Does drug price-regulation affect healthcare expenditures?

Omer Ben-Aharon (), Oren Shavit and Racheli Magnezi
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Omer Ben-Aharon: Bar Ilan University
Oren Shavit: Bar Ilan University
Racheli Magnezi: Bar Ilan University

The European Journal of Health Economics, 2017, vol. 18, issue 7, No 5, 859-867

Abstract: Abstract Background Increasing health costs in developed countries are a major concern for decision makers. A variety of cost containment tools are used to control this trend, including maximum price regulation and reimbursement methods for health technologies. Information regarding expenditure-related outcomes of these tools is not available. Objective To evaluate the association between different cost-regulating mechanisms and national health expenditures in selected countries. Methods Price-regulating and reimbursement mechanisms for prescription drugs among OECD countries were reviewed. National health expenditure indices for 2008–2012 were extracted from OECD statistical sources. Possible associations between characteristics of different systems for regulation of drug prices and reimbursement and health expenditures were examined. Results In most countries, reimbursement mechanisms are part of publicly financed plans. Maximum price regulation is composed of reference-pricing, either of the same drug in other countries, or of therapeutic alternatives within the country, as well as value-based pricing (VBP). No association was found between price regulation or reimbursement mechanisms and healthcare costs. However, VBP may present a more effective mechanism, leading to reduced costs in the long term. Conclusions Maximum price and reimbursement mechanism regulations were not found to be associated with cost containment of national health expenditures. VBP may have the potential to do so over the long term.

Keywords: Drug price; Price regulation; Drug reimbursement; Healthcare expenditure; Value-based pricing (search for similar items in EconPapers)
JEL-codes: H51 I18 (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (3)

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DOI: 10.1007/s10198-016-0832-z

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