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EF: Could you elaborate on the current situation in the healthcare system within Germany? 

KJ: The healthcare sector projected a deficit of about €17 billion for 2023, which will even deteriorate if the current system does not change. In March 2022, Health Minister Prof. Karl Lauterbach proposed a financial stabilization of the Statutory Health Insurance System, which the healthcare sector opposes because its implications are detrimental to the entire pharma industry. We see an increasing demand for medical services is increasing while financing is decreasing. The sector and the state will need to design a sustainable healthcare system for the future.

There are several factors currently affecting the pharmaceutical industry, and the bill would add new ones, making it more difficult to ensure healthcare sustainability.
First, the pharmaceutical industry has had a price moratorium since 2010, with fixed pricing. The final draft of the bill plans to extend it until the end of 2026, which would mean that there would be fixed pricing for pharmaceuticals for 16 years, which will make it difficult to do business, especially with the current economic situation. 
The current reference price system is very strict, with a sophisticated set of rules that make the prices decrease over time. All the costs for energy, raw materials, and APIs are increasing with the current political climate and other issues like the recession. The industry cannot afford local production due to price fixing.

The bill also proposes changes to the Pharmaceuticals Market Reorganization Act (AMNOG) that will directly impact reimbursement schemes, which will be negatively impacted by applying the AMNOG rebate in month 7 instead of 12 as it was before, among other rebate negotiations. With the new bill, a mandatory discount of 20% for combination products with new compounds would also be introduced.

Moreover, the current rebate system in place is price-driven and does not provide any premium for the added value, such as the quality of the product, the location of production, or to cover for shortages in supply.

All these factors are threats to developing a sustainable pharmaceutical environment, and it is important to address them if we want to keep Germany as a pharmaceutical location.

EF: Are there situations where companies cannot meet the demand once they have a tender with no products on the market as backup? 

KJ: Supply can be a challenge in Germany. With rebate contracts, a company must guarantee supply—failure to guarantee supply would result in significant fines.

We have come up with several proposals on how to improve the current rebate contract system. So far, our proposals have not been considered because of the financial deficit of the sick funds.

In order to ensure sufficient supplies, it would be necessary to award the tender to multiple companies instead of one. Multiple companies would increase the likelihood of product delivery. Also, products that are critical with regard to their supply situation and those that are essential for healthcare provision should not be tendered at all. Another factor to consider is whether it was produced locally or within the EU, as this significantly reduces reliance on logistical or geopolitical factors that could jeopardize a reliable supply situation.

We need to become way more independent and produce locally as a nation, as Europe, and as a sector. There needs to be more autonomy in Europe.

EF: How does the energy situation impact the industry? Do you think the learning to have a local supply of energy after the gas situation can be translated into the pharmaceutical industry strengthening the local supply of APIs and other critical supplies for the industry?

KJ: The ministry of economic affairs and climate action has prepared a forecast for gas and energy supply and demand as well as an action plan. In the event that there is a limited supply of energy, the gas delivery will be allocated based on protected customers, such as private households, social entities, and hospitals. Technically, the pharmaceutical industry—like all other industries—by definition is not a protected customer, which is why it would only receive gas once the protected customer group is supplied. We clearly understand the challenges a gas shortage might result in, not only for private households but also for different industries. We still deem the supply of patients with their needed medication essential.

The lack of gas could create a domino effect in other sectors, like the medical industry. At first glance, the pharma industry may appear to be less gas-dependent for instance compared to the chemical industry; however, the materials needed for medicine development and production come from gas-dependent industries, such as blisters that would come from the plastic and alloy industry, packaging that would come from the paper industry, vials from the glass industry,  all of those highly relies on gas and are industries which are not protected if there were a gas shortage.  

EF: How is digitalization being utilized among your members and how do you see this evolving? 

KJ: We all know about the necessity and the potential impact of digitalization in any industry. Therefore, we further strengthened the agenda for digital transformation within the organization and our members.

The healthcare sector overall needs to ensure that we make better use of digitalization. This will allow us to get better data faster and ultimately share it among stakeholders to encourage and improve research, particularly when it comes to orphan drugs, for which there is little data to begin with.

Furthermore, digitalization has a huge ability to address healthcare issues, improve patient experience, and expand data and digital knowledge through data. R&D-based companies need access to data that is generated within the healthcare system. With better use of Real World Evidence data, clinical trials might be fewer, more cost-efficient, less time-consuming, and more accurate. And it is as important to develop compliant, data-driven policymaking. Exchanging information at a European or international level will help to improve faster. Initiatives around a European Health Data Space (EHDS) are therefore of utmost importance. Access to data and interoperability of data are key.

In other industries, like the aviation industry, where there is a permanent assessment of relevant data, they are not only seen to provide the opportunity of, for example, a higher level of quality service, but are also deemed mandatory to inform decision making. If the healthcare sector and its respective industry were enabled to gather and use more specific patient data, it would enable better decision-making in order to further improve patient outcomes.

Healthcare professionals are sometimes reluctant to adapt to digitalization, often for pretended data protection reasons. However, patients are willing to share their data in exchange for better services. And like with the aviation analogy, data is the best way the industry can make data-driven decisions for more efficient healthcare services and better healthcare delivery.

EF: What would be the biggest benefits of leveraging technology in the industry? 

KJ: There are a number of benefits. Through digitalization, small and medium-sized companies can catch up with the market through aggregated data and research. AI is a big game changer here. The business model can become more efficient and accurate and yield more effective outcomes through digitalization. Also, there is a huge opportunity to accelerate HTAs. And regulatory processes and decisions could be better informed, faster and more advanced. During the pandemic, we saw the importance of a quick data exchange between the relevant authorities.

EF: How do you want the sector to be remembered? 

KJ: In my opinion, the biggest accomplishment for the sector would be an acknowledgement both from society and political stakeholders for the value the sector delivers to patients and also for the positive economic impact the sector has on economies.  We are too often considered as just a cost factor, while our value creation often tends to be significantly underestimated.

The positive ethical and economic impact we have on society is an accomplishment in itself. The pandemic is an example of the industry's positive impact on economies. Without the vaccine, we would still be in a pandemic. As Eisenhower once said, the limitations of your thinking will determine the limits of what you can accomplish. You cannot achieve what you do not think of. We should be considered fundamental stakeholders in society instead of a niche industry. We are part of society as corporate citizens. We want to contribute in order to make this world a healthier place.

August 2022