Act for the Financial Stabilisation of the Statutory Health Insurance System
In an order published today, the First Senate of the Federal Constitutional Court rejected two constitutional complaints lodged by pharmaceutical companies.
The complainants challenge several provisions in the Act for the Financial Stabilisation of the Statutory Health Insurance System (GKV-Finanzstabilisierungsgesetz; hereinafter: the Act) that serve to control the prices of medicinal products. The Act contains a range of different measures intended to ensure the financial stability of the statutory health insurance system in terms of both revenue and expenditure. The constitutional complaints are directed against measures that limit increases in expenditures on medicinal products that, in the complainants’ view, place excessive burdens on pharmaceutical companies. These include the manufacturer discount, the extension of the price moratorium, rules on price discounts for new, patented medicinal products (so-called guard rails), the time at which statutory reimbursement amounts begin to apply after a medicinal product with a new active ingredient is first placed on the market, and drug combination discounts. The complainants’ primary contention is that these measures violate their occupational freedom protected by Art. 12(1) of the Basic Law (Grundgesetz – GG); they also assert unjustified unequal treatment within the meaning of Art. 3(1) of the Basic Law.
The constitutional complaints are unsuccessful. They are inadmissible in part, as the complainants have not sufficiently demonstrated that the constitutional complaints satisfy the principle of subsidiarity and have not sufficiently substantiated that fundamental rights have been violated. Insofar as the constitutional complaints admissibly challenge the manufacturer discount and the extension of the price moratorium, they are unfounded. The interferences with fundamental rights resulting from these measures are justified. In particular, they are appropriate because in the overall balancing of interests, the aim of the common good pursued by the legislator – ensuring the financial stability of the statutory health insurance system – prevails.
Facts of the case:
The complainants are pharmaceutical companies within the meaning of the Medicinal Products Act (Arzneimittelgesetz). The complainant in proceedings II. (1 BvR 2197/23) manufactures medicinal products that are subject to a marketing authorisation, and holds the relevant marketing authorisations. The complainant in proceedings I. (1 BvR 1507/23) imports medicinal products that are subject to a marketing authorisation and distributes them in Germany. With their constitutional complaints, they challenge, in different respects, provisions of the Act which, according to the explanatory memorandum to the draft act, serve to close an ever widening gap between the revenues and expenditures of statutory health insurance providers.
The constitutional complaints challenge those measures in the Act which concern expenditures and which, in the view of the pharmaceutical companies, place particular burdens on them.
1. The Act inserted § 130a(1b) into the Fifth Book of the Code of Social Law (Sozialgesetzbuch Fünftes Buch – SGB V), pursuant to which statutory health insurance providers receive a discount of 12% on the pharmaceutical company’s selling price excluding VAT from pharmacies for medicinal products dispensed at the statutory health insurance providers’ expense from 1 January 2023 to 31 December 2023 (manufacturer discount).
2. At the same time, a price moratorium already in force was extended (§ 130a(3a) Fifth Book of the Code of Social Law). If a pharmaceutical company’s selling price has increased compared to the price on 1 August 2009, statutory health insurance providers receive a discount in the amount of the price increase for medicinal products dispensed at their expense; this moratorium was extended until 31 December 2026. This does not apply to medicinal products for which a fixed price was determined on the basis of § 35 of the Fifth Book of the Code of Social Law.
3. Moreover, the existing rules regarding agreements on reimbursement amounts under § 130b(3) of the Fifth Book of the Code of Social Law, which are based on added therapeutic value provided by the pharmaceutical product and the patent status of the appropriate comparative treatment, were amended and made more restrictive at the expense of pharmaceutical companies. The fundamental concept can be summarised as follows: If a new, patented medicinal product has a similar benefit as an existing comparative treatment, the reimbursement amount may result in a maximum of 90% of the annual treatment costs of the comparative treatment. If a new, patented medicinal product has an added therapeutic value, this does not necessarily entail a higher reimbursement amount than that provided for the comparative treatment (guard rails).
4. Pursuant to § 130b(3a) first and second sentence of the Fifth Book of the Code of Social Law, the reimbursement amount agreed under § 130b(1) of the Fifth Book of the Code of Social Law applies to all medicinal products with the same new active ingredient that were placed on the market on or after 1 January 2011, starting from the seventh month (prior to the entry into force of the Act from the thirteenth month) after the first medicinal product with the new active ingredient was placed on the market. § 130b(3a) third to eighth sentence of the Fifth Book of the Code of Social Law extends the same rule starting the period of application from the seventh month onward to other cases.
