In this Podcast episode, Dr. Stefan Walzer is speaking to Prof. Dr. Wagschal from the University of Freiburg about the upcoming elections in Germany.
They are discussing latest forecasts and potential policy implications.
Prof. Wagschal also explains limitations of forecasts and dynamics of recent elections.
Another important part is in the potential (new) coalitions and their likely impact on the health care market.
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Dr. Stefan Walzer: Welcome to MAP the biweekly Market Access Podcast provided by MArS Market Access and Pricing Strategy, which is your health care consultancy in the German speaking markets. MArS makes it as easy as possible for you to get your pharmaceutical, Medtech or digital health product to the market and of course, get the price it deserves. My name is Stefan Walzer and I am the founder of MArS and a health economist by training and working in the fields of market access, reimbursement, pricing and health economics since 2004. And now let's learn about the market access and reimbursement systems around the globe.
German elections coming up in autumn 2021. What can we expect, especially when keeping an eye on market access, health care reimbursement and obviously the kind of impact on the pricing bit? I think, first of all, what will really change also from a political perspective, quite clearly the most important piece and the most important information for everybody listening to it, is that Germany will get a new chancellor, for sure. Angela Merkel will no more be the chancellor after the elections. She's not going to the race again.
I mean, she was the chancellor for sixteen years by then and we’ll get then a new chancellor, most likely one of either the Conservatives, the CDU, the Social Democrats, the SPD or one by the Greens, which is quite interesting. The kind of forecast of the polls are also showing a lot of variety also and especially maybe interestingly, not so much yet from the content driven, but there are changes also in the kind of forecasts so far in terms of the election outcomes.
There was a couple of months ago the Greens clearly in front before the Conservatives. Then there were a couple of discussions around the candidate by the Greens, changing more again to the favor of one of the Conservatives. And nowadays, as of end of August beginning of September 2021, there's even the expectations that the Social Democrats are now in favour of the potential voters with roughly 22 to 24 percent, depending on which kind of numbers were taken.
Just a few percentage points in front before the Conservatives, but also the Greens are still in the race to go. I think that's very interesting, obviously, to see what this might really have kind of impact and also which kind of coalitions might obviously be doable. I think the beginning of July, it clearly looked that it might be probably the kind of coalition between the Conservatives and the Greens. I think even before that, in late spring, it looked more that the Greens might have the choices with whom to have a coalition.
Nowadays, it rather looks that we might have three parties into the coalition where then obviously as well, for example, the Liberals and even the kind of left party, the Linke, is currently being debated on, at least with some of the parties which are going to the elections anyhow. What does it really mean for health care? Interestingly, when we have a look at the various kind of programs by the political parties you see and read a lot about digitalisation.
Liberals also making up, obviously for start-ups, the conservatives even speak about, at least in a sentence about virtual hospitals but also, for example, the Greens are speaking about integrated care, patient focus. But let's just say it and state, the Left are also speaking of a maximum pharma pricing. I think unrealistically that they will really make it. Also, with that kind of idea; but just to mention it
So, what does it really mean when we really go more into the details of the programs? It's not really a lot of content in there to discuss about it. Very important, keeping in mind here also, is the potential various negative effects on tax income in the last couple of months. Quite obvious and quite evident is the COVID situation, but also, for example, the whole kind of flood issue what we had earlier in July, for example, in North Rhine-Westphalia, which obviously as well have had and will have a further kind of big budget impact in in terms of tax incomes and obviously also in terms of the expenses.
So all stakeholders with whom we spoke, and I agree with them, expect an entry into force of a saving law once a new government is in place. So, likely changes, probably even independent of the new coalition. We might even see it until the end of 2022 already. I think this is quite logic. I would say the biggest kind of threat is that there's no automatic added benefit for orphan drugs anymore within the AMNOG process.
I think some even speak about that, that this could come as early as April 2021. There might be even no more free pricing at launch. Or at least this is probably more likely because this is more easily to be implemented. Then that there might be paybacks of difference between the negotiated and launch price back to the launch date, which is obviously a bigger kind of impact for the pharmaceutical area. For the digital health area, we might see more that a fixed amount grouping for comparable DiGAs might come, especially for those with a comparable efficacy.
We need a well to see which kind of price impact the currently running price negotiations in the DiGA area would also have a kind of impact and quite clearly also for the DiPAs, which is the Digitale Pflegeanwendung, so it is the care applications which might probably have a very similar system to the DiGAs, which is probably more kind of positive effect. And medical devices, most likely, at least as of now, there will not be at least no major changes to be expected.
