European Union: Germany: Recent Developments in Pharmaceutical and Reimbursement Law

According to the Clinical Trials Directive¹ the Member States shall implement and put into force laws, regulations and administrative provisions necessary to comply with the requirements of the Directive by 1 May 2004. Germany has still not met this obligation which was expected to be met through enactment of the Twelfth Act on the Amendment of the Drug Act (Zwölftes Gesetz zur Änderung des Arzneimittelgesetzes - 12. AMG-Änderungsgesetz). The German Federal Council (Bundesrat) has rejected the bill and has called the conciliation committee. It is now unclear when the transposition of the Directive will take place. Moreover, following the German Healthcare Reform, there have been some changes to the rules on dispensing of medicinal products by pharmacies. Finally, the self-regulated Marketing Code of the leading research-based German pharmaceutical companies has recently come into force.

This article reviews these developments in pharmaceutical and reimbursement law and marketing practice.

The main focus of the 12th Amendment to the German Drug Act is the implementation of the EU Clinical Trials Directive. In particular, the amending law would make changes to the existing Drug Law in the following areas:

• For any clinical trial including Investigator Initiated Trials (IITs), both a positive opinion of an ethics committee and the approval of the competent federal authority (Bundesinstitut für Arzneimittel und Medizinprodukte, BfArM or the Paul-Ehrlich-Institut, PEI) would be necessary.

• GCP-, GLP- and GMP-inspections of the competent federal authority would be possible and planned.

• The competent federal authority and the ethics committee would work equally and independently.

• The application to the competent federal authority would have to contain a substantial dossier with details about the study drug, its quality, manufacturing steps and manufacturing authorization.

• Clinical trials would also be able to be carried out by non-physicians if they have an adequate scientific qualification.

• Clinical trials with minors would no longer need to be justified by a potential benefit for the individual. A potential benefit for the group of minors suffering from the same disease would be sufficient.

• Clinical trials data would be transferred to a centralized EU-database.
• A mandatory final report would have to be prepared within one year of the completion of a clinical trial.

The new drug law would have a great impact on all clinical trials in Germany.

In order to curb cost expansion and reduce costs of supplying medicinal products within the German Public Health Care System, Social Security Code V stipulates several reimbursement restrictions. As regards the dispensing of medicinal products by pharmacies, the obligation on generic substitution and the requirement to supply parallel imported pharmaceuticals are the most significant restrictions.

At the beginning of 2004 the Law on Modernisation of the Health Care System entered into force. The law brought a wide-ranging reform on the Healthcare System as well as changing the existing provisions on generic substitution and dispensing of parallel imports. However, the legal provisions of the Social Security Code V only provide basic rules. The important details of the new obligations are to be set by a framework agreement between the federal associations of public health insurance funds and the German Pharmacies Association. Since the former framework agreement has been terminated a new framework agreement will come into force at the beginning of June.

Although the general concept of both reimbursement restrictions remains, there are some significant changes. According to the Social Security Code V and the new framework agreement the rules in respect of generic substitution and the dispensing of parallel imports are as follows:

Physicians are required to prescribe pharmaceuticals by using the generic name of their active substance. However, clinical freedom allows physicians to choose a specific medicinal product and prescribe a brand. In the case that a physician does not expressly exclude generic substitution, the pharmacists in general are legally obliged to dispense a cheap version of the active substance.

When a pharmacy receives a prescription for a reimbursable medicinal product the pharmacist has to dispense a product according to the following rules:

• If the physician prescribes a pharmaceutical using its brand and, in addition, expressly excludes generic substitution, the pharmacist is obliged to hand out the specific brand.

• Where the physician prescribes a brand but does not exclude generic substitution, the pharmacist has the following choice: he may dispense the prescribed brand or one of the three cheapest pharmaceuticals which are comparable as regards packaging size, area of indication and dosage form.

• If the prescription only provides for the generic name of active ingredient, the pharmacist has to dispense one of the three cheapest pharmaceuticals containing this ingredient.

