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Sascha G. Wolf, Empirical Observations in:

Sascha G. Wolf

Pharmaceutical Expenditure in Germany, page 64 - 66

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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64 3.6. Empirical Observations Unexpected regularities in the development of pharmaceutical expenditure can be found (? gure 3.7): During the era of the Christian-Liberal coalition, which lasted until 1998, after two to three years of growth, one year with comparably drastically low or even negative growth rates followed. Thus, the health care reform acts of 1989 (GRG), 1993 (GSG) and 1997 (1st and 2nd SHI Restructuring Act) did indeed have cost-cutting short term in? uences on the expenditure growth rates. But this recovery always remained only in the year of the introduction of the reform act and afterwards it disappeared again in support of a new cost increase. This observation allows three conclusions: ? rstly, government is able to affect drug expenditure. Secondly, the cost-driving protagonists of the health care system need only some months to ? nd new ways of strategic behaviour to circumvent the recently established control instruments; and thirdly, the legislature was either not able or not willing to intervene into the market every year, but rather in important years. Considering the elections for the German Bundestag (the black pillars in ? gure 3.7), we can ? nd a remarkable clear pattern: During the Christian-Liberal coalition, the local minima of the growth rates are always to be found in the year before an election. We can adhere to the statement that apparently the right-wing government tried to cut drug expenditure down before elections, but afterwards it no longer had any reasons to prevent increasing pharmaceutical costs. This observation leads us to the presumption that it appears to be attractive for politicians to cut the costs at the expense of the pharmaceutical industry to gain votes. After the elections, the interests of the providers attain political prevalence over the cost-containment aims of the government and the growth rates increase again. Figure 3.7: Pharmaceutical Expenditure Growth Rates and Elections for the German Bundestag. -13 -8 -3 2 7 12 19 83 19 87 199 1 199 5 199 9 200 3 Growth Rates in % Year Source: Based on data from the Federal Statistical Of? ce and Schwabe and Paffrath (several volumes). From 1992 this includes the new German Laender. 65 One could object that the relevant variable for the voters is not the amount of pharmaceutical expenditure, but the amount of contribution rates. Indeed, the development of SHI contribution rates is not interrelated with the federal elections. However this argument ignores the fact that it is the sickness funds and not the government which account for the determination of contribution rates. Health insurances are only bounded by the basic principle of contribution rate stability. This principle allows for increasing contribution rates if the necessary level of medical care cannot otherwise be ensured (§ 71 SGB V). Accordingly, the government can only try to disburden the sickness funds and hope for a decrease in rates. A closer look at the ? nancial situation of the SHI demonstrates that, according to this, the health care reform acts consistently disburdened the sickness funds until 1998 (? gure 3.8). Comparable to the development of the expenditure growth rates, the surpluses and de? cits of the SHI revealed a cyclical trend: the reform acts of 1989, 1993 and 1997 always caused a surplus for the SHI that persisted until the next federal election. Even in 1987 we can observe a surplus although there was no state-run intervention. Consequently, the votes-maximizing strategy of the Christian-Liberal coalition is not based on decreasing contribution rates, but on the disburdening of the SHI. Hence the government established the framework for decreasing contributions rates and shifted the responsibility to the self-administration of the SHI. Figure 3.8: Financial Surpluses and De? cits of the SHI 1983-2003. -6500 -4500 -2500 -500 1500 3500 5500 198 3 198 4 198 5 198 6 198 7 198 8 198 9 19 90 19 91 19 92 19 93 19 94 19 95 19 96 19 97 19 98 19 99 20 00 20 01 20 02 20 03 Billion € Year Source: Based on data from the Federal Statistical Of? ce. With the accession to power of the Red-Green coalition, the interrelation between the growth cycles and the elections reversed (? gure 3.7). Decreasing growth rates for drug expenditure in 1999 and 2000 and a higher frequency of health reform acts (from 1999 to 2004 at least small reform acts were introduced every year) indicate a minor political in? uence of the cost-driving protagonists in the health care sector and narrow the time for strategic adjustments. This indicates that – in contrast to the Christian-Liberal coalition – due to their own clientele of low-income population classes a left-wing government is not willing to ful? l the ambition of the pharmaceutical industry to 66 increase drug expenditure. However, before the elections of 2002 and 2005 local maxima of growth rates can be observed, which shows that the pharmaceutical industry as well as physicians have no interest in supporting the Red-Green government with low expenditure and even try to counteract their re-election chances. Consequently, we must also consider corporatistic behaviour of the suppliers. One could argue that a different approach is feasible to explain this development: political reform acts usually follow a speci? c schedule. The ? rst year after an election is needed for consolidating the new government coalition, in the second year the political discussion and negotiation process takes place and, ? nally, in the third year the reform act comes into force. This could also explain the cyclical development with strong amplitudes in the third year in power. But several arguments oppose this supposition: ? rstly, between 1983 and 1998 a Christian-liberal coalition constituted the government. It is dif? cult to believe that after every election a consolidation period was necessary. Secondly, the high number of reform acts between 1998 and 2004 shows that the reform-schedule is absolutely ? exible. And thirdly, this approach is not able to explain the reversion of the expenditure cycle after 1998. 3.7. Conclusion The inability of government to contain disproportionate cost increases for pharmaceuticals is mostly attributed to the complex political negotiation and decision-making processes within the German SHI. As a major reason for the unassertive reform process, it is usually alleged that politicians are not able to accomplish strong control instruments against the will of the powerful interest groups of the health care sector. A closer look, however, reveals a different picture. We see political cycles in expenditure developments with strong amplitudes, which re? ect the ability of government to in? uence costs despite the restrictions of decision-making. But if it is possible to affect expenditure development, it is obviously necessary to consider the interests of the controlling protagonists: the health care suppliers, politicians, and especially the powerful pharmaceutical industry. Regarding politicians’ interests, scienti? c literature usually distinguishes between partisan and opportunistic incitements. Partisan theory says that politicians try to serve the interests of their clientele. According to opportunistic theory, politicians temporarily modify politics to improve their election chances. Our econometric tests have shown that health policy in Germany is strongly affected by partisan politics. We also found indications for partisan as well as opportunistic politics in combination with the ambitions of the pharmaceutical industry itself. These econometric results have been con? rmed by empirical observations.

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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.