Rebate contracts between German health insurance funds ("sick funds") and generic firms have become widespread since such contracts were permitted in 2007. But sick funds may also negotiate deals directly on patented drugs with innovative drug firms. And that, increasingly, is where the action is in Europe's largest market.

In the case of generics, payers like AOK, Germany's largest covering 45 percentof the country's insured, go out to tender and secure time-limited contracts based purely on price and supply capacity. The losers are effectively locked out of that segment of the market for the contract's duration (two years, for AOK deals) since pharmacists must prescribe a rebated drug to any of that insurer's customers. They're penalized even if they prescribe a parallel import.

It's slightly different for patented drugs: there's no tender process, for one, since such products are theoretically unique. And even after a deal's signed, sick funds can't force doctors to prescribe that drug - and thus can't control whether a pharmacist dispenses it.

But they can - and do - incentivize docs to, with financial rewards and other support structures. Indeed, Germany's sick funds are signing deals with doctors' associations almost as fast as they are with pharmacos. Examples include AOK's July 2008 minimum five-year tie-up (read the German update here) with two independent doc groups.

The result: stronger payer influence on prescribing decisions, and heftier payer clout in negotiations with pharmacos.

Most of those drug firms are dragging their feet when it comes to rebate deals around patented drugs, however - unsurprisingly, since Germany is a reference price market for many other European countries. Thus even if they do sign discount deals, the details are, by necessity, opaque.

But in some circumstances, such as for mature drugs at the end of their patent life, products that are struggling to gain market share and/or are poorly differentiated, several companies, including Sanofi Aventis, Novartis, Merck & Co. and Novo Nordisk, have been willing to play ball, according to consulting firm Booz & Co.

These and others are also testing out more creative deal flavors, in their quest to avoid straight price cuts but ensure their drug is prescribed. Wyeth for example has a compliance support scheme around its pricey rheumatoid arthritis drug Enbrel with several sick funds, where it funds homecare visits to patients and a telephone support scheme. According to Booz, the drug's showing a 'generally positive' sales trend within these sick funds as a result.

Meanwhile, Novartis has agreed with two payers to refund the costs of its osteoporosis drug Aclasta if it doesn't work (if the patient gets a fracture within one year of infusion, for instance), as it seeks to claw market share off competitor Actonel .

For AMD drug Lucentis, beset by bad publicity over its high price and around illegal off-label usage of cancer product Avastin, which contains a similar active ingredient, the company set an overall cost-per-year cap for the treatment at €350 million. The gamble paid off: sales trebled from a low base of just €20 million or so, and most of the bad noise stopped, according to Booz.

Such deals are not unique to Germany. Similar examples are arising in the UK, in the Netherlands and Italy; Australia is at the forefront of financial risk-sharing schemes.

But Germany's fragmented insurance market means there's a wide variety of deals under trial, as both payers and pharmacos seek a competitive edge. As such, any winner or loser structures that emerge - it's too early to tell which is which, for now - may well influence company strategies in other markets, not least the U.S.

Here, the equally fragmented nature of managed care organizations may limit their influence over prescribing for now, but experts such as ZS Associates expect this to change, and for payers like Medicare and Medicaid to increasingly influence prescription decisions.

Germany's worth watching, in other words.

[Editor's note: This is one in a series of "Spotlight on Germany" articles, focusing particularly reimbursement issues in that country. Additional articles already published address payer relationships with physicians, Wyeth's strategy for Enbrel, and Pfizer's strategy for Aricept. Catch up on the series, and keep up with European biopharma business development and policy, at our affiliated site, EuroPharmaToday. Sign up for free email alerts at www.EuroPharmaToday.com.

- Melanie Senior (m.senior@elsevier.com

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