I think the biggest ones are probably the ones we mentioned, and quite clearly there might be even a bigger discount than a mandatory discount for the various kind of products, especially for drugs coming after the elections. The elephant in the room still, and we will discuss that as well in a minute, is the citizens insurance system, the Buergerversicherung. It's a kind of NHS system which is favored by the, let's say, the left wing parties, Social Democrats, the Greens and obviously from the Linke and the still kind of dual system with the Statutory and the private health insurances, which is obviously then favored from the Conservatives and the Liberals.
So, you see, already with that constellation, I think the likelihood is not that high and we have also heard that writing the webinars. So, then let's just move over as well to our podcast discussion, this time with Professor Dr. Uwe Wagschal. He is a professor of politics at the University of Freiburg, and he has been working on various kind of election swipers, etc. So, we'll just see what the current kind of situation is as of early September, so three to four weeks before the actual elections happening.
Let's just see what he thinks would be the outcomes.
Prof. Wagschal from the University of Freiburg, thank you for your time, and especially now quite shortly before the elections happening here in Germany. Just give us the latest news, let's say. How does the current forecast look like with respect, maybe to the new chancellor in Germany?
Prof. Uwe Wagschal: Well, the forecasts have changed over the past months. I would say rather drastically. Currently, the Christian Democrats are about 20 percent, maybe a little bit more and some institutes and the polls for the SPD are rather bright concerning the history. So, they have surpassed the Christian Democrats. They are now twenty five percent and the Greens, well, the Greens are not as good as they've been four or five months ago.
Currently, there are between 15 and 18 percentage points concerning the polls, so there have been times have been above 20 percent, but that was exaggerated. So, when they claimed they would be able to do for change in Germany and with a new candidate, that's not the first and fourth place, probably the AFD, around 12 percent and the Liberals 12-13 percent.
They are quite close. And according to statistical interference, it's not really likely who will be on the fourth place. So, they are more or less in the same area and then on than the last to say the sixth, the sixth rank, it's the Left “die Linke” around six percent. But what is really striking are we have the so-called others, Sonstigen, so, the rest of the pack, so to say. 12 percent, this is really very high in the German history and maybe there is a small likelihood that the Freien Waehler, the free voters,
which is a moderate liberal center party, get around three to four percent. So, they have a chance to pass the five percent threshold to get into the parliament. But that's, I would say, high uncertainty that will reach the five percent since they're more strong in the south of Germany then in the northern part of Germany. And probably they might get five percent in Bavaria, five percent in Rhineland-Palatinate and Baden-Wuerttemberg but all the others would be would be hard there. Into the current polls, but to continue, maybe to give some insights, polls are always uncertain, and we’ve seen a big variance over the past weeks, as I said in the beginning, and we have all the problems with the polls.
I want just to recall you that we have had elections in June, in Sachsen-Anhalt, which is a small state in the eastern part of Germany. And just three or four days before the elections, the polls said Christian Democrats would get 27 percent and on the election Day, they got 37 percent. So, that was a big mistake of 10 percentage points. And we've seen such
mistakes of the pollsters over the past years, several times. So, this has to do, of course, with the methodological issues with the size of the polls and with the political weighting of the polls and the institute sometimes still leaning more to the left, sometimes they're leaning to the right. So, we have a big, big variance between the institutes and we have around eight pollster institutes in Germany. And so probably also well, another point which I want to raise is that they have different methods to collect the data.
So, sometimes they're using telephones. And as we all know, thirty five percent of the population don't have
a telephone with line. They have cell phones, which is difficult for pollsters. And sometimes they're using only internet like the Allensbach Institute. They use only internet. Sometimes they're mixing so to say, and the third and the fourth method is interviews, which is conducted by their own institute. And so you see, we have four methods to collect data, and this is also an explanation why we have, I would say, some unclear messages concerning the percentages at the end.
Dr. Stefan Walzer: Yeah, very interesting. I mean, so one could see that we currently don't have a statistically significant difference between maybe the first three parties.
Prof. Uwe Wagschal: Well, according to statistics, we have an error margin of around three, depending on the size and power, but so around three percentage points are roughly. So by statistical inference, you can't say when you have 21 percent or 24 percent, who is in the end, just in front. So that's just the calculaton.
You have some margin, some brackets, and so the brackets are overlapping. And in the end, it's difficult to say and it's not possible to say who's in the end leading with more likelihood, of course, that the party who is leading will be the winner, but by a statistical so to say reasoning. It can also be the case that the second ranked party can be in front of the other one. And this is the case currently with the situation Christian Democrats versus Social Democrats.