5. § 130e (drug combination discount) was also newly inserted into the Fifth Book of the Code of Social Law. Pursuant to this provision, statutory health insurance providers receive a discount from the pharmaceutical company of 20% of the pharmaceutical company’s selling price if medicinal products with new active ingredients are used in a combination designated by the Federal Joint Committee (Gemeinsamer Bundesausschuss), unless the Federal Joint Committee has found that the combination of medicinal products is expected to generate at a minimum a considerable added value.
Key considerations of the Senate:
I. The constitutional complaints are inadmissible in part.
Insofar as the constitutional complaints are directed against the guard rails (see 1. below), the start of the period of application of the reimbursement amount in the seventh month after the market launch of a medicinal product (see 2. below) and the drug combination discount (see 3. below), it has not been sufficiently demonstrated that they satisfy the principle of subsidiarity.
1. The complainant in proceedings II. failed to sufficiently demonstrate why it should have been unreasonable to expect the complainant to go through arbitration proceedings under § 130b(4) of the Fifth Book of the Code of Social Law before lodging a constitutional complaint regarding the guard rails and, if necessary, to seek legal protection in the ordinary courts against an arbitral award. It can be expected that this approach would lead to an improved basis for decision-making for the Federal Constitutional Court, particularly with regard to matters of fact that might be relevant to the decision. In this regard, it must be noted that the prices negotiated are frequently blended prices, since the outcome of the benefit assessment differs for different groups of patients and fields of application. The practice of blended pricing and the resulting case-law from the ordinary courts with regard to this practice may affect to what extent pharmaceutical companies in general are adversely affected by the challenged provisions.
2. Insofar as the complainant in proceedings I. challenges the applicability of the reimbursement amount beginning from the seventh month after market launch, it failed to sufficiently demonstrate why it cannot be expected that prior proceedings in the ordinary courts would clarify the facts and the law in a manner relevant for the constitutional complaint proceedings. While the provision regarding the start of application of the reimbursement amount is linked to the reimbursement amount itself and determines its temporal scope, the severity of the interference for pharmaceutical companies that results from the start of application hinges on the severity of interference that results from the provisions regarding the reimbursement amount itself. The latter can only be fully assessed in consideration of the specific determination of remuneration amounts either through agreement or through arbitration proceedings. The severity of interference resulting from the provision regarding the start of application of the remuneration amount can therefore only be assessed once a remuneration amount has been determined.
This also applies to pharmaceutical companies that import medicinal products, rather than manufacturing them as holders of the relevant marketing authorisations. Even though the complainant in proceedings I., an importer of medicinal products, is typically not involved in either the agreement of the reimbursement amount or in arbitration proceedings to determine such reimbursement amount, it must first seek legal protection in the ordinary courts, regardless of the fact that the courts have not yet resolved the question of legal protection for importers of medicinal products.
3. Finally, with regard to the drug combination discount, the complainants fail to sufficiently demonstrate why they should not be required to have recourse to the ordinary courts before lodging a constitutional complaint. The constitutional complaints challenge a new law, the interpretation and application of which has not yet been determined in the ordinary courts, even though the assessment of the extent to which pharmaceutical companies are adversely affected by the challenged provision could depend on this determination. The provision raises a number of questions of interpretation which must first be resolved in the context of proceedings before the ordinary courts.
II. With regard to the manufacturer discount and the extended price moratorium, the constitutional complaints, insofar as they have sufficiently substantiated a violation of fundamental rights and are therefore admissible, are unfounded.
1. The interference with occupational freedom resulting from the manufacturer discount is justified; in particular, it is compatible with Art. 12(1) of the Basic Law in substantive terms.
a) The manufacturer discount serves the legitimate purpose of ensuring the financial stability of the statutory health insurance system. It is also suitable for lowering expenditures on medicinal products and thus for contributing to the financial stabilisation of statutory health insurance. According to the legislator’s assessment, the manufacturer discount results in savings of approximately one billion euros. The same applies with regard to the inclusion of importers of medicinal products into the scope of application of the manufacturer discount; it is obvious that applying the manufacturer discount to imported medicinal products also contributes to reductions in expenditures. The interference with fundamental rights resulting from the manufacturer discount is necessary to achieve legitimate purposes of the common good. It is not for the Federal Constitutional Court to determine whether there are other conceivable measures that are equally effective with regard to cost containment measures in the statutory health insurance system.
