The potential for German Chancellor Olaf Scholz’s government to secure pro-pharmaceutical industry concessions related to the proposed overhaul of EU pharmaceutical legislation may have received a significant boost. A recent report from the German Federal Ministry of Health has raised substantial concerns regarding critical elements of the reform strategy, further underscoring the need for careful policy consideration. Additionally, the EU’s political landscape has shifted with the collapse of Prime Minister Mark Rutte’s government in the Netherlands, says GlobalData, a leading data and analytics company.

Eoin Martin Ryan, Pharma Research Analyst at GlobalData, comments: “The chances of achieving an early breakthrough in political negotiations on implementing the EU’s pharma strategy were dealt a blow by Germany’s Federal Ministry of Health highlighting considerable risks linked to the EU proposals to shorten the baseline regulatory data protection and to introduce variable market exclusivity periods. The intervention by the Ministry of Health raises the probability that German diplomats may soon seek to negotiate pro-industry changes to safeguard pharma investments.”

The German government’s view that changes to the EU strategy are desirable is contested by a pro-reform alliance led by the Netherlands. But the collapse of Rutte’s government risks causing unexpected consequences when it comes to negotiating an EU consensus position over the pharmaceutical reform strategy.

Ryan continues: “The Netherlands is heading into fresh elections in November 2023. The outcome of these elections is highly uncertain. However, the result will probably produce a fragmented political landscape. Forming the next coalition administration is therefore expected to be a long and difficult process. Hence, politics is likely to turn inwards to national issues. From this perspective, the Netherlands may temporarily be in a state of paralysis when it comes to EU policymaking.”

This may have profound implications for the EU’s pharmaceutical legislative reform proposals since there is a possibility that Dutch diplomats could be distracted at a sensitive time in negotiations to sway EU institutions and member states on the merits of implementing the pharma strategy. The scenario may play into Germany’s hands.

Policymakers in the Netherlands have taken a hardline against the innovative pharmaceutical industry and are an architect of the reform’s proposals to curb drug price growth. Without Rutte at the helm of an alliance of like-minded countries (which includes Austria, Poland, and Slovakia), it is possible the EU actors could be influenced to opt for a less ambitious approach, potentially resulting in a greater willingness by policymakers to offer concessions of some kind to the pharma sector.

One potential reason why any changes are still likely to be minor in nature is that reformist policymakers have a good argument that a major drug pricing crackdown underway in the US, and economic and regulatory headaches in the UK, mitigates the danger to EU pharmaceutical investment that stems from the draft legislation. This thinking is based on the idea that, if anything, the US price changes are potentially more detrimental to the innovative industry than the EU reforms.

Ryan concludes: “This is debatable. But it is the case that US developments will begin to be implemented in Q4 2023, well ahead of the EU plan. It is therefore plausible that the regulatory uncertainty building on both sides of the Atlantic may cancel each other out, meaning that neither the US nor the EU can gain a decisive advantage over the other in terms of attracting pharmaceutical industry investment.

“As such, when pro-reform EU governments challenge the German government’s argument that the reform package could have a chilling effect on pharmaceutical investment in the region, their strong counterargument is likely to start with the point that the EU rule changes should not be seen in isolation from other global pricing and regulatory developments, especially in the EU’s main pharma competitors.”

GlobalData’s Price Intelligence (POLI) service is the leading pharmaceutical pricing tool in the market, providing comprehensive data, analytics and analysis of pricing and reimbursement around the world every day.