Drug Prices Are Much Lower in Germany. Should the U.S. Take Notes?


The German health care system resembles the U.S. system in some important ways: both have multiple private insurers rather than a single governmental payer; both favor negotiation over regulation for determining prices; and both value patient access to even the most expensive treatments. But prescription drugs are another story.

In a new Commonwealth Fund issue brief, James C. Robinson of the University of California, Berkeley, and colleagues explain how Germany’s use of reference pricing and price negotiation keeps pharmaceutical prices below those in the U.S.

Germany employs modest levels of cost-sharing to influence consumers’ choices for drugs for which therapeutically equivalent alternatives exist. For drugs covered by this reference pricing system, drugmakers are free to set the prices of their products, but insurers won’t pay more for a new drug unless it offers additional clinical benefit. The maximum price insurers will pay is set at a level that ensures patients have sufficient choices of low-priced options.

Robinson says the German approach presents a viable alternative for the U.S., where the patient is rarely pointed toward the most cost-effective drug choices, and where cost-sharing burdens can be high, especially for people with complex medical conditions.

Reference pricing for pharmaceuticals_1x1 Read more Drug Prices Are Much Lower in Germany. Should the U.S. Take Notes?