Over the past decade, the German government has introduced a number of substantial health care reforms affecting the sales of pharmaceuticals. Germany uses a combination of cost control mechanisms to manage its national drug budget. Both negative and positive “Lists of Reimbursable Drugs” (comparable to open and closed formularies) are used in formulary management (Schöffski 1996). In addition, Germany uses office-based physician drug budgets and prescription copayments along with reference pricing. Office-based physicians receive an annual budget for drug expenditures based on the number of patients under their care. Similar to a capitation system, this regulation places physicians at financial risk for their prescribing behavior.
The German government uses reference pricing to help control prices for drugs for which there are exact or close substitutes on the market. The reference price system assigns covered products to one of three levels:
- Level 1: Those products with identically active substances.
- Level 2: Those products with pharmacologically similar active ingredients
- Level 3: Those products with similar therapeutic effects (therapeutic reference pricing)
In 1993, the government introduced further reforms that froze drug prices and set an aggregate cap on drug reimbursements. If expenditures exceed the cap, financial penalties could be imposed on the medical professional associations and the pharmaceutical industry. Evaluations of the reform found some dramatic effects. After the cap was imposed, physicians prescribed more generics, decreased their prescribing of products with unproven efficacy, and increased referrals to specialists and hospitals. The cap did not affect drugs administered in hospitals where specialists had a significantly higher cap. Use and price of drug products not covered by the National Insurance system also increased after the cap was imposed. Finally, some generic manufacturers increased their prices to the reference price level (Schöffski 1996; Lecomte and Paris 1998; Ulrich and Wille 1996; von der Schulenburg and Uber 1997; von der Schulenburg 1997; Drummond 1997; López-Casasnovas and Puig-Junoy 1999).
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