Just two years after the GKV-WSG (Statutory Health Insurance Act) came into force, discount agreements between pharmaceutical companies and health insurance funds have become an established standard in the German healthcare system. While the discount rate was still 27.2 percent in January 2008, by May 2009, every second prescription was already discounted (48.9 percent). In terms of expenditures (based on pharmacy selling prices – AVP), the discount rate is even significantly lower at 24.5 percent. This discrepancy is primarily due to the fact that patented and therefore more expensive drugs are still only included in the discount scheme in exceptional cases.

> As of May 2009, just 4.4 percent of prescriptions in the patent-protected area were discounted. There has also been no significant increase in the discount share in this market segment over the past two years. Short-acting insulin analogues still account for a large portion of discounted prescriptions in the patent-protected area (88.5 percent). The share of discounted original products for which patent protection has expired was 16.8 percent in May 2009. This corresponds to 12.4 percent of expenditures for original products. These figures suggest that discount agreements are not yet perceived as particularly attractive in this segment. However, at the end of 2007, just 2.6 percent of all original products were discounted.
For biosimilars – the successor products to biopharmaceuticals whose patent has expired – every second prescription and every second euro sold is discounted. When interpreting these figures, however, it should be noted that this market segment accounts for only 0.2 percent of statutory health insurance pharmaceutical expenditures.
The majority of discounted prescriptions fall into the generics segment. 72.1 percent of all generic prescriptions were discounted in May 2009. This figure does not yet include the recently implemented discount agreements of the Allgemeine Ortskrankenkassen (AOK) (General Local Health Insurance Funds) from the third AOK tender round for 63 active ingredients, which began on June 1, 2009. The announced AOK tender for 2010/2011 will also further increase the discount rate, especially in this market segment.
AOK tender
2010/2011 - over up to
94 active ingredients
In a preliminary information notice published in the Supplement to the Official Journal of the European Union on June 24, AOK announced that it will launch a tender procedure for up to 94 active ingredients and combinations of active ingredients on August 17. As with the last tender, each active ingredient will correspond to a specific lot, for which five regional lots will be created. The planned start of the new discount agreements is January 1, 2010.
The volume of the new AOK tender is once again by no means negligible and will lead to further distortions on the manufacturer side: Between May 2008 and April 2009, almost 45 million packages of the 94 active ingredients (excluding the excluded dosage forms) were prescribed to AOK policyholders. This corresponds to a dispensing volume of approximately €1.5 billion based on current pharmacy selling prices. By comparison, the volume of the 63 active ingredients in the last AOK tender is approximately 99 million packages, with a dispensing volume of approximately €2.3 billion. Accordingly, the new fourth tranche tends to include more expensive active ingredients.
Among the 94 active ingredients are 17 of the 22 active ingredients for which discount agreements were concluded for 2008/09 from the second AOK tender. In addition, there are two active ingredients, clopidogrel and fentanyl, each accounting for approximately €150 million in pharmaceutical expenditure within the AOK, and pantoprazole, which only recently became generic. Adding together the volumes from the third and fourth tenders, approximately 70 percent of the AOK's generic-eligible market segment (generics, originals, and biosimilars) will be subject to discounts in 2010.
The range discount agreements of the individual AOKs are not yet taken into account here (see Fig. 2).
Further tenders
in the starting blocks
Other health insurance providers such as KKH Allianz, Deutsche BKK or spectrum|K – a joint venture of company health insurance funds and their regional BKK associations – have also announced or recently published significant EU-wide discount tenders.
For example, on July 15, 2009, the Techniker Krankenkasse (Technical Health Insurance Fund) issued a tender for 89 active ingredients or combinations of active ingredients across the EU, corresponding to a spending volume of approximately €465 million. Pharmaceutical companies now have until September 7, 2009, to submit their bids for the lots. The Techniker discount agreements are scheduled to begin on April 1, 2010. As early as March of this year, the Federal Insurance Office (BVA) called for discount agreements concluded without a tendering process to be terminated as soon as possible and for a new tendering process to be put out to tender across the EU. It can therefore be assumed that at least new discount tenders will be implemented using an EU-wide tendering process. Currently, only 4.2 percent of discounted prescriptions and a mere 1.7 percent of discounted prescription sales (according to the AVP) are attributable to tenders.
Various points of criticism
Despite the successes proclaimed by AOK, the actual effects of the discount agreements remain unclear. The amount of financial expenditure incurred as a result of discount agreements is just as unclear as the amount of savings realized by the granted discounts for the health insurance companies. Given the sometimes quite different starting situations (significantly less market power, different tender details, etc.), it can be assumed that the discount agreements differ considerably in terms of their financial impact. In other words, not every health insurance company can benefit from discount tenders to a comparable extent.
This does not take into account all other cost-relevant factors, such as the transaction costs of the discount agreements themselves or the costs of ensuring treatment compliance on the part of doctors and pharmacists. For example, in Bavaria, the AOK (General Health Insurance Fund) and the State Association of Pharmacists have agreed on a so-called "compliance bonus." This amounts to between €0.65 and €1.00 (including VAT) per dispensed discount-contracted drug and is to be paid by December 31, 2009. Discount agreements are met with a negative response not only from many generic drug companies, but also from other players in the healthcare market for various reasons. Recently, for example, the Federal Cartel Office described the discount agreements of the Allgemeine Ortskrankenkassen (General Local Health Insurance Funds) as a threat to the German medium-sized generic drug industry. The Federal Cartel Office criticises the fact that the AOKs can enforce prices through the collective conclusion of discount agreements that would not be possible in a market economy, but that the Federal Cartel Office cannot take action against this because the legislature has exempted health insurance funds from the ban on cartels in this area.
Another criticism is that the system's purely short-term cost orientation neglects sustainable health promotion. This leads to increased cost burdens for the healthcare system in the medium to long term, as certain health problems could otherwise be avoided with appropriate prevention and support (and increased patient compliance).
While some research-based pharmaceutical manufacturers are currently testing various models of direct contracts with individual health insurance funds, which aim to achieve cost savings through discounts as well as improved healthcare for insured members, such models do not yet appear to be comprehensively considered in the generics sector. Possible options include indication-based contracts coupled with additional healthcare services. However, this requires a willingness to enter into new cooperation models – both between the manufacturers themselves and between manufacturers and other healthcare providers.
Although discount contract developments are now being closely monitored by many stakeholders in the healthcare market, scientific support is lacking in most cases. Health services research is tasked with evaluating the various forms of discount and value-added contracts in terms of costs and benefits and, based on the results, developing new contract models that also contribute to improving patient care. Discount contracts have paved the way to some extent in this regard by bringing pharmaceutical manufacturers and health insurers into closer dialogue. This foundation could be built upon by involving other healthcare partners in the contracts. However, concrete health services research projects are still lacking in this area.
by: Christian Bensing /
Dr. Andre Kleinfeld

Infobox: Short-acting insulin analogues
The discount on short-acting insulin analogues is based on a cautious assessment of the additional therapeutic benefit compared to human insulin by the Federal Joint Committee (G-BA) and the Institute for Quality and Health (IQWiG). In September 2006, the G-BA ruled that short-acting insulin analogues could only be prescribed at the expense of health insurance funds if the costs did not exceed those of human insulin therapy. This resulted in cost-sharing discount agreements being concluded between manufacturers and health insurance funds.