Drugmakers have attacked the German coalition government’s plans to curb the prices of new drugs, claiming that they will be “devastating” for investment in the country.

Health Minister Philipp Roesler has now outlined the new rules and, as anticipated, they will require manufacturers of new medicines to provide evidence of cost/benefit superiority over already-available treatments. This will form the basis of price negotiations with the statutory health insurers, which cover 70% of the population.

Companies would be permitted to set the drug’s price for the first year after its launch – they had asked for two years – and the insurers could then impose a mandatory short-term rebate of as much as 16%, up from the current 6%, if they and the manufacturer were unable to agree a maximum price during the first 12 months.

If no additional benefit can be shown for the drug, it will immediately be placed on the existing fixed-price scheme for patented drugs. The government’s plans also include the imposition of a drug price freeze, based on levels at August 1, 2009, which will run until December 31, 2013. The current discount price contract system covering generics will be retained.

Announcing the new rules, Mr Roesler said that prices of patented drugs had gone up 8.9% last year, while those of generics had fallen 2%, and that spending on medicines by public health insurers had risen 5.3%, which was entirely due to the price increases on new drugs. Official estimates are forecasting that the insurers’ deficit for 2011 will be as much as 15 billion euros.

“We will ensure that pharmaceutical companies will no longer be able to set the prices for medicine one-sidedly and on their own,” said the Minister.

But the association of research-based companies in Germany, the VFA, claims that the plans have broken the coalition government’s promise to the industry of “competitive reorganization and deregulation” when it came to power. They could “hardly be beaten for their bureaucratic complexity,” added the VFA’s director general, Cornelia Yzer.

She also warned that the new system will be devastating in terms of Germany’s investment potential, adding that research-based drugmakers “have been an anchor of stability in Germany during the economic crisis – we have kept our jobs secure and have brought investment to Germany.”

However, the Spitzenverband der Gesetzliche Krankenkassen, the national association of statutory health insurers, had described the measures as a “good package.” The group’s head, Doris Pfeiffer, welcomed its short-term measures and the maintenance of the discount contract system for generics, and added: “price negotiations in connection with a sensible benefit analysis are the key to prevent excessively high prices for new drugs.”