The German experience in reference pricing

Price regulation schemes function both as a means for public authorities to contain costs, and as an economic tool to support the national pharmaceutical industry. This twofold contradictory aim of public intervention in pharmaceutical demand and supply makes such pricing schemes difficult to apply. This article concerns the reference price scheme which concerns setting a price cap for each active ingredient, or group of active ingredients considered equivalent according to some feature (e.g. therapeutic effects and chemical structure). In 1989, the reference price scheme for reimbursable drugs was introduced in Germany to reduce pharmaceutical expenditure, which had been steadily increasing in the past. The study investigates the economic effects of introducing reference prices in Germany in order to assess whether this system has been effective in containing public pharmaceutical expenditure. We conclude that the reference price scheme is an effective tool for price control, but cost containment requires further measures.     

Endogenous versus exogenous generic reference pricing for pharmaceuticals

In this paper we carry out a vertical differentiation duopoly model applied to pharmaceutical markets to analyze how endogenous and exogenous generic reference pricing influence competition between generic and branded drugs producers. Unlike the literature, we characterize for the exogenous case the equilibrium prices for all feasible relevant reference prices. Competition is enhanced after the introduction of a reference pricing system. We also compare both reference pricing systems on welfare grounds, assuming two different objective functions for health authorities: (i) standard social welfare and (ii) gross consumer surplus net of total pharmaceutical expenditures. We show that regardless of the objective function, health authorities will never choose endogenous reference pricing. When health authorities are paternalistic, the exogenous reference price that maximizes standard social welfare is such that the price of the generic drug is the reference price while the price of the branded drug is higher than the reference price. When health authorities are not paternalistic, the optimal exogenous reference price is such that the price of the branded drug is the reference price while the price of the generic drug is lower than the reference price.     

The impact of generic reference pricing in Italy, a decade on

Objectives

The generic reference price (GRP) was introduced in Italy in 2001. The main purpose of this paper is: (a) producing evidence regarding the effect of GRP on prices; (b) testing the hypothesis that there is a reallocation of demand from the genericated (and reference-priced) molecules to patent-protected products that have the same therapeutic indication.

Methods

The analysis used a unique dataset of quantities and revenues of six therapeutic groups that were observed for more than a decade. Difference-in-differences analysis is applied. Prices are adjusted for all the regulatory interventions in the ten years of observations, to control for confounding impact of these interventions.

Results

On average, prices dropped 13 % more in groups to which GRP was applied than in other groups. Moreover, each entry of a new generic was associated with a price drop of around 2.8 %. On the other hand, GRP did not induce any significant switching towards in-patent molecules.

Conclusions

We provide the first empirical results of the impact of GRP on prices in Italy and evidence that GRP cannot be held solely responsible for the often reported demand reallocation towards new and in-patent molecules.     

Medical problems associated with the national reference pricing system in Hungary

The author analyses the medical problems associated with the proposed reference pricing system prepared for the 2004 pharmaceutical price and reimbursement negotiations by the Hungarian National Health Insurance Fund (HNIF). In case of drugs containing identical active ingredients the author does not consider it acceptable that from the criteria of reference grouping bioequivalence was omitted, since bioequivalence is the basic clinical pharmacologic principle underlying the safe utilization of generic drugs. The proposal introduces in Hungary the therapeutic reference pricing for drugs belonging to the same ATC 5 level group, having different chemical structures but identical mechanisms of action. The products are listed according to their defined daily dose (DDD) and the arithmetic mean of the cheapest products giving together 50% market share is calculated. Each ATC 5 group has a given per cent reimbursement level and the fixed amount paid by the HNIF for all drugs in the group is defined as the given percentage of the mean price. This sum is reimbursed irrespective whether the products are patent protected or not, furthermore those drugs whose price is three times higher than the fixed mean price are excluded from the reimbursement system. As a result the patients' co-payment for the more expensive drugs will be significantly increased in the future. The basis of the therapeutic reference price is the assumption that the outcome of the treatment will be the same using drugs with the same mechanism of action. However, this assumption lacks valid scientific proof. According to the author, the proposed budget centric reference pricing system, which does not take into account the differing clinical pharmacologic profiles of the drugs, will significantly inhibit the use of new, innovative drugs, the establishment and continuous improvement of truly cost-effective patient care. Several alternative approaches are proposed for controlling drug budget. Finally the author recommends that a Committee should be established to develop a comprehensive proposal for the reorganization of the pricing and reimbursement system of the drugs available for general and/or hospital use, and for the follow-up of the health care effects of these measures.     

Reimbursement of pharmaceuticals: reference pricing versus health technology assessment

Reference pricing and health technology assessment are policies commonly applied in order to obtain more value for money from pharmaceuticals. This study focussed on decisions about the initial price and reimbursement status of innovative drugs and discussed the consequences for market access and cost. Four countries were studied: Germany, The Netherlands, Sweden and the United Kingdom. These countries have operated one, or both, of the two policies at certain points in time, sometimes in parallel. Drugs in four groups were considered: cholesterol-lowering agents, insulin analogues, biologic drugs for rheumatoid arthritis and “atypical” drugs for schizophrenia. Compared with HTA, reference pricing is a relatively blunt instrument for obtaining value for money from pharmaceuticals. Thus, its role in making reimbursement decisions should be limited to drugs which are therapeutically equivalent. HTA is a superior strategy for obtaining value for money because it addresses not only price but also the appropriate indications for the use of the drug and the relation between additional value and additional costs. However, given the relatively higher costs of conducting HTAs, the most efficient approach might be a combination of both policies.     

