German rebate exemptions under threat
This article was originally published in Scrip
Exemptions for struggling pharma companies from the obligatory rebates that all firms must offer German health insurers are under scrutiny from the European Commission. The commission has opened an investigation into the opt-outs, claiming they could be in breach of EU guidelines on state aid for rescuing and restructuring companies in financial difficulties.
The findings could set an important precedent on whether the EU's Transparency Directive can be trumped by the state aid guidelines, according to Matthias Heck, who heads the Brussels office for the BPI, the German pharmaceutical industry association.
Back in 2010, German authorities increased the mandatory rebate that companies must give public and private sick funds from 6% to 16% in a bid to save €1.2bn a year. In addition, a price freeze was introduced to stop companies getting around the rebate hike. However, firms in financial difficulties were able to apply for an exemption from the rebates and freezes. The hike, price freeze and the exemptions were all in line with the EU's Transparency Directive on pharmaceutical pricing and reimbursement.
However, after a complaint from an unnamed pharmaceutical company, the commission has opened an "in-depth investigation" into the exemptions and whether they are in line with the state aid rules. It believes that the exemptions constitute state aid because they impact the state's resources by upping costs to public health insurers. These insurers get the bulk of their funding from a central pot of money financed through tax.
All state aid for restructuring and rescuing companies must comply with the state aid rules, says the commission. At the moment, it thinks that the German exemptions fall down on two points: that the aid is not granted on the basis of a restructuring plan; and that the aid is not limited in time.
So far BAFA, the body in charge of awarding the exemptions, has only awarded them to 10 companies, mostly to smaller, local firms: Bencard Allergie, Inopha, Isopharm, SpePharm, Concept Pharma Vertriebs, Hal Allergie, Schur Pharmazeutika, Tussin Pharma, Veron Pharma Vertriebs and docpharm Arzneimittelvertrieb.
That there are only ten cases shows that BAFA is looking closely at the applications and that it is reasonably strict in its approach, according to Mr Heck, who has heard of a number of companies being turned down for the exemptions.
Moreover, he is surprised that the commission is arguing that the exemptions are not limited. He points out that BAFA's summary of exemptions clearly shows that definite start and end dates for the exemptions. In addition, BAFA's exemption guidelines stipulate that the exemptions are finite and that they are reassessed every year to make sure that the company still meets the exemption requirements.
Mr Heck believes the exemptions are important for companies, and that those which have so far benefitted Companies could be forced to pay back state if the commission finds against the rebate.
The rebates have proved very unpopular with industry, and last year alone cost companies €2.5bn (scripintelligence.com, 30 January 2013). They were supposed to come to an end at the end of 2013, but debate about whether they should be extended further is ongoing, and any definitive decision is unlikely to come before the general elections later this year.