The rules show that offering one of the three cheapest pharmaceuticals of a comparable group of substances may help to increase sales. On the strength of past experience, physicians often prescribe a brand and expressly exclude generic so that pharmacies are not requested to dispense a cheap version. However, the importance of the rules on generic substitution should not be underrated.

In order to exploit the price advantage which parallel imports are expected to have, Social Security Code V provides an obligation for pharmacists to dispense parallel imports instead of originals. Whereas the previous version of the Social Security Code V did not stipulate requirements on the price of parallel imports, the dispensing of parallel imports was required, if an imported pharmaceutical only had a marginal price advantage. Now, the pharmacists' obligation to dispense imported products only applies for imports which are significantly cheaper than the prescribed original. In detail, imports must at least be 15% or E15 cheaper than the original.

In order to force pharmacists to comply with the rules parallel imports must account for 5% of the turnover of a pharmacy. The framework agreement sets out a specific parallel import quota of a pharmacy's turnover. If a pharmacy does not reach this quota, its reimbursement claim is - to a specific rate - cut by the health insurance funds.

On February 16, 2004 the members of the German Association of Research-Based Pharmaceutical Companies (Verband Forschender Arzneimittelhersteller e.V ("VFA")), a trade organisation of 41 leading research-based German pharmaceutical companies, founded the Registered Association for Voluntary Self-Control of the Pharmaceutical Industry (Freiwillige Selbstkontrolle für die Arzneimittel-Industrie e.V.). The new Registered Association is meant to prevent corruption and safeguard industry's compliance with the rules of conduct for cooperation with physicians. In order to enable the Registered Association to fulfil its function, an Anti- Corruption-Code ("FS Arzneimittel-Industrie"- Kodex) has been adopted by the members of the new association as well as Procedural Rules ("FS Arzneimittel-Industrie"-Verfahrensordnung) for proper enforcement of the Code. The terms came into force in Germany in April 2004, after the approval of the German Federal Cartel Office.

With the anti-corruption scheme, the pharmaceutical industry has avoided the establishment by law of an official anti-corruption agent. The first draft of the healthcare reform, which was enacted on 1 January 2004, arranged for such an official agent. The agent was meant to combat misuse and corruption within the German Healthcare System. The Federal Ministry of Health withdrew this plan after the VFA offered to establish an efficient self-regulatory scheme. The new private association, its anticorruption code and the additional procedural rules will establish a new private unfair competition and corruption body which will work independently of the court's assessment of business conduct in the pharmaceutical industry.

The Anti-Corruption Code sets out rules of conduct for cooperation between the pharmaceutical industry and physicians. It contains provisions such as dealing with presents for physicians, business entertainment, lottery advertising, invitations to vocational training sessions, drug monitoring contracts and other forms of contractual cooperation. The rules mainly emphasise current lawful business behaviour. Thus, the contents of the Anti-Corruption Code is not revolutionary. The procedural rules provide a process as to how infringements of the Code can be pursued and fined. The alleged infringements of the Code can be brought before an arbitral committee of the new Association. The application can be filed by any natural or legal person. The new arbitration system consists of two levels. In the first instance it is entitled to impose a fine up to E 50,000 on the infringing company. In the second instance it may impose fines of up to E 250,000 - far higher than those of the administrative, and usual, court fines. In addition, in the second instance the arbitration system is entitled to issue a public condemnation in the case of serious infringements.

Although the new Association was founded by the members of the VFA, any pharmaceutical company can join. The terms of the Code and the Procedural Rules are only binding on members. The above mentioned fines therefore can only be levied on members of the association. However, the Arbitral Committee of the new Anti-Corruption Association is - as a guardian of German competition rules - entitled, by the Unfair Competition Act, to pursue unfair competition actions before the German courts on the basis of the Unfair Competition Act. As the Act applies to all market participants, including nonmembers of the Association, they may also face action by this new arbitration system.

Footnote

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