Reference pricing systems

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. 

Maassen, B.M. (1998), Reimbursement of medicinal products the German reference price system - law, administrative practice and economics , Cuademos de Derecho Europeo Farmaceutico, 8, 69-100. 

The philosophy in which Table 9.1 is inspired requires some elucidation given the role of doctors as their patients agents, they could be placed on either the demand side and the supply side. Here we have opted for the latter approach, in view of their function as prescribers, who prefigure the available supply and simultaneously help towards defining the demand. The reference pricing system figures twice, insofar as it seeks to influence both demand and supply at the same time. As far as demand is concerned, it is designed to break the consumer/decision-maker/payer dissociation that characterizes the... 

Further controls exist at the provincial level at which each province maintains a published formulary of drugs that are reimbursable along with the reimbursement level. Quebec, observers perceive, lists nearly all new drug products, whereas Ontario appears to be slow to list newly approved products. Each province has additional control mechanisms. Ontario requires the first generic drug to be at least 40% less costly than the branded originator product. Some components of the reference price system are seen in British Columbia and Newfoundland. 

The German and Dutch reference pricing systems set reference prices for three groups of pharmaceutical products ... 

The reference price system provides a strong stimulus to the physician to adopt low-cost prescribing and to the patient to accept it. In addition a strong stimulus is given to companies to lower the prices of their products to the reference price level so as to retain market share. In that way they will avoid loss of sales as patients shift to cheaper products in order to avoid co-payments, and the lower price may actually lead to an increase in unit sales and market share. Thus price competition between companies is fostered. 

This second option is usually adopted in simple reference price systems where each category of drugs comprises only products based on the same generic substance. 

The notion of co-payments has been referred to briefly above in connection with reference pricing systems. It is however of broader apphcation. All that it means is that a system of pubhc health financing has chosen deliberately to limit its commitment to pay for pharmaceutical care, shifting a part of the burden onto the patient himself or herself. In some or all instances, the patient will be obliged to make a co-payment before a drug is dispensed. 

Setting a National Reference price system involves four main decisions ... 

The following are some country examples on the definition and scope of drug classes for a national reference price system. 

Level I drugs were grouped easily, but decisions on level II and III were more complex and only a selection of these drugs were clustered within the reference price system. 

Since the first reference price system was implemented ten years ago, some studies have been performed to evaluate the effects of such a system. However, the assessment is still incomplete. Despite several years of implementation, there are still very few health outcome data related to drug utilization... 

The disadvantage of any co-payment system is that it may act as a deterrent for essential care and run counter to the social ohjectives of a health care system. This is the advantage of a reference price system in which the emphasis is on the use of low-priced drugs and in which co-payments can therefore he avoided. 

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