German Chancellor Angela Merkel announced yesterday that the government is seeking 3.5 billion euros in savings from the profits of pharmaceutical companies, health insurers, hospitals and dentists.

The cuts form part of the government’s plan to close an 11-billion euro gap in the national health budget for next year. Ministers also announced yesterday that charges for state-provided health care will be increased, with premiums rising from 14.9% of employees’ gross pay to 15.5%, the burden being split equally between employers and workers. This is expected to bring in an extra 6 billion euros.

The federal cabinet recently approved the second part of the Health Minister Philipp Roesler’s draft cost-containment law, which is expected to be approved by the upper house of parliament in the third quarter of the year. The first part of the bill, which was approved by parliament last month, includes two short-term cost-curbing measures taking effect from August 1, namely, a three-year drug price freeze and an increase in discounts on drugs not covered by the reference pricing system from 6% to 16%. These two measures are each expected to yield savings of around 1,15 billion euros a year.

In a recent note on the German government’s plans for structural changes to the pharmaceuticals sector, analysts at IHS Global Insight point out that German public spending on drugs rose 5.3% last year to total 32 billion euros, and that this was mainly driven by the 8.9% growth by value reported for products which are not included in the reference price system. Branded drugs accounted for some 26% of total public spending, and only around 2% of them are subject to price regulation.

In contrast, sales of products which are covered by the discounted contract system fell 2% last year, the analysts note.

- Meantime, the Financial Times reports this morning that Italy is to cut the prices of a number of oncology drugs from 2011, after a preliminary analysis of two-year data by the national drugs agency showed them to be less effective than their manufacturers had claimed. The drugs had been purchased by the state at prices 20%-30% below list, based on a “pay for performance” agreement which permitted price adjustments according to the benefit demonstrated, and their prices could now be reduced by a further 30%-40%, it says.