b) The interference with fundamental rights resulting from § 130a(1b) of the Fifth Book of the Code of Social Law also satisfies the requirements of proportionality in the strict sense.
aa) The interference with fundamental rights in the present case is moderate. In light of the volume of savings of more than one billion euros, the discount of 12%, the applicability of manufacturer discounts in different forms from at least 2002 and the additional hedge through the price moratorium under § 130a(3a) of the Fifth Book of the Code of Social Law, the interference must be considered to be of greater weight than merely low severity; this is the case despite the fact that statutory price discounts in the statutory health insurance system have typically been categorised as minor interferences.
bb) The interference must be viewed in light of its purpose of ensuring the financial stability of statutory health insurance, which is an exceptionally significant task of the common good that the legislator is not only authorised, but also required to pursue. Where healthcare is to be provided to the population through a social security system, its financing constitutes an exceptionally significant interest of the common good, which may, and must, guide the legislator in designing the system and incentivising the behaviour of service providers.
cc) In balancing the burden resulting from the manufacturer discount on the one hand against its effect of furthering interests of the common good on the other, the outcome is that the challenged provision is appropriate. This follows from the fact that the provision specifically serves to further an exceptionally significant interest of the common good while resulting in interference of moderate severity in an area where the legislator is afforded broad leeway. The legislator’s assessment that a widening gap between the revenues and expenditures of statutory health insurance would arise unless legislative measures were taken is not objectionable under constitutional law. It is not ascertainable that this assessment is flawed.
(1) In addition, the particular features of the statutory health insurance system must be taken into account.
(a) The statutory health insurance system is, for the most part, not driven by market forces. Service providers that challenge cost containment measures do not challenge state measures that concern their own activities and services in a free market; rather, such challenges concern their involvement in the comprehensive social system of statutory health insurance which is financed by the contributions of those insured and for which the state is responsible with regard to its proper functioning. It is inherent in the system that the legislator bears special responsibility for the stabilisation of the costs of statutory health insurance – a pay-as-you-go healthcare system financed by contributions which provides full healthcare to almost 90% of the population that is a necessary part of the social state.
(b) All of this means that service providers are particularly subject to the effects of legislation concerning the social state. They are beneficiaries of the statutory health insurance’s system of benefits in kind, which provides them with greater economic security than a system of free competition. This is especially true for pharmaceutical companies. Ultimately, statutory health insurance providers are customers who are obliged to supply the medicinal products prescribed by contracted doctors to those insured.
(c) To the extent that protected legitimate expectations of pharmaceutical companies as to the invariability of the pricing rules in the statutory health insurance system exist at all, they are very limited. As the flip side to the state’s responsibility to provide stability, this applies above all in relation to measures that serve to counteract structural deficits in the statutory health insurance system. But pharmaceutical companies must also expect cost containment measures as a matter of course, particularly when these are already known as measures in the respective areas of service and when price setting was not unrestricted even before the entry into force of the new rules or when prior cost containment measures must be ‘improved’ and/or consequences must be drawn from their shortcomings.
(d) This is especially the case when the legislator imposes burdens on those who, in its view, bear particular responsibility for the increases in cost. If the legislator seeks to counteract excessive deficits that have been identified or will likely arise through cost containment measures, it is relevant, when determining the appropriateness of these measures, whether the legislator takes action with regard to those who have especially contributed to the deficit. According to the legislator’s unobjectionable assessment, which the Federal Constitutional Court only reviews as to its plausibility, past increases in the costs for statutory health insurance and those that are anticipated in the future are the direct result of a disproportionate increase in spending on medicinal products. The increase in expenditures for medicinal products over the last ten years was six times higher than the total increase in benefit expenditures per insured person. The calculations submitted in the present proceedings are not suitable for refuting this legislative assessment, as they use different points of reference and calculation methods, which lead to different results than the calculations on which the legislator based its assessment. The legislator’s assessment that the most recent cost increases can be attributed to patented medicinal products in particular is likewise not evidently flawed. According to the figures generally available and submitted in the statements in these proceedings, the share of patented medicinal products in total sales of medicinal products has, like the sales of patented medicinal products, increased disproportionately.
