Worldwide spending on prescription drugs has increased dramatically in recent years. Although this increase has been particularly pronounced in the US, it remains largely unaddressed there. In Europe, however, different approaches to regulating drug prices have been implemented. Under the 2011 German Pharmaceutical Market Restructuring Act (Arzneimittelmarktneuordnungsgesetz, or AMNOG), for example, manufacturers freely set the prices of newly authorized drugs during their first year on the market. Benefit assessments are carried out during this year and then used in price negotiations between manufacturers and representatives of the country's statutory health insurers. Using data on fifty-seven anticancer drugs launched in Germany from 2002 to 2017, we found that implementation of AMNOG was associated with drug prices being more closely aligned with clinical benefit. Introducing price negotiations led to a 24.5 percent decrease in negotiated prices relative to launch prices. We did not find evidence that manufacturers responded by setting higher launch prices. AMNOG is an example of how government price negotiation can be designed to better align prices with clinical benefit without delaying patient access.
Keywords: Anticancer drugs; Cost reduction; Costs and spending; Drug pricing; Health policy; Markets; Pharmaceuticals; Prescription drug costs; Prescription drugs; access to care.