The impact of reference pricing on healthcare outcomes in patients with arterial hypertension

ObjectivesReference pricing is a proven cost-containment measure; however, there are concerns about its potential negative effects on patients. Slovenia introduced generic reference pricing (GRP) in 2003 and therapeutic reference pricing (TRP) in 2013, including TRP for ACE inhibitors and a new group of angiotensin II receptor blockers in September 2018. We aimed to evaluate the impact of GRP and TRP on medication adherence and blood pressure control in patients with hypertension.MethodsWe performed a prospective cohort study in community pharmacies in Slovenia. At visit 1, we recorded patient characteristics, including history of antihypertensive treatment, medicine substitutions, and co-payments, as well as blood pressure measurements and medication adherence. Eight weeks later on visit 2, we re-assessed medication adherence and blood pressure.ResultsOf the 114 patients, only three (2.6%) patients’ therapies changed because of GRP and none changed due to TRP. Thirty-six (31.6%) patients co-paid for prescribed antihypertensive medicine. Medication adherence was significantly better among patients who co-paid for their blood-pressure-lowering therapy than it was among those prescribed a reference medicine. Patients with reference medicines had lower blood pressure compared to patients with co-payments; however, the multiple linear regression models showed no effect of co-payment on blood pressure.ConclusionWe conclude that reference pricing did not negatively affect blood pressure control in patients with hypertension; in fact, it may promote medication adherence in these patients.     

A re-examination of the impact of reference pricing on anti-hypertensive drug plan expenditures in British Columbia

Reference pricing (RP) limits drug plan reimbursement of interchangeable medicines to a reference price, which is typically equal to the price of the lowest-cost interchangeable drug; any cost above that is borne by the patient. Much of the evidence of the effects of RP comes from 'before and after' studies of the RP scheme adopted by Pharmacare, the publicly funded drug plan for seniors and others in British Columbia, Canada. We critically assess the identifying assumption inherent in the before and after design - namely, that pre-RP trends accurately predict counterfactual outcomes - in the context of estimating the impact of RP on Pharmacare's expenditure on anti-hypertensive drugs for its senior beneficiaries. We use similar data from a public plan that has not introduced RP to estimate the effects on drug expenditures of patent expiration, secular changes in prescribing patterns and various other factors common to all Canadian public drug plans that could potentially confound the before and after estimates of the effect of RP on drug plan expenditures. We find that controlling for such factors reduces estimates of drug plan savings attributable to RP of the Calcium Channel Blockers by about half.     

Carcinogenicity of beryllium: Review of the literature

The carcinogenicity of beryllium (Be) is reviewed. At least 17 different senior authors have published 27 different scientific articles which demonstrate the carcinogenicity of 13 different beryllium compounds. Osteogenic sarcomas can be induced in rabbits by the intravenous injection or by the inhalation of Be compounds. Lung cancer can be induced in rats and monkeys by intratracheal injections and inhalation exposures. The first published report on the carcinogenicity of Be was in 1946.     

Tiered co-payments,pricing, and demand in reference price markets for pharmaceuticals

Health insurance companies curb price-insensitive behavior and the moral hazard of insureds by means of cost-sharing, such as tiered co-payments or reference pricing in drug markets. This paper evaluates the effect of price limits – below which drugs are exempt from co-payments – on prices and on demand. First, using a difference-in-differences estimation strategy, we find that the new policy decreases prices by 5 percent for generics and increases prices by 4 percent for brand-name drugs in the German reference price market. Second, estimating a nested-logit demand model, we show that consumers appreciate co-payment exempt drugs and calculate lower price elasticities for brand-name drugs than for generics. This explains the different price responses of brand-name and generic drugs and shows that price-related co-payment tiers are an effective tool to steer demand to low-priced drugs.     

Breastfeeding in the industrialized world. Review of the literature

Since the Industrial Revolution there has been an almost continuous decline in breastfeeding in North-America and western Europe. But the last years numerous studies report that breastfeeding is regaining popularity. The social forces responsible for this are a back-to-nature movement, ecological concerns, breastfeeding support groups and a renewed interest by scientists, the health profession and national and international organizations. Many determinants of child feeding behaviour have been analyzed extensively: ethnic and cultural background, socioeconomic and employment status, maternal (age, parity, marital status) and child (sex, birthweight) characteristics, maternal knowledge and attitudes, health care management. Still the relative influence of these factors can only be estimated, partly because of a lack of an accurate methodology. The reasons mentioned with regard to weaning often indicate a lack of confidence intensified by deficiencies in information and support systems. The negative influence of the infant food industry on breastfeeding behaviour cannot be disregarded. Clearly the promotion of breastfeeding in our society is a policy matter, requiring positive action in the field of health education; legislation, research and the reorganization of health services.     

Payers test reference pricing and centers of excellence to steer patients to low-price and high-quality providers

Hospitals frequently exhibit wide variation in their prices, and employers and insurers are now experimenting with the use of incentives to encourage employees to make price-conscious choices. This article examines two major new benefit design instruments being tested. In reference pricing, an employer or insurer makes a defined contribution toward covering the cost of a particular service and the patient pays the remainder. Through centers of excellence, employers or insurers limit coverage or strongly encourage patients to use particular hospitals for such procedures as orthopedic joint replacement, interventional cardiology, and cardiac surgery. We compare these two types of benefit designs with respect to consumer choice and how they balance price and quality. The article then examines their potential role in the policy debate over appropriate coverage and cost-sharing requirements.