Starting in February 2006, a wave of health care cost-containment reforms swept through Germany, designed to deliver Û1.0 billion in 2006, rising to Û1.3 billion in 2007 and 2008. A further far-reaching package was agreed in July 2006 to restructure the financing of health care and create a more cohesive, uniform system.

These reforms impact the German pharmaceutical market in a number of ways and include a stronger role for IQWiG (Institut für Qualität und Wirtschaftlichkeit im Gesundheitswesen) in the evaluation of new drugs and technologies. Frank-Ulrich Fricke, Principal, HEOR at IMS Health, examines the implications of this change and unfolds the new map that may help to guide pharma across an unfamiliar landscape.

From 2008, after the amendment of its methodologies IQWiG - an independent foundation broadly equivalent to England's NICE (National Institute for Health and Clinical Excellence) - will be able to conduct cost-benefit assessments, initially on drugs considered 'high-profile'. This is in addition to its previous remit for evaluating clinical benefit.

From that point on, Germany will join a growing number of countries - the USA included - where pharmaceutical products are measured with an economic slide-rule before a penny of statutory health insurance funds is made available to procure them. The only difference being that in Germany a product will gain market access first and then be assessed for subsequent restrictions or withdrawal of prescribability. IMS currently estimates that up to Û140bn of annual global pharmaceutical sales are subject to some form of economic evaluation.

By satisfying IQWiG's criteria, a drug can be prescribed via the statutory health insurance thereby allowing access to a wider prescription market. Failure to demonstrate efficiency gains is likely to limit the market to those citizens and private health funds that are willing and able to pay up to the full prescription price.

IQWiG carries out its work at the behest of Der Gemeinsame Bundesausschuss or Federal Joint Committee (G-BA). The G-BA - part of the selfgoverning body that oversees the German health care system - is institutionalized as a legal entity under public law. However, it does not have responsibility for the licensing of drugs, which is the preserve of the Federal Institute for Drugs and Medical Products (BfArM). G-BA likens its role to being the "eye of the needle" through which a new drug or method must pass to gain a positive evaluation in terms of benefit and efficiency, before qualifying for reimbursement in outpatient care from the statutory health insurance (SHI) funds.

Together IQWiG and the G-BA act as the muscular gatekeepers of the health care market in Germany. Convincing these organisations that a new treatment offers improved value for money over existing interventions has become the key to commercial success.

IQWiG assessments of new drugs, other interventions, current marketed drugs and additional measures that may have a relevant budgetary impact on the SHI, are typically commissioned by the G-BA and serve as a basis for a number of important decisions. These include whether to include a drug in a reference pricing group, the prescribability of drugs for SHI members, and treatment guidelines. In addition, based on an IQWiG assessment and according to the law, the head association of the sick funds must set a maximum reimbursement price.

The IQWiG assessment will be based on its own pre-defined criteria which together with its data sources will be set out early on in the process in a 'report plan'. This is published as part of IQWiG's operational procedures which also involve a 'draft report' ahead of a 'final report' for the G-BA. To complete the process the G-BA then conveys its recommendations to the Ministry of Health (BMG). The role of the Ministry is only to consider whether the decisions taken by the GBA are legally robust.

The Current Situation
 IQWiG is currently preparing its new assessment methodology paper and is expected to finally announce the selected methodologies, (Version 3) in Q4 2007. This will allow pharma companies very little time to prepare for assessments beginning in 2008.

Statements emanating from IQWiG and G-BA officials suggest that the new process may involve a health benefit assessment as the first step (as before). If no such benefit is perceived, then no cost-benefit assessment will be conducted. If, however, there is believed to be benefit over existing treatments then a cost-effectiveness analysis will be conducted as the next step.

To determine whether any new drug offers a health benefit gain, comparisons will be made with the current care regimen for patients within the SHI sector defined in the report plan. Based on current IQWiG practice, many health benefit assessments, but only a few cost-benefit assessments, can be expected - mainly because so far very few evaluations have revealed additional benefits from new therapies.

New treatments that are innovative, high-profile, expensive, and likely to be in demand by a large number of patients are the most likely G-BA targets for an IQWiG assessment. Staying 'off the radar screen' of the G-BA and other institutional players in health care may therefore become a strategic necessity for some pharma companies in Germany. Quite what constitutes 'expensive' is not defined by IQWiG, but it is likely to be a highly moveable threshold.

Cost-effectiveness According to IQWiG
 Also unclear is what form IQWiG's technical costbenefit analysis will take. However, the following 'good practice' guidelines can be expected to influence its final shape:

• Recommendations of the Panel on Costeffectiveness in Health and Medicine

• Published guidelines for authors and peer reviewers of economic submissions to the British Medical Journal

• New England Journal of Medicine policy on cost-effectiveness analyses

• Set of German recommendations on the conduct of economic evaluations

IQWiG is also consulting a number of international experts regarding the potential methodology - although again it is unclear on what basis these 'experts' were selected.

