German Drug-Price Controls Extended in End-of-Year Merkel Fix

German Chancellor Angela Merkel’s coalition extended price controls for pharmaceuticals, blocking a potential windfall for drug companies.

Lawmakers from Merkel’s Christian Democratic bloc and the Social Democrats voted today to prolong price freezes and a discount on the drugs in two stages, first to March 31, 2014, and then through 2017, beating a Dec. 31 expiration date.

Failure to pass the measures would have raised German health-care costs by about 2 billion euros ($2.7 billion) next year, according to the legislation that the lower house, or Bundestag, passed by a show of hands in Berlin.

Merkel’s two-day-old alliance of Germany’s two biggest parties squeezed the vote into the year’s last legislative session after coalition talks delayed most business since she won re-election on Sept. 22.

The laws 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.

In the 2010 overhaul, 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.

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 levels on Aug. 1, 2009.

Before it's here, it's on the Bloomberg Terminal.