healthcare market

Insurers Call for Brake on Drug Costs

The high price of drugs is challenging insurers.
  • Why it matters

    Why it matters

    The prices charged by drug makers are rising and insurers say they can’t afford to cover the medicines’ costs and that more regulation is needed.

  • Facts


    • AOK is an association of health insurers and covers 24 million people, one third of the German population.
    • Health insurance is compulsory in Germany and for the majority, the costs are shared between employers and employees.
    • The cost of medicines is rising as drug makers set the price for a year after approval; usually a lower price is then negotiated after an assessment.
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A report on the costs of medicine in Germany has led health insurers to threaten that if drug costs remain high, rationing may be necessary.

This is a question that politicians may soon be forced to consider, according to Martin Litsch, chief executive of public health insurer AOK.

“It’s the last thing we as health insurance companies want,” Mr. Litsch said. “But if the prices for patent-protected medications continue to rise so drastically, we’ll be pushing the boundaries of affordability.”

Health insurance is mandatory in Germany; costs are shared between employee and employer. Private health insurance is also available, used by 11 percent of people. As costs of healthcare rise, public health insurance schemes have rolled back some of the services they provide.

Mr. Litsch’s statement came in response to an annual report by a scientific institute of insurance funds and pharmacologist Ulrich Schwabe from the University of Heidelberg.

“We have rarely a boom like last year,” Mr. Schwabe said. In 2014, spending on medicines rose by over 10 percent and by a further 5.8 percent in the first half of this year.

Furthermore, 46 new drugs were approved last year, the highest number since the regulations for approval were set in 1976, according to clinical oncologist and chairman of the Drug Commission of the German Medical Association, Dr. Wolf-Dieter Ludwig.

New drugs are an important source of income for the pharmaceutical industry as manufacturers can set their own prices for a year after a drug is approved. They then negotiate with health insurers to set usually a lower price for the medicine based on an assessment of its benefits.

The pharmaceutical industry, long in crisis due to the high costs of developing new medicines, argues that this dry spell has ended thanks to innovation.

According to Mr. Ludwig, though, most drugs show little improvement on their predecessors –what is innovative is merely the price. One example is Gelead’s Solvaldi, used to treat Hepatitis C. Each therapy course costs €62,000, or $69,300 per course of therapy.


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