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Variations in external reference pricing implementation: does it matter for public policy?

Author

Listed:
  • Jennifer Gill

    (Cowdray House, London School of Economics and Political Science)

  • Anna-Maria Fontrier

    (Cowdray House, London School of Economics and Political Science)

  • Dionysis Kyriopoulos

    (Cowdray House, London School of Economics and Political Science)

  • Panos Kanavos

    (Cowdray House, London School of Economics and Political Science)

Abstract

Background External reference pricing (ERP) seeks to rationalize prices and contain costs using foreign prices as a reference for the determination of domestic prices and is often used as the starting point for the facilitation of negotiations between health authorities and pharmaceutical manufacturers. Methods A systematic literature review was used to identify characteristics of ERP implementation across 29 countries. Primary data collection, in the form of surveys directed at key stakeholders, was also used to supplement data in instances where information received from the systematic literature review was outdated or minimal. Findings from the systematic literature review and primary evidence from key stakeholders were bench-marked against 14 best practice principles inherent to an optimal ERP system. Results Significant heterogeneity in ERP implementation across countries was identified. Country basket size, pricing calculation, and frequency of price revisions varied between countries. Belgium, France, and South Africa were more likely to adhere to the best practice principles, whilst Bulgaria, Hungary, and Romania had the most instances of non-adherence. Conclusion The observed heterogeneity has policy implications for governments including globally declining pharmaceutical prices, launch delays in lower income countries, reduced incentive for continued R&D, and reduced access to medicines. Overcoming this issue to ensure that ERP is beneficial to all stakeholders will require a focus on developing sustainable, transparent, simple, and stable systems using a set of key guidelines that should maximize the benefits of the pricing policy.

Suggested Citation

  • Jennifer Gill & Anna-Maria Fontrier & Dionysis Kyriopoulos & Panos Kanavos, 2019. "Variations in external reference pricing implementation: does it matter for public policy?," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 20(9), pages 1375-1397, December.
  • Handle: RePEc:spr:eujhec:v:20:y:2019:i:9:d:10.1007_s10198-019-01100-y
    DOI: 10.1007/s10198-019-01100-y
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    References listed on IDEAS

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    1. Nicolas Houy & Izabela Jelovac, 2015. "Drug Launch Timing and International Reference Pricing," Health Economics, John Wiley & Sons, Ltd., vol. 24(8), pages 978-989, August.
    2. Nicolas Houy & Izabela Jelovac, 2014. "Drug approval decision times, international reference pricing and strategic launches of new drugs," Working Papers halshs-01072741, HAL.
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    4. Fontrier, Anna-Maria & Gill, Jennifer & Kanavos, Panos, 2019. "International impact of external reference pricing: should national policy makers care?," LSE Research Online Documents on Economics 100929, London School of Economics and Political Science, LSE Library.
    5. Afschin Gandjour, 2013. "Reference Pricing and Price Negotiations for Innovative New Drugs," PharmacoEconomics, Springer, vol. 31(1), pages 11-14, January.
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    8. Anna-Maria Fontrier & Jennifer Gill & Panos Kanavos, 2019. "International impact of external reference pricing: should national policy-makers care?," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 20(8), pages 1147-1164, November.
    9. Håkonsen, Helle & Horn, Anne Marie & Toverud, Else-Lydia, 2009. "Price control as a strategy for pharmaceutical cost containment--What has been achieved in Norway in the period 1994-2004?," Health Policy, Elsevier, vol. 90(2-3), pages 277-285, May.
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    Cited by:

    1. Anna-Maria Fontrier & Jennifer Gill & Panos Kanavos, 2019. "International impact of external reference pricing: should national policy-makers care?," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 20(8), pages 1147-1164, November.
    2. Fontrier, Anna-Maria & Gill, Jennifer & Kanavos, Panos, 2019. "International impact of external reference pricing: should national policy makers care?," LSE Research Online Documents on Economics 100929, London School of Economics and Political Science, LSE Library.
    3. Kanavos, Panos & Kamphuis, Bregtje W. & Fontrier, Anna-Maria & Colville Parkin, Georgia & Saleh, Shadi & Akhras, Kasem S., 2020. "Pricing of in-patent pharmaceuticals in the Middle East and North Africa: Is external reference pricing implemented optimally?," Health Policy, Elsevier, vol. 124(12), pages 1297-1309.
    4. Kanavos, Panos, 2019. "Does external reference pricing deliver what it promises? Evidence on its impact at national level," LSE Research Online Documents on Economics 101522, London School of Economics and Political Science, LSE Library.
    5. Gamba, S.; & Pertile, P.; & Righetti, G.;, 2022. "Spillovers of Pharmaceutical Price Regulations: evidence from the AMNOG Reform in Germany," Health, Econometrics and Data Group (HEDG) Working Papers 22/20, HEDG, c/o Department of Economics, University of York.
    6. Panos Kanavos & Anna-Maria Fontrier & Jennifer Gill & Olina Efthymiadou, 2020. "Does external reference pricing deliver what it promises? Evidence on its impact at national level," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 21(1), pages 129-151, February.

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    More about this item

    Keywords

    External reference pricing; Pharmaceutical policy; Regulation of pharmaceuticals; Systematic review; Expert consultation;
    All these keywords.

    JEL classification:

    • I - Health, Education, and Welfare
    • I1 - Health, Education, and Welfare - - Health
    • I10 - Health, Education, and Welfare - - Health - - - General
    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health

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