Whereas the Greens, when they have only 15 percent, they are so to say their brackets are just
much lower than those of the Social Democrats. So it’s only a case between Greens and the Christian Democrats will be second. But I would bet a lot of money that the Christian Democrats will be in front of the Greens because their second votes in Saarland would not be counted which are one percentage point less and. and we know that when the election is approaching, that's a kind of rally around the flag effect. And historically, Christian Democrats are the strongest party in Germany.
And you see all the internet surveys, they leave out many of the elderly. And so, the average voter age is around 56-57, a little bit higher for the Christian Democrats. So the elderly are going probably to deliver again for Christian Democrats. And you will see in the end, they will be in the end much higher than the 20 percent which are now forecasted by most of the pollsters.
Dr. Stefan Walzer: Yeah. And I think it's something what we have seen probably also some years ago in the elections in North Rhine-Westphalia, by the way, also with the CDU with Armin Laschet, right?
Prof. Uwe Wagschal: Yes, and so with my myself, my institute, we were running our political panel Deutschland and we have similar effects. So especially elderly, elderly are tending to vote for Christian Democrats and the younger, more for the Greens. But you see, the Greens are not very liked within the ranks of the elderly people. Right? So, we have kind of over estimating for the Greens and underestimating for the Christian Democrats because when you use the internet for collecting the data, the elderly are not just in your data set and the other ones are overrepresented.
Therefore, you have to take this into account. You can do it, the weighting, you can do political weighting. But we have seen also in the past that political weighting is difficult and also weighting by the social demographic factors like age, gende, region where you’re coming from. This can also, well, interfere to some extent, and it's a tricky business, weighting a social demographic factors and separated by political factors.
Dr. Stefan Walzer: Yeah, that's absolutely true. That's true. So, do you expect any, let's say, maybe even further bigger changes with respect the focus in the next weeks until the election, when there was quite a big change, let's say, between June, July and early September?
Prof. Uwe Wagschal: Yes. And that's as I said several times. No, it's quite surprising that that we have this huge variance
within the data within the published data. And well, you might say we have also changes in the society, so religious affiliation goes down that is not working for the Christian Democrats, but we have also a change in society. And now the fact with the media: We see a clear polarization between the media, some are really in favor of the greens and some moral, the conservative once, they are now arguing for the Christian Democrats.
And this will also have some effect. And now the prominence of the
people from culture, from sports, they are living there. So to say, they advise how to vote and who to vote. And so that might influence also the situation. But as I said, when the election day is approaching, we have to rally around the flag effect. And this might help the Christian Democrats to some extent, maybe also the Social Democrats, since they have so to say, the largest bulk of stem voters for their party.
But you don't know what will happen. And politics with scandals and other scandals and corruption may be. And so, these short term effects will have an effect. But on the other hand, you
can now vote. We have started voting. The voting process has started since two weeks, I think, and so many are casting their votes. And this, of course, these voters are gone. So they are out of interest and so they have casted their vote. And so this has all to be taken into account.
So, we will see probably a much higher figure for these latter voters. And so this has also kind of effect since when the situation is working more for the Social Democrats and for the Greens, probably more Greens and the Democrats will be in this letter, postal voting.
So, another factor is that the more educated are voting with postal voting and the more Greens are doing postal voting. So, this can also be seen in the past data. Just nowhere published.
Dr. Stefan Walzer: Interesting. Very good. So maybe moving a bit away from the, let's say, individual results of the parties towards obviously what we're all looking forward what will be potentially the new government meaning which coalition might be potentially likely as of September 6th and 2021? Big question mark.
Prof. Uwe Wagschal: So first of all,
50 percent is needed to form the government, but 50 percent of seats in the parliament. So, we have to deduct the lost votes. All parties under five percent. We have 40 parties running with lists plus seven other parties, just only four candidates, so 47 parties in Germany, that is a historical high and probably only six will enter the parliament. Right. If we take the Christian Democrats together, then that means 40 parties are not entering, 34 parties are not entering and these are wasted votes. And 12 percent wasted
votes mean that you need 44-45 percent of seats in parliament to form the government. And currently the grand coalition will be possible,
but with a different sign so that the Social Democrats, when Social Democrats will be stronger than the Christian Democrats, so the grand coalition will be in place. So that is probably the most likely
situation. However, we also have the situation that we might have a left-left-green government, which is also a majority and even stronger, with around 50 percent - 52 percent. Well, we have different signs in that direction. So sometimes the Social Democrats said yes. But then the scandal came with Afghanistan and then they said no, the Social Democrats.