New Imperative: Demonstrating the Value of Medicines
To succeed in the reformed German health care market pharma companies must focus on a range of short- and long-term solutions that provide a clear pathway through an IQWiG assessment. In particular, they will need to revisit reimbursement and market access processes.

In the past, pharma companies could, following market authorization, market their product, set the price and receive full reimbursement. This will change. With the new processes in place they can still set the price but they will need to assess the likelihood of an IQWiG/G-BA approval. Developing health economic information, including a health technology evaluation, and preparing thoroughly for an IQWiG assessment is therefore essential. For some companies it will call for a new set of skills and techniques.

What is also emerging is the opportunity for pharma managers to engage with IQWiG during the assessment process which will begin with IQWiG conducting a scoping workshop and inviting stakeholders to comment on the extent of the assessment. As a next step, consultations on the report plan will be held, followed by hearings on the draft reports. In between, evidence available to be included in the assessments will be discussed informally. To be prepared for these “encounters” pharmaceutical companies should compile the evidence available and potentially produce a parallel Health Technology Assessment (HTA) of their own, based on internationally accepted standards (INAHTA or DAHTA) and written by specialist authors.

Judging by the proposed IQWiG 'report plan' for the assessment of a particular treatment, pharma managers will need to compare the suggested population, intervention, comparator and outcomes of mortality, morbidity and quality of life with their own notions about their product. They should also evaluate the criteria for study/article evaluation selected, as well as the deployed search algorithm. This can be done best by comparing the report plan with an HTA.

IQWiG's assessment process may last 12 months or longer and managers will need to follow this closely, especially with regard to publication of the draft report. This is issued with an invitation for comments which will be subsequently discussed at a private hearing with IQWiG. Thorough preparation is essential, based on available evidence, but the timescale for turnaround is short - a mere four weeks.

IQWiG's final report should take into account revisions agreed at the draft report stage but there will be no scope at this point for a further appeal to IQWiG regarding the final report it submits to the G-BA.

The next opportunity for an appeal is directly to the G-BA once their decision has been made. Appeals can challenge the reference pricing group set, the treatment guidelines laid down and any prescribing exclusions from SHI funds. If this proves unsuccessful, a final challenge can be made and the case heard before the Social Courts. A successful challenge may mean referral back to the G-BA for reconsideration. In the meantime, the product in question remains on the market and the manufacturer can establish the brand. Thus, although the delay of the assessment can benefit the product, the process will nevertheless incur additional costs.

Early Planning Critical
Companies hoping to supply pharma products in Germany need to start looking for the positive economic impact of their new healthcare intervention, early in their development process. In doing so, they should consider patient potential, current pathways of care, and the financial impact of the illness. From this analysis they will need to develop strong value hypotheses as well as demonstrate the clinical difference their new treatment will make. All this will need to be translated into financial terms.

For the major international Pharma companies such a process is likely to fit in with current best practice; for others some procedural adjustments will be required. But even such a rigorous approach might not be sufficient to secure prescribability, potentially resulting in the need to consider discount pricing. However, this may not be quite as damaging as it first sounds.

Discounting
The Social Code makes provision for manufacturers and sickness funds to agree discount contracts and most of the statutory health insurance funds have these contracts in place. For Pharma, an attractive feature of this scheme is that discount contracts do not affect public or reference prices across the rest of Europe. In other words, a discount in Germany does not mean a discount elsewhere in Europe.

Recent experience in Germany shows that such discount contracts can be an effective way of either staying on the market (short acting insulin analogues) or entering the market (generics). By establishing a discount contract with a sickness fund, those companies marketing generics have been able to gain market share and, in some cases, gained a handsome dividend. Patients, too, benefit from the discount schemes not only in terms of access to treatments they would not otherwise have but also because the presence of a discount contract enables sick funds to release their patients from co-payments.

Patients and Prescribers - An Alternative Scenario
Where pharma companies are unwilling or unable to negotiate a discount contract, one effect of the economic belt-tightening reforms may be to limit the toolkit available for prescribers and reduce the choice of treatment for patients. This, in turn, may further differentiate the quality and quantity of care, with those who are privately insured and/ or willing to pay more out of pocket having access to those treatments which are more in line with their individual preferences and potentially more expensive.

Public reaction to this will in part depend on the media attention attracted by IQWiG's work and the strength of the patient lobby. The patient's perspective - particularly in terms of health endpoints that describe a patient 'feeling better' - is not fully considered by IQWiG. Over time such neglect may lead to public dissatisfaction with the changes to the health care system putting reforms once again on the German health policy agenda.