Pricing policy reference

Lopez-Casasnovas, G., and J. Puig-Junoy. 2001. Review of the Literature on Reference Pricing, in Reference Pricing and Pharmaceutical Policy, ed. G. Lopez-Casasnovas and B. Jonsson, 1-41. Barcelona Springer Verlag Iberia. 

Recently, a quasi-experimental design was used to study British Columbia s reference pricing policy for five therapeutic classes of drugs to determine if a worsening of health outcomes could be detected after implementation of the reference pricing policy. The... 

The National Commission on State Workmen s Compensation Laws recommended insurance providers experience rate WC premiums to the maximum extent feasible. Historically, WC insurers have not used the accident experience of a small establishment to determine the establishment s price of WC insurance. Instead, they have combined the injury statistics for all workers within an industrial class and determined a so-called manual rate for WC coverage. The product of each worker s wage rate and the manual rate for his or her industrial class summed over all workers determines the total WC insurance premium for a small firm. As firm size increases insurers pay less attention to the average experience of the industrial class (the manual rate) and more attention to the safety record of the individual firm. Experience rating of insurance policies refers to the process of adjusting insurance prices... 

In the second paper, Thomas considers a related problem but incorporates a general stochastic demand function and backlogging of excess demand. Specifically, Thomas considers a periodic review, finite horizon model with a fixed ordering cost and stochastic, price-dependent demand. The paper postulates a simple policy, referred to by Thomas as (5,5,p), which can be described as follows. The inventory strategy is an (5, S) policy If the inventory level at the beginning of period t is below the reorder point, st, an order is placed to raise the inventory level to the order-up-to level, St. Otherwise, no order is placed. Price depends on the initial inventory level at the beginning of the period. Thomas provides a counterexample which shows that when price is restricted to a discrete set this policy may fail to be optimal. Thomas goes on to say ... 

In case of the additive demand model, Chen and Simchi-Levi prove that the (s,5,p) policy identified by Thomas is indeed optimal. On the other hand, for the general demand model, they show that a different policy, referred to as an (5, S, A, p) policy is optimal policy. In such a policy, the optimal inventory strategy is characterized by two parameters st and St and a set At C [st st + St)/2], possibly empty. When the inventory level, xt at the beginning of period t is less than st or if xt E At an order of size St — Xt is made. Otherwise, no order is placed. Thus, it is possible that an order will be placed when the inventory level xt E [st, (st 4- St)/2], depending on the problem instance. On the other hand, if xt > (st + St)/2 no order is placed. Price depends on the initial inventory level at the beginning of the period. 

Aaserud, M., Dahlgren, A. T., Kosters, J. P. et al. (2006). Pharmaceutical policies effects of reference pricing, other pricing, and purchasing policies. Cochrane Database Syst. Rev., 19(2), CD005979. 

The purpose of this chapter is to present the main economic characteristics of reference pricing (RP) as a system for the public funding of pharmaceuticals financed by the public sector. The following sections deal with the definition and objectives of RP and analyse the features of the various reference pricing systems that are applied internationally. This is followed by a look at the justification for RP from the economic point of view. We then go on to analyse the impact of RP policies, especially with regard to expenditure, consumption and drag prices. In the final section we discuss what can be expected from the application of RP to the Spanish health system. 

Zanunit-Lucia, J. and R. Dasgupta (1995), Reference pricing the European experience , Health Policy Review, St. Mary s Hospital Medical School paper no 10, London. 

Lopez-Casanovas, G. and J. Puig-Junoy (2000), Review of the literature on reference pricing , Health Policy, 54, 87-123. 

Giuliani, G., G. Selke and L. Garattini (1998), The German experience in reference pricing , Health Policy, 44, 73-85. 

That argument was first famously raised by the then U.S. FDA Commissioner Mark McClellan before the First International Colloquium on Generic Medicine in Cancun, Mexico (September 25, 2003). It was raised again by the Republican Policy Committee of the United States Senate (2005). Its policy statement, Pharmaceutical Price Controls Abroad An Unfair Trade Policy, cited the 2002 U.S. Trade Promotion Authority Act, which acknowledged that price controls and reference pricing for pharmaceutical products (to be discussed below) are trade-distorting... 

Governmental policies with reference to capital gains and gross-earnings taxes should be understood when costs are determined. Suppose a concern decides to sell some valuable equipment before its useful life is over. The equipment has a certain asset or unamortized value, but the offered price may... 

There is also the whole chicken-and-egg issue in respect of mass production and infrastmcture, referred to above, the full dimensions of which are now apparent. It is clear that FCVs will never even approach cost-competitiveness with ICE vehicles without mass production (at least 500000). However, it is not clear how they will achieve this level of sales until the cost (and therefore price) reductions of FCVs have taken place. Nor is it clear either that such sales will take place until the requisite infrastructure to service the vehicles is in place, or who will provide the finance for the huge investment in infrastructure that would be required. Possible policies and strategies that may resolve these difficult transition problems are discussed below. 

In countries, such as some of the member states of the European Community, where social health insurance funds are the largest purchasers of drugs, national reference pricing can have a considerable effect on corporate strategies for R D and on marketing policies. 

S. Schneeweiss, O. Schoffski andG. Selke, What is Germany s experience on reference based drug pricing and the etiology of adverse health outcome or substitution . Health Policy 44 (1998), 253-260. 

J. Zammit-Lucia and R. DasGupta, Reference pricing. The Enropean experience. Health Policy Review, paper N.IO, St Mary s Hospital Medical School, London, 1995. 

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