German Health Minister Philipp Roesler is expected tomorrow (March 10) to announce plans to reform the branded pharmaceutical market, including a requirement that drugmakers must negotiate prices for their new drugs with the public health insurers, or accept fixed price ceilings if they fail to reach agreement.

The Ministry estimates that this requirement could save more than 2 billion euros a year. Also expected to be included in the package are short-term measures such as compulsory discounts and a price freeze.

A panel of experts convened by the Minister – who has pledged to bring “average drug prices permanently under control” - is reportedly finalising proposals for the market restructuring for publication on Wednesday.

The price negotiations with insurers - which would exempt products from assessment by the Institute for Quality and Efficiency in Health Care (IQWiG), Germany’s drugs cost-effectiveness watchdog - have in fact been permitted since 2007, but have not been taken up by the industry. It is also forecast that that the package will require approval applications for new drugs to be accompanied by benefits assessment studies, and could make changes in other areas which the Minister had pledged to examine, such as patent term duration.

Germany is Europe’s biggest pharmaceutical market, worth more than 30 billion euros annually, and about 85% of the population is insured through the Gesetzliche Krankenkasse (GKV) public health insurance system.

The upcoming proposals are set to be revolutionary as the changes to the generics market introduced in September 2007, when the government introduced two-year “preferred-supplier discount contracts.” These allowed public health insurers, for the first time, to invite supply tenders from generics makers and to stipulate which generic drugs their insurees should receive. The first round of these contracts is estimated to have saved the insurers more than 500 million euros, and the second round is currently being negotiated.

The restructuring adds another dimension to the controversy in January over the ousting of the IQWiG’s outspoken head, Peter Sawicki. from his post, reportedly because of industry complaints about his continuing obstructive approach which, it claimed, was preventing drugmakers from getting their new products onto the market. Minister Roesler is a member of the Free Democrat Party (FDP), a traditionally pro-business group with strong links to drugmakers, doctors and pharmacists and which, according to local media reports, was instrumental in getting Prof Sawicki removed.