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Sascha G. Wolf, Development of Drug Expenditure in:

Sascha G. Wolf

Pharmaceutical Expenditure in Germany, page 46 - 48

Future Development, Political Influence and Economic Impact

1. Edition 2009, ISBN print: 978-3-8329-4164-2, ISBN online: 978-3-8452-2005-5 https://doi.org/10.5771/9783845220055

Series: Neue Studien zur Politischen Ökonomie, vol. 6

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46 the attained results correspond with empirical observations. Finally, section 3.7 will state the conclusion. 3.2. Development of Drug Expenditure With around € 25 billion, the drug sales volume29 of the “German Statutory Health Insurance System” (SHI) once again reached a record high in 2005.30 Between 1983 and 2005 drug disbursements have increased by more than 230 %. In contrast, German GDP has increased by only 160 % (nominal values). Especially within the last decade, the drug expenditure development has become more dynamic. As a consequence the ratio of drug expenditure to total SHI expenditure has grown from 13.9 % in 1993 to 17 % in 2005. The comparably strong rise of drug costs motivated the legislator to introduce a series of reform acts and to establish a complex regulatory framework.31 Figure 3.1 delivers an overview of cost development and the most important reforms. Figure 3.1: SHI Drug Expenditure 1983 - 2005 and Health Care Reform Acts (selection). 100 150 200 250 300 198 3 198 5 198 7 198 9 19 91 19 93 19 95 19 97 19 99 20 01 20 03 20 05 Index (1983 = 100 % ) Year Health Care Modernisation Act 7th Health Care System Modification Act Drug Budget Replacement Act Health Care Reform Act Health Care Structure Act Source: Based on data from the Federal Statistical Of? ce and Schwabe/Paffrath (several volumes). From 1992 inclusive the new German Laender. 29 The drug sales volume is the gross turnover of pharmacies with reimbursed, ? nished product pharmaceuticals. 30 The data from this section are taken from the SHI-Drug-Index of the Scienti? c Institute of the Health Care Fund (WIdO), published in Schwabe & Paffrath (volumes 1985 - 2006) and from the Ministry of Health (2006a). 31 For detailed information about the regulatory framework see Schreyögg et al. (2004). 47 In the 1980s, for the ? rst time, the government aimed to implement elementary structural changes to achieve sustainable cost-containment. The long political discussion and negotiation process resulted in the “Health Care Reform Act” (GRG) in 1989. The introduction of a new reimbursement scheme, reference pricing, as part of this reform and the exclusion of drugs against bagatelle disturbances of health from the SHI bene? t catalogue failed to ful? l its expectations. A renewal of the growth in expenditure induced the legislator to carry out a second attempt in 1993. The “Health Care Structure Act” (GSG) compelled drug manufacturers to cut prices (“price moratorium”) and coupled out-of-pocket payments to drug package size. The most important modi? cation, however, was the introduction of the drug budget, which forced physicians and pharmaceutical manufacturers to be directly liable for exceeding expenditure. The combination of reference pricing and budgeting allowed for the control of both prices and quantity, and lead to a cost decrease of 24 % in the ? rst quarter of 1993. The number of prescriptions fell about 17 %. For the ? rst time, a reversal of the expenditure growth rate had been achieved. But the success was only short-lived: in the following year the familiar growth trend started again with 4.6 % in 1994 and 7.1 % in 1995. Instead of strengthening expenditure control, in 1996 the “7th Health Care System Modi? cation Act” decisively weakened the reference pricing scheme by excluding patent protected drugs. This meant that from this day on, no reimbursement limit for patented drugs existed and manufacturers enjoyed full absence of price control. Following this, the market share of expensive patented medications increased from 18.9 % in 1996 to 37.9 % in 2002. Additionally, in 2001 the German government abolished the drug budget, which lead to rapidly raising expenditure of more than 10 % (ca. € 2 billion). In return, the government obliged the industry to pay a “solidarity contribution” of about € 200 million to the SHI. Moreover, the so-called “aut idem” rule, which compelled pharmacies to substitute non-protected drugs above a certain price line with cheaper products, was introduced. But these measures did not prevent further increases to the SHI’s drug disbursements. With the intention for a substantial restructuring of the SHI in 2004, the “Health Care Modernisation Act” (GMG), which re-implemented reference pricing for patent protected drugs, came into force. A positive list, however, has not been introduced although it had been intensively discussed by politicians.32 Nevertheless, the GMG decreased drug expenditure in the ? rst quarter of 2004 by about € 900 million compared to the same period in the previous year (Ministry of Health 2005a). But by 2005 the drug sales value had once again reached a record high of € 25 billion. With these facts, the impact of the optimistically touted reform act was ineffective. 32 “Positive List”: a list of approved and reimbursable pharmaceuticals. 48 3.3. Common Explanation Approach This short overview of the development of drug expenditure in the last 20 years casts a negative picture of the long-term impact of political attempts at cost-containment. The question arises: why has politics failed to construct an effective control system to achieve the of? cially declared goal of cost-containment? As a major reason for the unassertive reform process, it is usually alleged in scienti? c literature that the German SHI is characterised by the qualities of the so-called “negotiation democracy”. The concept “negotiation democracy” was used for the ? rst time in the 1970s to describe political systems in which essential decisions were not reached by a majority of votes, but by the way of negotiation processes.33 Especially health policy is highly affected by this because of a multiplicity of negotiation arenas. On the one hand, most health care reforms require the approval of both the Bundestag (Lower House of Parliament) and the Bundesrat (Upper House of Parliament). Different political majorities in each chamber often lead to con? icts in the negotiations through the competition of parties, causing blockades of the reform process for tactical reasons (Schreyögg et al. 2004). On the other hand, the organisational build-up of the SHI provides special associations and interest groups with several possibilities to exert in? uence on the decision-making process (Gäfgen 1988). In the context of the SHI’s self-administration, associations of SHI physicians and the central associations of the sickness funds possess the decision making authority. Decisions take place under supervision, but without direct participation of government. Other institutionalised forms of involvement of interest groups in special committees are without decision-making power, but they are nevertheless very important in forming political opinion (Bandelow 2004), e.g. the “Concerted Action in Health Care” (disestablished in January 2004) or the “Advisory Council to the Assessment of the Development in Health Care”.34 Apart from this, it is normal for more than 70 interest groups to take part in parliamentary hearings on health care reform acts (Schreyögg et al. 2004, p. 5). The analysis of the political decision-making process is getting even more sophisticated by the fact that the process is characterised by unstable protagonist coalitions. Every single issue of reform package generates diverse interest coalitions among the representatives involved (Perschke-Hartmann 1994, p. 21). The concept of “negotiation democracy” assumes that the described multiplicity of negotiation arenas prevents effective health care reform acts. Hence politicians would not be able to assert strong control instruments against the will of the powerful health 33 The term “negotiation democracy” was introduced into German-speaking political science by Lehmbruch as “Proporzdemokratie” (Lehmbruch 1967). Later on he replaced this term with the Swiss concept “Konkordanzdemokratie” (Lehmbruch 1968), which is the German equivalent to Lijphart’s “consociational democracy” (Lijphart 1968). See also Lehmbruch 1996. The theory of “negotiation democracy” was extended in the 1980s by the compromise and negotiation enforcements of the federal structure as well as the neo-corporatism con? ict-settlement in Germany (Czada 2000). 34 Bandelow (1998) gives a survey of all included interest groups.