(e) In light of the foregoing, the manufacturer discount is appropriate. The legislator’s special responsibility for the stabilisation of the costs of statutory health insurance and the particular effects that legislation concerning the social state has on pharmaceutical companies, which in the legislator’s view have some responsibility for cost control, mean that the aim of the common good pursued by the legislator must clearly prevail. The measure significantly furthers this aim of the common good.
(2) It is also not ascertainable that the limits of reasonableness have been exceeded due to a risk of stifling the affected industry. While the cost containment of EUR 1.3 billion resulting from the measure is considerable in itself, particularly in an ex post assessment, it does not exceed the limits of what is reasonable. Not only is this the case because, according to the evaluations available, there is no evidence of instability in the pharmaceutical industry in Germany or a risk of imperilling the supply of medicinal products. It must also be taken into account that prices for identical medicinal products have been higher on average in Germany than in other European countries; moreover, it has neither been submitted nor is it otherwise ascertainable that the manufacturer discount that was in effect until 31 December 2023 has led to relevant market adjustments.
(3) The extension of the manufacturer discount to importers of medicinal products is also not inappropriate. In this regard, it must be taken into account that the legislator has plausibly identified pharmaceutical prices as the cause for the considerable increase in expenditures. It is also in the interest of ensuring the supply of medicinal products for those insured, and thus within the legislator’s discretion, to promote parallel imports as an essential factor for maintaining competition, while at the same time ensuring that parallel imports have a competitive effect. In order to maintain the price differential between original medicinal products and parallel imports, price regulations must also apply to such imports.
2. The challenged provisions also do not violate the fundamental right under Art. 3(1) of the Basic Law of the complainant in proceedings I. It is true that there is no differentiation between importers and manufacturers of medicinal products, as they are grouped together as pharmaceutical companies. However, this lack of differentiation is justified.
In the present case, the standard for justification is limited to the prohibition of arbitrariness, because the (lack of) differentiation is not linked to a person or product, but only to a distribution channel and it concerns an area in which the legislator is afforded broad leeway and discretion.
Based on this standard, a violation of Art. 3(1) of the Basic Law can be evidently ruled out. By not differentiating between importers and manufacturers, the legislator pursues the aim of cost containment specifically with regard to patented medicinal products and therefore also includes importers of patented medicinal products in the cost containment measure. A general exemption of importers of medicinal products from the manufacturer discount would make it more difficult to achieve that provision’s aim.
3. The interference with the complainants’ occupational freedom resulting from the extension of the price moratorium is likewise justified. In particular, the extended price moratorium is appropriate. In balancing the effects of the fundamental rights interference on the pharmaceutical companies on the one hand and the legitimate interests of the common good pursued by the legislator on the other, the interests of the common good pursued by the provision prevail.
The extended price moratorium, which must de facto be classified as a price cap, constitutes a considerable to serious interference with fundamental rights. However, the impairment of the pharmaceutical companies’ occupational freedom resulting from the extended price moratorium is not disproportionate to the significance and urgency of the financial stability of statutory health insurance. This follows from the exceptional significance of the interest of the common good in terms of the legislative leeway afforded, which is capable of justifying even a considerable to serious interference. It must also be taken into account that those affected stand to benefit from the financial stability of statutory health insurance and are subject to legislation concerning social policy to a particular degree. Moreover, it must be noted that past and future cost increases in statutory health insurance can be attributed largely to the sale of patented medicinal products. Further, the Act does not significantly impair the legitimate expectations of pharmaceutical companies, as it is based on known cost containment measures taken in response to specific circumstances. It is also not ascertainable that the limits of reasonableness have been exceeded due to the risk of stifling the affected industry.
4. Even considering the admissibly challenged legislative measures in a cumulative assessment, no violation of the complainants’ constitutional rights can be found.
With regard to the question of whether the severity of interference resulting from the provisions is no longer tolerable under the rule of law, it must be taken into account that the aim pursued by the challenged provisions – the financial stabilisation of statutory health insurance – is an exceptionally significant aim of the common good that is considerably furthered by the provisions, and that the pharmaceutical companies are beneficiaries of the statutory health insurance’s system of benefits in kind and are as such particularly subject to the effects of legislation concerning the social state. Moreover, the burdens are limited in time. In an overall assessment, no impairments are ascertainable that would exceed the severity of interference tolerable under the rule of law.