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CAP Report: German Prescription Drug Review Model Could Provide Insights for U.S. Market Improvements

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Contact: Tom Caiazza
Phone: 202.481.7141

Washington, D.C. — Recent reforms to Germany’s market-based prescription drug system could provide a framework for cost containment and higher quality outcomes for the U.S. market, a new Center for American Progress report finds. Under a newly implemented system, Germany’s prescription drug market—which contains many similarities to the U.S. market—balances market forces, as well as research on drug effectiveness to inform private-sector price negotiations in a way that lowers costs and improves health outcomes without sacrificing innovation.

“The prescription drugs markets in Germany and the United States have traditionally been strikingly similar,” said report author Daniel Bahr, a CAP Visiting Fellow and former German health minister. “The reforms Germany has implemented over the past few years show that it is possible to maintain an innovative marketplace, improve the effectiveness of new drugs, and lower costs for consumers.”

The report, “Comparing the Effectiveness of Prescription Drugs: The German Experience,” highlights recent German legislation that established an organized process to assess a new drug’s effectiveness over existing treatments to influence the price paid by insurers. Under the German system, drug companies set a price for their products but are then required to submit them for independent, nongovernmental analysis in order to determine whether the new drug is more or less effective than existing treatments. Those determinations then set the basis for private-sector negotiations over reimbursement rates. The first wave of negotiated drugs resulted in discounts of up to 70 percent for some drugs.

This system maintains the incentives for creating innovative and effective new drugs while offering opportunities to lower cost. With the Patient-Centered Outcomes Research Institute, or PCORI, charged under the Affordable Care Act with funding comparative effectiveness research in the United States, the German model serves as a strong example for how this research can make an impact.

Bahr will speak about the report and the German prescription drug system at Atlantic’s Future of Medicine: A Conversation on Cost and Value speaker series this morning, Wednesday, May 21, at 10:30 a.m. ET.  Click here to view the discussion.

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