Abstract
BackgroundExternal 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.ObjectivesTo 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.MethodsPrimary and secondary data collection through a survey of leading experts and a systematic literature review, respectively, over the 2000–2017 period.ResultsForty 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.ConclusionsERP 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.
Highlights
External Reference Pricing (ERP) is used widely across the globe to inform decisions on pricing and coverage of pharmaceuticals and is used either as the dominant method to explicitly set prices or as one of the criteria to inform pricing and reimbursement decisions [1,2,3,4,5,6,7]
Studies were excluded when only their abstracts were available and when studies were focusing on the international implications of External reference pricing (ERP), which falls outside the scope of this review
Despite the documented price declines, ERP has been criticised both in the literature and by experts as being a “non-optimal” pricing regulation not resulting in appropriate and competitive price levels over time compared with other approaches to pharmaceutical pricing, such as cost-effectiveness or value-based pricing (VBP)
Summary
External Reference Pricing (ERP) is used widely across the globe to inform decisions on pricing and coverage of pharmaceuticals and is used either as the dominant method to explicitly set prices or as one of the criteria to inform pricing and reimbursement decisions [1,2,3,4,5,6,7]. ERP systems vary substantially in the way they are implemented and, the impact of ERP is difficult to study compared to other pricing methodologies. 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, costcontainment, pharmaceutical price levels, drug use, equity, efficiency, availability, affordability and industrial policy; and second, to critically assess the quality of evidence on ERP. 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
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