Does external reference pricing deliver what it promises? Evidence on its impact at national level

Panos Kanavos

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: Background External reference pricing (ERP) is widely used to regulate pharmaceutical prices and help determine reimbursement. Its implementation varies substantially across countries, making it difficult to study and understand its impact on key policy objectives. Objectives To assess the evidence on ERP in different settings and its impact on key health policy objectives, notably, cost-containment, pharmaceutical price levels, drug use, equity, efficiency, availability, affordability and industrial policy; and second, to critically assess the quality of evidence on ERP. Methods Primary and secondary data collection through a survey of leading experts and a systematic literature review, respectively, over the 2000–2017 period. Results Forty five studies were included in the systematic review (January 2000–December 2016). Primary evidence was gathered via survey distribution to experts in 21 countries (January–July 2017). ERP contributes to cost-containment, but this is a short-term effect highly dependent on the way ERP is designed and implemented. Low prices, as a result of ERP, can undermine the availability of medicines and lead to launch delays or product withdrawals. Downward price convergence can hamper investment in innovation. ERP does not seem to promote efficiency in achieving health system goals. As evidence is weak, results need to be interpreted with caution. Conclusions ERP has not regulated prices efficiently and has unintended consequences that reduce the benefits arising from it. If ERP is carefully designed with minimal price revisions, prudent selection of basket size and countries, and consideration of transaction prices, it could be a more effective mechanism enhancing welfare, equitable access to medicines within countries and help promote industry innovation.

Keywords: external reference pricing; pharmaceutical pricing; pharmaceutical policy; regulation of pharmaceuticals; systematic review; expert consultation (search for similar items in EconPapers)
JEL-codes: I10 I11 I18 (search for similar items in EconPapers)
Pages: 23 pages
Date: 2019-10-03
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Published in European Journal of Health Economics, 3, October, 2019, 21(1), pp. 129-151. ISSN: 1618-7598

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