If so, to say certain likelihood that this will be effect, but also kind of likelihood that a left-left-green government will not be formed. But currently I would place my bet for a grand coalition. However, on the other hand, we can also form governments
with when the grand coalition is not in place either with the Greens or with the Liberals as partners. So that would then be a three party government and this is also probable.
Possible, right, if currently the grand coalition is around forty five percent, it's quite narrow that it would reach - and I think it's clear you need a strong and stable government for the future. And when it's only three or four, a margin of only three or four parliamentarians, well, that's it. However, what we'll see historically is that we will probably have the largest parliament ever. The size of the parliament should only be 598.
But in the last four years, the parliament has been at a size of 709. And I would guess that with the situation as it is these days, we will approach 800 parliamentarians, so that would be a disaster also for communication. It's a very expensive one and double the size, or maybe six percent larger than the
constitutional size of the parliament. That's not a good sign for our democracy, but you have to change the electoral laws to make it more fair for the public to say.
Dr. Stefan Walzer: Yes, that makes a lot of sense. I mean, you also just brought up, I think, a very good point. I think we need to have a stable government in the future. I mean, how fast do you think we could really have then really a new government in place?
Prof. Uwe Wagschal: That's a really, really interesting question since the last government was formed after half a year or so,
but 180 days almost, so that's half a year. That was the longest. Historically, Germany takes 90 days, three months, that's the average. I would say that for the last 20 years. But
we see all the tendency that the duration of government forming government is increasing. The reason is we have a higher fragmentation of the political system, the higher fragmentation of the parliament, of course, more parties. So, we will have at least six parties, maybe seven. And maybe when you look at other European countries like the Netherlands, or so, they are just negotiating since seven months, I think they have 17 parties in parliament!
You see, if you want to make a political system fairer and fairer, you can look to Belgium, you can look to the Netherlands and then you see the disaster. You have maybe a very fair electoral system, but in the end, you will not be able to form a government. Political systems have to deliver, have to form effective government, and this is not taken into consideration in all this discussion about fair electoral systems. You have to form a government. So that was historically the point for the majority ruling in Great Britain; they can form a government within one week, even in three days or so, that that's their time spent and not six months.
And that's a huge problem. I think when we have economic crisis, political crisis, see, we have four years for a term. And if you lose six months government formation, negotiation processes, maybe 10, the parties
say no, you see all these democratic processes within the parties, which have to take place then again. So, the party is asked, and that by a vote, maybe a
complicated vote, and then it takes another three or four weeks and then we will have a caretaker government with Angela Merkel. Angela Merkel will rule, I promise, at least four months more. So, we probably will have a government, a new government, after not before Christmas
Dr. Stefan Walzer: I think that makes a lot of sense. Also, with the explanations. And I mean, let's just also see, I guess, and obviously, it will be mainly driven by the results. I mean, which kind of coalition might potentially be built up and which options are also open for the winner, especially.
Prof. Uwe Wagschal: Just look at the coalition treaties. We started with the first coalition, a treaty that was 1961 with seven pages. It was a funny paper to read – seven pages! And now we are approaching 200 pages. And they have to negotiate 200 pages and to say, well, of course, to get that after the party platform, the programs and so on, so forth. But there will be tough negotiations. The groups negotiating becoming even more. I think with the first coalition negotiation between the Greens and the Social Democrats, with Schroeder, I think, there were only 8 or 16 persons. The last time there were more than 100!
Dr. Stefan Walzer: How do you want to negotiate with 100 people?
Prof. Uwe Wagschal: Yes, you see what if you have veto players? You have different party organizations and the young Greens are saying, no, as they have said already; so I'm not kidding. They have said we don't want the coalition with the Christian Democrats, the young Greens and then, well, you have all these guys and in the negotiation process and they've a kind of veto and then it will be difficult to reach agreement. Greens, Christian Democrats, we knew it's maybe so. Only 40 percent, if I look at my data from the Wahl-Swiper or Working advice application.
So we see only across,
cross between two parties of about 40 percent. Of course, the Greens and the Social Democrats are high, the Greens on the left are even higher. But then negotiations are difficult and with more veto players on the negotiators, more subgroups that that will be, I promise, difficult and
it will not take place before Christmas.
That's my bet.
Dr. Stefan Walzer: OK. So let's just see for 2022.
I mean, we have quite a good number of listeners, obviously out of the health care area. And so, one of the last questions might be just also going to that kind of reaction. What impact do you expect generally for the health care market by a potential new government, obviously, knowing that we don't know who might be the new government?
