//Pricing of drugs – at what cost?

Pricing of drugs – at what cost?

We go into a doctor’s office and leave with a diagnosis and a prescription. Next we stop by the pharmacy. In Germany, if your insurance is not private, you mostly don’t even know the price of your drug because it’s paid for directly by your insurance. You only notice the 5-10 Euros copay.

But how is a drug priced in Germany? And (how) does data play a role in helping pharma secure an attractive price point?

Let’s fast forward directly to the launch of a new drug. At the time of launch, the pharmaceutical company has to present patient level evidence of the drug’s added value compared to existing comparative therapies. In the first year, however, the drug’s price can be defined freely by the company. 

The added value is verified by the Federal Joint Committee (short G-BA: which is the highest decision-​making body of the joint self-​government of physicians, dentists, hospitals and health insurance funds in Germany) within the first three months on the market. The Federal Joint Committee then decides if this particular drug is superior to similar, already marketed substances or not.

The goal of any pharmaceutical companies is, of course, to demonstrate added benefit. Because after three further months on the market a negotiation about the drug’s price starts. In this case the chance of keeping the drug’s first year price is high. Entering other markets successfully and being profitable looks promising.

If no added value can be found, pharmaceutical companies have to adapt to a lower fixed price based on the substance category their drug is assigned to. There will be no price negotiation and the drug may face further price decrease in the future. Pharmaceutical companies may start evaluating the profitability of the drug in the market.

Added value can include shorter hospital stay-ins, less side effects, less pain and aspects that influence a patient’s or patient group’s quality of life positively. 

Already in the US, many high cost therapies are reimbursed under outcomes based contracts. By 2018 alone, 43 contracts became public for drugs such as Enbrel, Kymriah and Rebif (1). Experts think this is only the tip of the iceberg. And it’s a new challenge for pharma. “Inability to measure outcomes” is cited as the number one hurdle to successful contracts by pharma executives (2). If you look to e.g. the UK, It is safe to say data will play an important role in pricing arguments and the commercial success of a drug. 

Quickly and reliably collecting real world evidence is increasingly becoming a critical success factor for pharma’s commercial success. 

Preview: How pharma can collect much need real world evidence while staying on top of adverse events reporting

Stay connected, stay healthy!


P.S.: Ariana can provide you with real time patient data  – get in touch to learn how she does it.


  1. PhRMA (2018). VALUE-BASED CONTRACTS: 2009 – Q2 2018. (http://phrma-docs.phrma.org/files/dmfile/PhRMA_ValueBasedContracts_Q2.pdf
  2. PhRMA Member Survey Results (2017). Barriers to Value-Based Contracts for Innovative Medicines. (https://www.statnews.com/wp-content/uploads/2017/03/PhRMA_ValueBased_MemberService_R23.pdf)