Managing pharmaceutical regulation in Germany: Overview and economic assessment

Jonas Schreyögg, Klaus-Dirk Henke and Reinhard Busse

No 2004/6, Discussion Papers from Technische Universität Berlin, School of Economics and Management

Abstract: Rising costs in pharmaceutical expenditure have become a major concern for policy makers in Germany over the last years. Therefore the pharmaceutical market in Germany has been increasingly targeted by different kinds of regulations, focussing both on the supply and the demand side, using price, volume and spending controls. Specific regulations include price reductions, reference pricing, pharmacy rebate for sickness funds, increasing co-payments, an "aut-idem" substitution, parallel imports, negative list, guidelines, and finally spending caps for pharmaceutical expenditure per physicians' association. Although it is difficult to attribute certain effects to single measures, some measures like reference pricing and physician spending caps are more effective and long-lasting than others. Although highly disputed among physicians, the spending caps applied between 1993 and 2001 have limited pharmaceutical expenditure for an entire decade. However, while some measures do effectively control expenditures, their effect on allocative efficiency may be negative.

Date: 2004
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