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Zusammenfassung

Der Arzneimittelsektor der Gesetzlichen Krankenversicherung stand wiederholt im Fokus zahlreicher Gesundheitsreformen. Dennoch ist es bislang nicht gelungen, den Trend steigender Ausgaben nachhaltig zu bremsen. Die vorliegende Untersuchung leistet einen Beitrag dazu, die Ursachen dieser Entwicklung zu erklären und Lösungsansätze aufzuzeigen. Mittels Hauptkomponenten- und Cluster-Analyse wurden Gruppen von Arzneimitteln mit vergleichbaren Konsumeigenschaften gebildet. Jede Gruppe wurde auf den Einfluss der Altersabhängigkeit und des technologischen Fortschritts hin analysiert. Aufbauend auf diesen Ergebnissen wurde eine Prognose der zukünftigen Ausgabenentwicklung bis zum Jahr 2050 erstellt. Obwohl die Hauptkostenfaktoren exogen sind, steht der Gesetzgeber dem vorhergesagten ansteigenden Kostenpfad nicht hilflos gegenüber. Im Gegenteil: Anhand ökonometrischer Tests wird gezeigt, dass die Gesundheitspolitik in der Vergangenheit durch wahl- und klientelorientierte Interessendurchsetzung geprägt war. Mehr Effizienz in der Arzneimittelversorgung könnte durch die Einführung individueller Gesundheitssparkonten erzielt werden. Dies bestätigen die Resultate eines vertikal differenzierten Wettbewerbsmodells.