Pricing and Reimbursement of Prescription Drugs in German Social Health Insurance

The current regulation of the market for prescription drugs in German health insurance is under pressure for two reasons. First, third-party payers are unable to control expenditures effectively. Expenditures for prescription drugs are continuously increasing and at a more rapid pace than expenditures in other health care sectors such as ambulatory care and hospital care. Second, third-party payers are incapable of setting incentives for individual physicians to prescribe more efficiently. Physicians prescribe a considerable share of prescription drugs that are more expensive
than therapeutic or generic substitutes.

In this paper the authors develop and present reform scenarios for the regulation of prescription drugs in German health insurance by comparing two important parameters for third-party payers and manufacturers across health care systems. These parameters are regulation of reimbursement and regulation of pricing.