Pricing and Reimbursement of Medicinal Products

Legal Regulations Governing Drug Pricing and Reimbursement

In Germany, drug pricing and reimbursement are governed by law. The goal is to provide early access to innovative therapies while ensuring cost-effective and sustainable financing through the statutory health insurance system. The key guiding principles are cost control, security of supply, and patient-relevant medical benefit. Different pricing mechanisms are applied depending on the type of medicinal product, its degree of innovation, whether it has a patent or data protection, and the market and competitive landscape. There is a highly formalized regulatory framework for pharmaceuticals that links various levels of price regulation.

In addition to benefit assessment and reimbursement amount determination, pharmaceuticals are subject to legal requirements that influence pricing throughout the distribution chain. Notably, these requirements include the Pharmaceutical Price Regulation, which governs wholesalers’ and pharmacies’ markups and margins, as well as legally mandated manufacturer discounts. These mechanisms operate independently of the benefit assessment outcome and significantly impact actual revenues. Germany plays a special role in this regard because pricing and reimbursement decisions made here are often used as a global reference.

Figure 1: Negotiated settlements in previous proceedings

Reimbursement amounts for drugs with new active ingredients under Section 130b of the German Social Code, Book V (SGB V)

In Germany, drugs with new active ingredients are subject to the early benefit assessment procedure under the AMNOG. Following market launch, the manufacturer may initially set a freely chosen retail price, which remains valid until the sixth month after market launch. At the same time, the Joint Federal Committee (G-BA) evaluates the patient-relevant added benefit of the drug compared to an appropriate comparator therapy, provided it is not an orphan drug.

The result of this benefit assessment forms the central basis for the subsequent price negotiations with the National Association of Statutory Health Insurance Funds (GKV-Spitzenverband), in which the reimbursement amount is agreed upon. The reimbursement amount is negotiated depending on an orphan drug status, the extent of the added benefit, and the type of appropriate comparator therapy. For drugs without evidence of additional benefit, the reimbursement amount is based on the appropriate comparator therapy or existing fixed-amount groups. Similarly, the G-BA may determine that the drug can be administered in combination with another preparation, which may result in a combination discount pursuant to Section 130 SGB V. Furthermore, research activities in Germany can have a positive impact on the negotiations.

You can use our AMNOG questionnaire to get an initial idea of the pricing conditions under the AMNOG that might apply to your product—for example, in the case of unproven added benefit.

Reimbursement of generic drugs, including fixed amounts (Section 35 SGB V) and discount agreements (Section 130a, c SGB V)

Once a patent expires, generic drugs can enter the market, leading to intense price competition. For many of these drugs, fixed-amount groups are established, thereby setting a maximum reimbursement. Manufacturers are under even more economic pressure because they must cover the costs of products that cost more than a set price.

In addition, health insurance companies enter into discount agreements with pharmaceutical companies to further control their drug expenditures. These agreements significantly influence prescribing and dispensing practices in pharmacies and have a substantial impact on market shares, sales volumes, and revenues.

The specific structure of fixed-amount groups and discount agreements thus plays a decisive role in shaping market conditions in the generic drug market.