Drug discount agreements: development, benefits and supply aspects of a successful model

Since the introduction of drug discount contracts in 2003, but especially after the contracts were activated through a substitution obligation in favor of discounted drugs in 2007, the market for interchangeable drugs has changed radically. While the direct economic effects of the contracts can be seen in the health insurance companies' transparent budget accounts set up specifically for this purpose (Official Statistics of the Statutory Health Insurance Funds KJ 1), fundamental questions about care are not obvious at first glance. In particular, associations of generic manufacturers, previously vigorous advocates of the exchange principle as the fundamental basis for the existence of the generic pharmaceutical market, now see the exchange of drugs with identical active ingredients as a risk to the common good and the instrument of discount agreements as the end of all generic competition. Large corporations complain about the hostility to small and medium-sized businesses, while medium-sized companies complain about the lack of planning security in discount agreements. In the field of conflicting interests, it is important to examine the instrument of discount agreements, which is widely recognized by politicians, from the perspective of the AOK Baden-Württemberg, which has been in charge of the entire AOK system for years, but especially from the patient's perspective.

>> With the Contribution Rate Guarantee Act (BSSichG), the insertion of Paragraph 8 in Section 130 a SGB V gave statutory health insurance companies the opportunity for the first time to use competitive procedures to reduce their expenditure burden in the area of pharmaceuticals through a free agreement with effect from January 1, 2003 of discounts with pharmaceutical companies. Although a large number of health insurance companies tried to make extensive use of this instrument, the contractual discounting largely had no noticeable market response. The established and very successful incentive systems of pharmaceutical companies for doctors and pharmacists, as well as image campaigns aimed at patients, proved to be superior (Hermann/Wienands 2008; Hermann 2009) (Fig. 1).
The regulatory content of the contracts, which was limited to the reimbursement of funds and thus an indirect price reduction, was largely ignored by corporations with strong marketing interests, while marketing weak companies, especially smaller companies, were largely denied market access despite the discount agreement.
After the significant structural strengthening of the instrument of drug discount agreements as part of the GKV Competition Strengthening Act (GKV-WSG) on April 1, 2007, this fundamentally changed. Since then, medicines for which a comparable, discounted alternative is available must be substituted in the pharmacy. As part of the AOKen's first tender, for example, 11 predominantly small and medium-sized companies were awarded discount contracts for 43 active ingredients. Although these companies were initially ridiculed (rücker 2007), they quickly overtook the previous industry leaders for the majority of active ingredients (Schuhmacher/Gewaltig/Busse/Greiner 2009). Sales losses of up to over 30 % were recorded for the most important active ingredients for the largest and best-known generic drug providers. By actively influencing the selection of medicines in the pharmacy via the health insurance company (Fig. 2), companies that had previously been unable to assert themselves against the aggressive marketing practices of market-dominating – and moreover high-priced – providers achieved a realignment of market shares after regular non-discounted medicines were introduced discounted ones were substituted.
The new form of competition of discount agreements confronted the established, large companies with strong marketing power in particular with the opposite market requirements: up to now, the interest of these providers has been in achieving the greatest possible interchangeability with first-party preparations after the patent has expired as well as with other generics in order to expand the market as broadly as possible through aggressive marketing occupy, the efforts to win the pharmacist's favor came to nothing. The previously desired interchangeability became a disadvantage, and the cost-intensive field service became an unfortunate burden on companies (Müller 2007).
Reaction of pharmaceutical companies
The contracts met with a very positive response, particularly among smaller companies who were given significant market access for the first time through discount agreements. To the same extent, disadvantaged, unsuccessful companies tried - understandably - to limit the effects of discount agreements. After the first phase of refusal in 2007, this was primarily done through legal action. The large number of proceedings initiated, which also intensively occupied various higher courts, and the legislative action in the GKV Organizational Development Act (GKV-OrgWG) ensured legal certainty in particular for the procurement law framework of the discount contracts until the end of 2008 (Masuch 2009; Byok 2010). As a result, the legal attacks on discount contract tenders noticeably diminished.
Since the establishment of a discount agreement based on the procurement law model was predetermined and the chances of a successful attack have been correspondingly lower since then, the activities of weakly competitive pharmaceutical companies essentially shifted to circumventing the implementation of existing discount agreements through substitution in the pharmacy (Fig. 3) or . to question the instrument of discount agreements per se. For the latter, the following theses in particular are put forward:
1. Substitution with discounted medicines endangers the
Therapy safety
2. Drug discount agreements threaten the pharmaceutical industry
telstand
3. The dispensing of drugs through drug discount agreements makes prescriptions non-transparent for doctors.
AOK discount contracts from the patient's perspective
In addition to the long-standing possibility or necessity of doctors changing medication for medical or economic reasons, the legislator introduced the pharmacist's basic obligation to exchange medication in favor of the three cheapest, comparable medicines with the Medicines Expenditure Limitation Act (AABG) in 2002. Furthermore, with the GKV Modernization Act from the beginning of 2004, pharmacists were obliged to substitute medicines for which reimports are available. The replacement of one drug with another is anything but new. What is still unclear is the proportion of substitutions actually induced by discount agreements and their acceptance by the patients directly affected.
In order to provide more clarity here, a well-known opinion research institute commissioned AOK Baden-Württemberg to survey 5,715 AOK Baden-Württemberg policyholders at the beginning of this year about any medication changes and the corresponding reasons. As a result, 47 % of the insured persons who had been taking medication regularly for over six months were switched to other medications in the last two years. However, only 39 % of all drug changes could be traced back to drug discount agreements (Fig. 4).
Of the more than 3,000 insured people who had heard of the drug discount contract instrument, significantly more than half, namely 54 %, rated the drug discount contract instrument as good or very good. In contrast, a small minority of only 15 % respondents are negative about discount contracts (Fig. 5).
The result is even more positive for those insured who have already had experience of switching to discounted medicines. When asked which intervention in the health system might be viewed as an alternative to discount contracts, only 8 % preferred an increase in the GKV contribution rate, 12 % preferred cuts in services, for example in rehabilitation measures, and only 19 % preferred an increase the co-payments for medicines take precedence over discount contracts with possible changes to medicines. (Fig. 4).

