German cabinet approves bill to slash drug costs

BERLIN, June 29 (Reuters) - German Chancellor Angela Merkel's cabinet approved a draft bill which aims to eventually save some 2 billion euros ($2.4 billion) per annum in the cost of patented drugs by breaking up drugmakers' pricing power.

In a special session on Tuesday, the cabinet agreed the law drafted by Health Minister Philipp Roesler, which should curb profits made by drug companies and wholesalers.

Coupled with other measures already taken by the government, the new law -- due to be signed off by parliament in the autumn, and to take effect from Jan. 1 -- aims to save around 1.5 billion euros from next year, Roesler said.

Thereafter this figure is due to rise to around 2 billion euros, easing the strain on cash-strapped health insurers.

The measures will enable health insurers, which spend more than 30 billion euros on pharmaceuticals each year, to negotiate on the price of newly approved treatments by using a cost-benefit analysis of new products.

Statutory health insurers in Germany face a funding gap of some 11 billion euros next year alone.

German lawmakers have turned their attention to patented drugs after completing sweeping changes to the market for generic drugs in Europe's largest economy.

Health insurers can now tender bulk procurement deals of generic drugs at a discount, a move led by Germany's largest health plan AOK, leaving drugmakers scrambling for contracts.

The VFA association of research-based pharmaceutical makers with operations in Germany attacked the bill, saying it skewed the drugs market in favour of health insurers. (Reporting by Thorsten Severin; Writing by Dave Graham; Editing by David Holmes) ($1=.8194 Euro)