the end of 2006. Since April 1, 2006, drugmakers have had to offer the funds a 10% discount on products out of patent but, from January 1 this year, this discount can be calculated by taking price reductions into account.

The funds argue that, if pharmaceutical companies cut their prices at least 10%, this discount evaporates together with any savings the funds might have achieved on drug costs. From early December 2006, the funds say that 14 generics producers increased the price of over 2,000 products. If they reduce these prices 10% from January 1, the funds could lose 150.0 million euros ($197.8 million) in discount savings over the next three years.

If other drugmakers become involved in this trend, the extra burden on the funds could reach 1.5 billion euros over the three-year period. This would nullify the aim of the drug savings legislation (AVWG) which requires savings on the drugs bill of 500.0 million euros annually.