The broad acceptance of the discount contracts underlines that, contrary to hasty claims from a more or less pharmaceutical-sponsored expert perspective (Hoffmann/Windt/Glaeske 2009), there are no visible losses in quality of care.
Effect of the AOK discount agreements on the
pharmaceutical medium-sized companies
As imitators of formerly patent-protected drugs, generic drug suppliers benefit from both a high reference price for the original drug and from the largely eliminated research costs, which has always enabled companies in Germany to have a very reasonable margin. Before the intensification of price competition through the instrument of discount contracts in conjunction with the pharmacies' obligation to substitute, generic competition often began with prices only approx. 10 % below the old original. Companies with strong marketing skills used the sales achieved in this way to expand their market share as quickly as possible after the patent expired by massively incentivizing doctors and pharmacies to prescribe their generics through monetary benefits or direct discounts. Product launches while patent protection was still in place – in return for a corresponding remuneration to the patent holder – as “early entries” were (and still are) common.
The basis for this extremely successful marketing by the dominant companies is the experience that the prescribing doctor can be made to switch from the high-priced old original to an “economical generic” much more easily than the switch from a higher-priced to a cheaper generic. This fact has been supported over the years, not least by the routinely undifferentiated use of the term generic, for example in pharmaceutical agreements between health insurance companies and associations of statutory health insurance physicians, in which the achievement of an agreed generic quota per se is defined as a cost-effectiveness goal. This has led to the price level of a generic being hardly questioned and even prices higher than the originals, largely unnoticed by the doctor and nevertheless prescribed.
As a result, the regulation of high-priced generics by companies with strong market and marketing power led to a progressive oligopolization of the market below high-price levels, while the market remained largely closed to smaller companies despite economic pricing (Fig. 6).
Against this background, it becomes clear that the instrument of substitution in the original version was far from sufficient. Only by activating the drug discount agreements with the creation of new social law framework conditions in favor of discounted drugs could this be fundamentally changed. Due to the conditional exclusive status of contractually discounted medicines in pharmacies, the market conditions were reorganized and, for the first time, in favor of smaller, economically offering companies (Fig. 7).
However, the remaining high market share of those companies that did not conclude a discount agreement remains remarkable.
As a result of the legislative incentive for discount agreements, the long-observable permanent growth in the market share of the leading pharmaceutical companies and thus the gradual ousting of smaller competitors from the market was permanently stopped for the first time (Fig. 8).
The changes in market access for new and smaller companies lead not only to an expansion of the market shares of established medium-sized companies but also to an increase in the number of providers. This can be clearly demonstrated by the development of blockbusters such as metformin, simvastatin or omeprazole (Fig. 9).
Relevance for doctors
In contrast to the substitution in the pharmacy that was common before 2007, only the substitution in favor of discounted products leads to the delivery of more efficient medicines to the health insurance company. The doctor can identify which drug this is or which drugs are eligible in the case of several discount agreements for an active ingredient in his practice management software - all providers of relevant software solutions are obliged to provide relevant information in accordance with Section 73 Paragraph 8 SGB V.
Based on the data available to him, the doctor is also able to directly select a discounted drug for the prescription. In order to promote compliance, the patient can sensibly be made aware of the specific prescription behavior of his or her practitioner in the doctor's office. If in a specific case the doctor insists on prescribing a non-discounted drug - for example due to the patient's allergy to an excipient - the doctor can, as before, exclude substitution in the pharmacy by labeling the prescription accordingly.
Conclusion
Since their introduction, drug discount agreements have developed into one of the most effective spending control instruments in statutory health insurance. When it comes to spending on pharmaceutical products, they are also the only competitive instrument available to market participants. With the establishment of the new incentive systems in 2007, encrusted market structures were broken, market entry was made easier for small and medium-sized companies and the oligopoly-like high price level of a few pharmaceutical companies was eliminated. From the patient's perspective, discount contracts are the method of choice, as the evaluation from the perspective of those directly affected shows. <<