Merkel Coalition Seeks Last-Minute Extension of Drug-Price Caps

German Chancellor Angela Merkel’s coalition plans to extend price caps for pharmaceuticals in legislation scheduled for a vote today, blocking a potential windfall for drug companies.

Lawmakers from Merkel’s Christian Democratic bloc and the Social Democrats will probably pass two bills to prolong the price freezes and a discount on the drugs in two stages, first to March 31, 2014 and then through 2017, the German parliament’s daily bulletin reported yesterday. The current rules expire Dec. 31.

Failure to pass the legislation would raise German health-care costs by about 2 billion euros ($2.73 billion) next year, according to the bill’s preamble.

Merkel’s 2-day-old alliance of Germany’s two biggest parties set the vote for this year’s last legislative session after coalition talks delayed most business since she won re-election on Sept. 22. The Bundestag, or lower house, is due to vote at about 11 a.m.

The bills uphold a price freeze on drugs introduced in 2010 to limit the cost of public health care, while reducing a mandatory discount on drug sales to 7 percent from 16 percent.

Merkel’s government increased the mandatory rebate for patent-protected drugs not already covered by a reference price to as much as 16 percent from 6 percent as part of the 2010 overhaul.

The policy forced drug makers to justify the cost of new medicines by proving they help patients more than older, cheaper treatments. Also part of the clampdown was a price freeze for some drugs, based on Aug. 1, 2009 levels. That cap expires on Dec. 31.

To contact the reporters on this story: Brian Parkin in Berlin at bparkin@bloomberg.net; Naomi Kresge in Berlin at nkresge@bloomberg.net

To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net

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