New redemption price for German medical cannabis flowers

In short

EUR 4.30 instead of EUR 9.52 per gram: The reimbursable base price for medical cannabis grown in Germany has been almost halved while the base price for imported cannabis flowers remains unchanged.

According to an arbitration decision of June 17, 2022, a base price of EUR 4.30 (plus surcharges of 90% or 100%) per gram is reimbursable for cannabis flowers grown in Germany. Before the decision, the compulsory health insurance funds reimbursed a basic price of 9.52 euros per gram plus variable supplements for all cannabis flowers. This also applied to cannabis flowers grown in Germany and sold to pharmacies for a fixed price of just 4.30 euros per gram.

As the potential legalization of recreational cannabis looms on the horizon, the reduction in the reimbursable base price of German cannabis once again shows the dynamics of the German cannabis market. The price reduction has the potential to further strengthen the position of medical cannabis importers and make Germany an even more attractive market.

Key points to remember

• After Annex 10 of the German contract on the pricing of substances and substance preparations (“Hilftax“) has already all but ended the era of individual cannabis flower pricing, the current arbitration decision adds further structure to the field.
• The drop in the reimbursable basic price of German cannabis flowers makes these flowers less profitable and potentially less attractive for pharmacies.
• Pharmacies have less financial flexibility to calculate their cannabis business, as lower profit margins for certain flower types cannot be recouped by higher margins for German flowers.
• Importers of medical cannabis could benefit from the lower reimbursable base price of German cannabis.

Background

German medical cannabis

Since 2017, cannabis flowers can be prescribed by doctors in Germany under certain circumstances. Cannabis cultivation was not available in Germany initially, so all flowers had to be imported. To meet growing demand and reduce reliance on imports, three medical cannabis companies were granted licenses to grow a total of 10,400 kilos of medical cannabis in Germany over four years through a tender process in 2019. Part of the companies’ obligations is to exclusively sell German cannabis to the so-called Cannabis Agency of the Federal Institute for Drugs and Medical Devices (Federal Institute for Arzneimittel und Medizinprodukte or BfArM) which will then resell it to pharmacies. In July 2021, Germany’s first cannabis flowers were sold to pharmacies by the BfArM cannabis agency.

Previous tariff regime

Originally, medical cannabis prices were calculated solely on the basis of German drug price regulations (Arzneimittelpreisverordnung or AMPreisV). According to AMPreisV, reimbursable prices were calculated based on the pharmacy purchase price (the price at which the pharmacy purchased a product from a cannabis company) adding variable surcharges. The pharmacy’s purchase price has not been further determined. As a result, cannabis companies were free to set prices for their products.

In March 2020, Annex 10 of the Hilfstaxe entered into force and set a new base price of 9.52 euros per gram for all cannabis flowers that would be reimbursed by statutory health insurance funds to pharmacies. In addition to the basic price, pharmacies could claim surcharges, which decrease with the volume sold. While Schedule 10 did not in theory affect the ability of cannabis companies to set their own prices, in practice it did set a price limit by determining the reimbursable base price for cannabis flowers (because if a pharmacy does not will be reimbursed only for a base price of EUR 9.52 per gram plus supplement, he is unlikely to buy products for which he will have to pay significantly more than this amount).

Since Annex 10 did not distinguish between flowers from different countries of origin, the above also applied to flowers grown in Germany, with one significant difference: all German cannabis flowers are sold exclusively by the BfArM cannabis agency to pharmacies for a fixed amount. price of 4.30 euros per gram. As a result, a pharmacy buying German cannabis had to pay EUR 4.30 per gram, but was entitled to claim a refund of EUR 9.52 per gram plus surcharges. In April 2021, the German Ministry of Health requested the German Association of Pharmacists and the National Association of Statutory Health Insurance Funds to amend the Hilfstaxe so that the lower pharmacy purchase price of German cannabis by EUR 4.30 per gram be reflected accordingly. After unsuccessful negotiations and a year of arbitration proceedings, the ongoing dispute between the German Association of Pharmacists and the National Association of Statutory Health Insurance Funds over cannabis prices has now been settled by a decision of arbitration.

New refund rules

According to the arbitration decision of June 17, 2022, the reimbursable basic price of German cannabis is 4.30 euros per gram. Pharmacies can add a 100% (for “unchanged” cannabis flower) or 90% (for processed cannabis flower) surcharge, regardless of the volume prescribed.

In addition, the decision addresses the issue of the destruction of unused cannabis flowers after the expiry of the shelf life. This is particularly relevant for German cannabis flowers, as they are only sold to pharmacies in larger 50 gram containers. Therefore, there is a risk that the cannabis will not be used before the end of the shelf life. The arbitration award stipulates that if a pharmacy has to destroy German cannabis flowers, it can request reimbursement for 5 grams to 45 grams, at 4.30 euros per gram. This option is available up to four times a year.

These new German cannabis refund rules come into effect retroactively to July 1, 2021.

Consequences

In general, since the reimbursable price of German cannabis was lowered, German cannabis has become less profitable for pharmacies, at least in the event of lower prescription volumes (For imported cannabis flowers, the reimbursable surcharges always decrease with the increase in prescription volumes while there is no decrease (more supplements for German cannabis flowers. Therefore, the higher the prescription volume, the less the reimbursable base price becomes relevant). At first sight, this question seems to be of limited relevance, since the German cannabis market share only covers a fraction of the total demand. However, it cannot be ruled out that the quantities produced in Germany will increase over time. Without the new reimbursement rules, pharmacies might have preferred to buy German cannabis and thus achieve significantly higher profit margins. This would also have allowed German cannabis to establish itself on the market despite (still) limited availability. This effect is no longer to be expected given the new regulations. As a result, the German market has the potential to become even more attractive for importers of medical cannabis.