Prof. Uwe Wagschal: If we have a left government, though the green-red-red, we would probably see a change in the private health insurance. So that would be the hard times for private health insurers. That's my bet. And we will get a general citizens insurance.
Not maybe the British style with the NHS, but
well, but maybe leaning toward that direction with a state-run administered insurance scheme that will change a lot of things in the market. And if we have a government formed by Christian Democrats, Social Democrats, nothing will change. Stakeholders and veto players are too strong in the system. But if we're going to have a left government, then we have a problem. When the liberals are entering the government, I would say, they will also block such a change for a citizen
looking at other minor facts,
which I have read and at the parties platforms: Probably the Greens are going for more centralized,
so to say, care institutions. They want to centralize a little bit more. Yes, maybe Christian Democrats are more liberal, more federalist leaning.
So, we will see some changes, some minor issues. But I think the big issue is now the Central Citizen Insurance and the strike against private health insurers.
Dr. Stefan Walzer: Yeah, that's true. I think that's now really the kind of big debate, I think I remember when we had the webinar in July. I think we're probably… I was at least also betting that it might be more kind of Christian Democrats plus the Greens in whichever kind of direction, right? I think it was quite clear that at least the kind of red-red-green kind of coalition would be out of the scope. But I think now it could be maybe an option, especially maybe, I mean, you really summarized quite nicely, that I think Olaf Scholz has, let’s say, different messages, obviously also to give because of the different kind of stakeholders within the party.
Prof. Uwe Wagschal: But if you read between the lines now, the last month, it's an issue. It's not the hottest issue in the campaign, but it will be a big issue after the election. Definitely. It's just that the parties will not discuss this issue because…
the Greens will loose definitely when the whole story is coming out and also the other ones do not have a real big interest to discuss this matter, but between the lines, if you read the FAZ or the NZZ, there's some hints that it will be the case for the new government.
Dr. Stefan Walzer: Very good. Perfect, Prof. Wagschal, it was again a pleasure to discuss and to really see a bit and look forward to the election. Let's just see what will happen in roughly two weeks time. I was great, and again, nice to talk to you. So, thank you very much. And then talk to you soon again.
Prof. Uwe Wagschal: OK, thank you.
Dr. Stefan Walzer: So exciting elections coming up in Germany end of September, currently, the forecasts do not show a significant difference between the Social and the Christian Democrats, both basically in the lead. I think nobody really knows what will happen with the Greens. And I mean, what we have also just heard, I think there are methodologically some kind of, let's say, issues to really do a good kind of forecast. But at the end of the day, I think we might maybe see another win by either the Social or the Christian Democrats. And then I think the core question is obviously… what might be the kind of coalition? What will then see, probably, according to Professor Wagschal, and I think I agree, not before beginning of next year.
What does that all mean for health care? At the end of the day, I think there are two core and important points here to consider. One is what Prof. Wagschal has already said. Might there be a potential change in the overall health care system in the insurance kind of system where we might more maybe see something like an NHS like kind of system, more favored by the left, by the Social Democrats and by the Greens? So, if this coalition might come into place, I think the likelihood is at least very high that something like an NHS system would be put into place.
If not, obviously we need to see what might change. This is the kind of biggest potential change in the system, but there might be further ones. And I think that's also, I think what we have already seen, probably also in other countries. I mean, we have seen big impacts by the COVID 19 pandemic with a different kind of let's say that parts and budgets which are being paid, I think a lot of time obviously making sense to be paid for into the economic, into the economy in general to the various companies, but also to individuals, to the people, especially now the last one and a half years.
But also we have seen other kind of issues like the flood, for example, in Northrhine-Westphalia, which also has and will have a big impact on the budget overall. So, I think what especially various stakeholders have already said there will be a kind of impact on probably especially that drug prices, I think an easy target the, in quotes please, enemy for some of the stakeholders, at least. So that's something maybe to get prepared for. I think all of the other parts needs to be seen, especially when we come up and see how the elections resulted and especially also afterwards, which might be maybe more towards Christmas, which is then which coalition would govern Germany.
So, stay tuned. And also check out our LinkedIn account on the day of the elections, which is the last Sunday of September 2021.
That was an episode of MAP, the Market Access Podcast provided by MArS Market Access and Pricing Strategy, which is your healthcare consultancy, in the German Speaking Markets. MAP is available every second week with a new episode, so watch out. And in case you might have questions, contact me directly and or visit our website on www.marketaccess-pricingstrategy.de