VZCZCXRO6321
PP RUEHAG RUEHDF RUEHLZ
DE RUEHRL #0371/01 0541545
ZNR UUUUU ZZH
P 231545Z FEB 07
FM AMEMBASSY BERLIN
TO RUEHC/SECSTATE WASHDC PRIORITY 7186
INFO RUCNMEU/EU INTEREST
RUCNFRG/FRG COLLECTIVE
RUCPDOC/DEPT OF COMMERCE WASHDC

UNCLAS SECTION 01 OF 02 BERLIN 000371 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
STATE FOR EB/TPP/IPE JBOGER AND COMMERCE FOR ITA/MAC/OIPR 
PETERS 
 
E.O. 12958: N/A 
TAGS: ECON ETRD KIPR GM
SUBJECT: MISSION GERMANY SUBMISSION FOR 2007 SPECIAL 301 
REVIEW 
 
REF: STATE 7944 
 
SENSITIVE BUT UNCLASSIFIED.  NOT FOR INTERNET DISTRIBUTION. 
 
¶1.  (SBU) SUMMARY.  Mission Germany recommends that Germany 
receive the same treatment in the 2007 301 Report as it 
received in 2006 and not be listed in the priority watch list 
category.  The situation facing American pharmaceutical 
companies in Germany has not appreciably deteriorated during 
the past year.  The German government is currently 
implementing a wide-scale health care reform.  It is too 
early to evaluate how this reform will impact American 
pharmaceutical companies, and unfair to prejudge this 
legislation before it is implemented.  An amendment to the 
law on pharmaceutical reference pricing system was passed in 
2006, addressing some industry concerns about disparate 
treatment for generic and patented pharmaceuticals.  The 
amendment attempted to clarify the procedure by which drugs 
can be listed as innovative.  U.S. industry maintains that 
Germany's reference pricing system continues to unfairly 
discriminate against U.S. companies.  While we remain 
concerned about the government's referenced pricing system 
and its impact on U.S. industry we are improving our dialogue 
with the German government to educate them regarding the 
impact of these regulations on the pharmaceutical sector and 
the role of innovation in Germany.  We believe this dialogue 
is bearing fruit and the situation has not appreciably 
deteriorated over the past year to warrant Germany's 
placement on the priority watch list.  END SUMMARY. 
 
¶2.  (SBU) PhRMA's Special 301 submissions for 2006 and 2007 
are very similar, reflecting the fact that the situation for 
PhRMA in Germany has not appreciably changed during the past 
year.  PhRMA raises concerns about the impact of pending 
health care reform legislation.  However, post deems it 
inappropriate to judge the German government on legislation 
that has not yet been implemented and whose impact on the 
pharmaceutical industry remains unclear. 
 
¶3.  (SBU) During the past year, the German government passed 
the Health Cost Containment Act, which did address some of 
PhRMA's concerns.  The act, which went into effect on April 
1, was the first major amendment to the Fixed Referenced 
Priced System instituted in 2004 and clarifies the process 
for deciding which drugs are truly innovative, and thus 
exempt from reference pricing.  For the first time, it also 
imposes a mandatory 10% rebate on generics, which will affect 
mainly German manufacturers and addresses PhRMA's complaint 
that the law unfairly favors generic drugs (mainly of German 
origin) at the expense of patented drugs (mainly of U.S. 
origin).  The law also requires the government to develop 
rules clearly defining innovative drugs.  These rules are 
intended to make the process for declaring which drugs are 
innovative more reliable and transparent.  While the 
amendment also contained measures criticized by industry, we 
believe it is an attempt by the government to address 
industry concerns and try to improve legislation on reference 
pricing.  We have asked industry to document their concerns 
over specific decisions of the Joint Federal Committee of 
Doctors and Sick Funds and inform of the Embassy of any 
applications for innovative drugs that were denied.  During 
the past year, we have received no such information from any 
member of PhRMA. 
 
¶4.  (SBU) The Embassy has continued to engage with the German 
government on the need for transparency in the process of 
determining innovative drugs.  Deputy Secretary of Health and 
Human Services Alex Azar visited Germany in February 2006 and 
met with German officials and industry to discuss the need 
for innovation in the pharmaceutical sector.  The Ambassador 
and other USG officials have met repeatedly with the 
officials from the ministries of Health and Economics to 
discuss our concerns.  German Health Minister Schmidt 
traveled to the U.S. several times in 2006 to gather more 
information on the U.S. approach to cost containment and 
innovation in the health care sector.  USTR is proposing to 
head a delegation in the spring of 2007 to visit Germany to 
continue this dialogue. 
 
¶5.  (SBU) We have continue to  concerns regarding the impact 
of the German reference pricing system for pharmaceuticals on 
U.S. industry.  But we believe that placing Germany onthe 
priority watch list could have a damaging impact on our 
ongoing discussions with Germany on the need to foster a 
climate for innovation in the health care sector.  The German 
government has addressed some industry concerns over the past 
 
BERLIN 00000371  002 OF 002 
 
 
year.  It is also up to industry to test the provisions of 
the amendment to the reference pricing system to see if 
Germany has made its system of declaring drugs innovative 
more transparent and fair.  It also remains to be seen 
whether the impact of new health care legislation will be 
detrimental to the American pharmaceutical industry.  Such 
concerns warrant further monitoring and a continued dialogue, 
not punitive measures. 
TIMKEN JR