Lawmakers in Germany have passed a bill that will cut health insurance costs in a shakeup that has generated strong resistance from global drugmakers.
Germany’s Bundestag, the country’s primary legislative body and national parliament, gave approval to a financial reform of the statutory health insurance (GKV) system. The law will curb spending on various aspects of healthcare systems, including medicines, doctors, and hospitals.
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There are a range of cost-containment measures across the bill: the mandatory rebates that pharma companies provide to health insurance will rise, hospital costs passed to insurers will be limited, and reimbursement rates will be adjusted. A key statute is that future spending growth will be tied to overall economic growth.
The reform is one of Chancellor Friedrich Merz’s flagship manifesto agendas designed to battle spiralling insurance premiums. Currently, total contributions to the statutory healthcare system average about 17.5% of an employee’s gross salary. Both employees and employers contribute equally.
Presenting the bill, Merz said: “This health insurance reform represents one of the most significant welfare state reforms of recent decades. By saving more than €16bn, we are preventing premiums for those with state health insurance from having to rise.”
Considered one of the largest healthcare system shakeups in German modern history, the bill has generated significant controversy. The parliamentary vote was far from a consensus – 318 backed the bill while 284 voted against it.
The core concern cited by some political parties in Germany is determining which sector should bear the brunt of making the country’s healthcare system financially sustainable. Germany is the largest healthcare market in Europe, leading in total expenditure and population coverage. The country trails only the US, China, and Japan when ranked for the largest pharmaceutical markets globally, as per 2023 data.
The pharma industry has felt singled out by the bill and has duly voiced concerns regarding harm to life sciences competitiveness. Eli Lilly, Boehringer Ingelheim, Pfizer and Merck KGaA have said the proposals make long-term investment decisions difficult amid the economic uncertainty.
Lilly’s CEO, Dave Ricks, told German newspaper Handelsblatt that the company will scale back manufacturing facility construction in the wake of the reform, instead redirecting some of the funds back to the US.
Reacting to the Bundestag vote, Han Steutel, president of industry trade body vfa, said: “[This law] jeopardises the supply of innovative therapies to patients in Germany. The new law will lead to global companies no longer investing in Germany, jobs being lost, and innovative medicines no longer being available in Germany. One of Germany’s last successful, innovative industries will thus be destroyed.”
The reform also arrives against a backdrop of more stringent examination of Germany’s drug price control by the Office of the US Trade Representative (USTR). In June 2026, the US government agency launched a new investigation targeting Germany over what it describes as “persistent underpayment for innovative medicines” and other policies discriminatory to US commerce. President Donald Trump has long asserted that the US pays a disproportionate amount of money on the global pharma stage, meaning the investigation could place further pressure on the German government’s fast-moving healthcare agenda.
