Analysis-Big pharma taps UK playbook to pressure European capitals on drug prices

By Maggie Fick and Bhanvi Satija

LONDON, June 17 (Reuters) – Global pharmaceutical companies, facing pushback from European capitals on drug pricing, are turning to a playbook that brought them recent success in Britain: threats of pulling investment and expansion plans to pressure policymakers.

The latest target has been Germany, which is debating legislation to tighten spending on medicines. The industry notched a win in Britain when the government agreed to increase spending on medicines as part of a broader deal to avoid Washington-imposed tariffs.

Pfizer wrote last week to the German chancellor that its Germany investments were at risk over the drug-pricing policy, while AstraZeneca warned that it may not launch new medicines in Germany if the changes go ahead.

Earlier in June, Eli Lilly announced it would halve a planned 2.3 billion euros ($2.7 billion) investment and even Germany-based Boehringer Ingelheim said it was scrapping expansion plans worth 900 million euros. Both cited the proposed legislation.

“The industry is delighted with how the UK government folded in the face of their pressure,” said Diarmaid MacDonald of Just Treatment, a UK-based patient group. “They would love to see others replicate that capitulation.”

Germany’s health ministry said this week that nothing had been decided yet and declined to comment further on any parliamentary deliberations.

GERMANY UNDER PRESSURE

Critics say Britain yielded to industry pressure. The UK government said the April agreement with Washington secures tariff-free access to the U.S. while creating a more innovation-friendly environment for drugmakers to provide high-skill jobs.

Now the pressure on Germany is starting to hit home.

On Monday, a government source told Reuters it would scrap some of the plan the industry opposed, ditching a variable discount mechanism for a fixed one to address concerns the uncertainty would hit investment.

While the move would reduce uncertainty, industry sources said that does not address broader concerns about Germany’s pricing environment. The proposed law faces parliamentary debates over the coming months and could be changed.

The industry sources said the UK agreement was viewed positively by drugmakers not only due to changes to the system for valuing and paying for new drugs, but also because it involved commitments on innovation and patient access.

Healthcare analyst Diederik Stadig of ING Bank said drugmakers were being more reactive in Germany versus a more premeditated strategy for Britain, though he agreed the two cases were similar.

“The German government made a proposal, ‘we want to reform pricing’. And the industry said, ‘OK, that’s all well and good, but that affects our return on investment’,” he said.

Tariffs, U.S. pricing policy, the rise of China and the lucrative nature of the U.S. market all make Europe less appealing currently, Stadig said. “The industry is making Europe acutely aware of this”.

A BROADER TUSSLE OVER DRUG PRICES

The proposed legislation in Germany to cap ⁠rapidly ​growing costs in ​the statutory health insurance system has thrust the country into the centre of a broader tussle between drugmakers and European governments that began several months ago.

In France, the national health authority in April accused drugmakers of using “coercive pressure” to influence clinical assessments, including threats to withdraw medicines from the market.

HollandBio, the Netherlands’ biotech lobby, said companies were becoming more cautious about reimbursement filings and that the country risked slipping further down drug-launch priority lists.

That tension has been sharpened by the impact on Europe of U.S. President Donald Trump’s most-favored-nation pricing push, which aims to tie prescription medicine prices in the lucrative U.S. market to ​lower prices elsewhere, including in Europe.

Major drugmakers have struck deals with the White House to lower drug costs in exchange for tariff exemptions, adding to pressure for increasing prices elsewhere.

Some critics saw Germany’s partial retreat as a troubling sign of the industry’s leverage, but noted that European nations also had sway given the bloc remained an important market despite being less lucrative than the United States.

“America is not the only market in the world,” said Sally Gainsbury, analyst at healthcare think tank Nuffield Trust, while adding that the UK-U.S. pricing agreement was nonetheless a warning for Europe.

“The depressing reality is that the ‘UK playbook’ here means health systems will spend more, but will get less health benefit for their populations,” she said.

($1 = 0.8615 euros)

(Reporting by Maggie Fick and Bhanvi Satija in London; Editing by Adam Jourdan and Bill Berkrot)