Aligning Cost With Benefit for Cancer Drugs: Success in Germany

Roxanne Nelson, RN, BSN

August 12, 2020

A major move to reform pharmaceutical spending in Germany has resulted in a closer alignment of the prices of cancer drugs with clinical benefit, according to a new study. The introduction of a policy whereby drug prices are negotiated 1 year after products are launched led to a nearly 25% drop in costs from when the drugs entered the marketplace.

There are lessons here for the United States, say the authors.

"The core of the German system — negotiating drug prices based on their comparative effectiveness — has been integrated into proposed federal legislation," said study author Ameet Sarpatwari, JD, PhD, instructor in medicine and assistant director of the Program on Regulation, Therapeutics, and Law in the Division of Pharmacoepidemiology and Pharmacoeconomics, Harvard Medical School, Boston, Massachusetts.

The study was published online July 7 in Health Affairs.

Legislation passed in Germany in 2011 permitted pharmaceutical manufacturers to freely set prices for newly authorized drugs for 1 year, after which prices would be negotiated. The authors assessed data on 57 new oncologic agents that were launched in Germany from 2002 to 2017, and then compared incremental health benefits and costs before and after the 2011 law took effect.

They found that in the period after passage of the German Pharmaceutical Market Restructuring Act (AMNOG), there was a significant association between overall or progression-free survival and incremental treatment costs after prices were negotiated.

These findings suggest that AMNOG was successful in linking prices to clinical benefit in a way "not previously observed."

There was no evidence that drugmakers responded to the law by setting higher launch prices.

Revamp the System

Cancer drugs are notoriously expensive, with costs continuing to escalate with each new product that comes on the market. Previous studies have shown that these high costs cannot be justified with respect to clinical benefit.

In Germany, pharmaceutical spending is among the highest in Europe, at $800 per capita, compared to an average of $517 (2016 figures) for Europe in general, although it is still are far lower than in the United States.

The launch of AMNOG was a response to steadily rising pharmaceutical spending. The goal was to align prices and reimbursement more closely with expected benefits while continuing to promote innovation.

Under AMNOG, the manufacturer can freely set the price for the first year the drug is on the market. At the same time, the drug is formally assessed by a nonprofit, nongovernmental research body, the Institute for Quality and Efficiency in Health Care, and by a regulatory agency, the Federal Joint Committee.

On the basis of this assessment, prices for drugs are then negotiated between manufacturers and the umbrella organization of German statutory health insurers.

"Most universal healthcare systems base coverage and reimbursement decisions on health technology assessments, similar to the appraisal done in Germany," Sarpatwari told Medscape Medical News. "However, some systems utilize comparative cost-effectiveness instead of comparative effectiveness, or require completion of the assessment process before entry to the market, such as in England (by the National Institute of Clinical Excellence)."

Some of these processes can lead to delays in access to the medications. "More generally, ongoing evaluation of the outcomes of each system are needed to inform whether certain components have better outcomes than others," he said.

Decrease in Cost

For their study, Sarpatwari and colleagues evaluated 57 new cancer drugs, of which 14 were launched before AMNOG and 43 during the AMNOG period. The average annual incremental cost at launch was $51,127 for the entire sample.

After AMNOG went into effect, costs were consistently lower than when the drugs launched. After negotiation, the average reduction was $14,242. This represents a relative decrease in costs during the period of benefit assessment and negotiation of 24.5%.

The authors also compared the growth in overall healthcare spending with that in pharmaceutical spending before and after AMNOG took effect. In the period prior to AMNOG (2004–2010), standardized healthcare spending increased by 23.6%, although the increase was much higher for pharmaceuticals — 32.5% for the same period.

After AMNOG was implemented (2011–2017), standardized overall healthcare spending and pharmaceutical spending grew at nearly the same rate (26.7% and 27.4%, respectively).

Could a similar system work in the United States?

Unless further policy changes are implemented, bringing a similar system of evidence-based price negotiations in the United States would not likely lead to the same changes in oncology drug prices as those in Germany, the authors comment.

That said, Sarpatwari pointed out that some change is already taking place in the United States.

"Most notably, the Elijah E. Cummings Lower Drug Costs Now Act, passed by the House in December 2019, would authorize Congress to negotiate prices for up to 250 of the costliest brand-name drugs for Medicare and the private market using comparative effectiveness as one of several factors in determining a maximum fair price," he said.

"Some states, too, have adopted comparative effectiveness as a criterion in determining supplemental rebates to request from drug manufacturers in Medicaid," he added. "Greater voluntary embrace of rigorous and transparent comparative effectiveness analyses by state and private payers to inform coverage decisions would go far in realizing some of the benefits of the German system in the US."

Approached for comment, Alice Chen, PhD, health economist at the Schaeffer Center, University of Southern California, Los Angeles, explained that one of the key components of the AMNOG system is estimating the expected treatment benefits. "However, identifying the value of new drugs can rely heavily on metrics used," she told Medscape Medical News.

"For example, we have shown that value of new cancer drug approvals in the US actually aligns with cost when measuring value by mean survival gains, as opposed to median survival gains, which only considers half of the patient population," explained Chen, referring to an article she coauthored last year (Value Health. 2019 Dec;22:1387-1395). "In other words, longer-term survival gains have kept up with the prices.

"Similarly, how the German Federal Joint Committee assesses drugs within AMNOG will matter a lot," she said. "While the system can keep prices lower, there is a risk for potentially effective drugs to be withdrawn because they are evaluated using metrics different than clinical guidelines."

Implementation of a value-based pricing solution on a wider scale requires accurate value assessments across all factors, such as the use of appropriate clinical endpoints and comparators, Chen added. "This ability to assess drug value has created some concern in Germany, and we have shown in our research that value-to-price comparison can vary significantly depending on what metric of value is used."

Coauthor Victoria D. Lauenroth has been employed with AstraZeneca Germany since October 2019, after the initial manuscript was submitted but before revisions were finalized. Aaron S. Kesselheim and Sarpatwari are supported by Arnold Ventures and the Harvard-MIT Center for Regulatory Science. Ariel D. Stern is supported by the Kauffman Junior Faculty Fellowship. Chen has disclosed no relevant financial relationships.

Health Aff. Published online July 7, 2020. Abstract

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