External Reference Pricing Research Articles

The design of external reference pricing schemes and the choice of reference countries and pricing rules

AbstractExternal reference pricing imposes a price cap for drugs based on prices in other countries. I study the choice of reference countries and pricing rules in a three‐country framework. If the manufacturer sells to all three countries, the minimum price rule yields the lowest drug price. If the referencing country is sufficiently large, the manufacturer may not export to reference countries under the minimum price rule. External reference pricing creates the incentive for the reference countries also to adopt external reference pricing. Thus, external reference pricing results in price convergence.

A conceptual framework to build effective medicine pricing policies for low and middle-income countries (LMICs)

Building effective medicine pricing policies is a challenging task in all high-, middle- and low-income countries. In high-income countries have stable health systems in place, trained workforce, as well as specialised agencies to evaluate innovative drugs for reimbursement. However, in low- and middle-income countries (LMICs) the challenges are manifold. A large majority of low- and middle-income countries lack technical expertise either to evaluate new medicines or to set efficient medicine prices. The countries also lack comparator reference pricing data to set prices. Also, there are significant out-of-pocket expenditures as people pay for medicines by themselves. An effective medicine pricing policy is vital in the context that it can be used as a tool to improve access and affordability among the masses. This discussion paper presents a conceptual framework to build effective medicine pricing policies for low and middle-income countries (LMICs). The enablers to build effective medicine pricing policies are also discussed. This includes (a) data and statistics on the pharmaceutical situation of the country (b) Having a national medicine policy in the country (c) The availability of the medicine pricing data and (d) Human resources and technical capacity. WHO has recommended several strategies including External Price Referencing (EPR), Internal Reference pricing, Value-based pricing, Cost-plus pricing, and Generic medicine policies to build a pricing policy. However, this information is generic and it's a complex task for countries to tailor to their needs, hence a critical analysis is provided on these policies. The concepts related to fair medicine pricing, providing information to consumers and price transparency are also discussed.

Developing Nepal's medicines pricing policy: evidence synthesis and stakeholders' consultation.

The objectives of this paper are to (a) explore stakeholders' opinions regarding Nepal's existing medicines pricing practices/situation and (b) build and present a set of medicines pricing policies for Nepal. A review of the literature and field visits to community retail pharmacies, hospital pharmacies, wholesalers, and distributor outlets in Kathmandu were conducted to assess the medicines pricing situation. Following the literature review, preliminary meetings with stakeholders and field visits were held and a draft interview guide was prepared. Consultative sessions subsequently were undertaken in Kathmandu, Nepal, in January 2023 with representatives from the Department of Drug Administration, Ministry of Health and Population, Association of Pharmaceutical Producers of Nepal, consumer groups, Transparency International, Medicines Importers Association of Nepal/ Pharmaceutical Distributors Association of Nepal, Nepal Chemist and Druggist Association, and Nepal Pharmaceutical Association. Notes were taken during these meetings regarding issues and concerns raised as well as experiences and recommendations for the future, as outlined in the interview guide. The stakeholders in general stated that they do not have any objection to price regulation; however, they believe such regulation should be subject to periodic review. Both the importers and the Ministry of Health and Population have the view that an independent body/authority should be charged with regulating the prices of medicines. A set of policy options to be considered for use in Nepal include cost-plus pricing, external price referencing, internal reference pricing, and mark-up regulations. Key issues related to pricing were identified and suggest that a set of pricing policies and updated regulations need to be considered to establish changes that are transparent, rational, and acceptable to the related stakeholders. Hence, suggestions made in this paper could be useful to inform a rational and fair pricing structure and to improve access to medicines.

The impact of changing the reference countries on the list prices for patented medicines in Canada: A policy analysis

Background: Canada's Patented Medicine Prices Review Board (PMPRB) uses external and internal reference pricing (IRP) to regulate patented drug list prices. PMPRB has changed external reference countries from 7 to 11 to include countries with prices closer to the OECD median. We examined the impact on the list prices for patented medicines had the amendment been implemented from 2013.Methods: Using IQVIA MIDAS® quarterly sales data, we selected branded products that were launched in Canada in 2013–2018. The list price for each product in each country was calculated as its average annual price during the 3rd year post Canadian launch. The median international price (MIP) was the median of the list prices of PMPRB7 (MIP7) and PMPRB11 (MIP11). We assumed the same IRP would be (scenario 1) or would not be used (scenario 2).Results: Among the selected 400 products, 80.3 % (321) had MIP7 and MIP11 (launched in at least one reference country); 18.3 % did not have MIP11. The total current expenditures were $7,134.4 M. In scenario 1, MIP11 would not be binding for most products and expenditures would decline only by 0.7 %. If IRP were abolished, expenditures might decline by 14.1 % if the launching sequence would not change.Conclusions: MIP11 might not be binding for most medicines. The impact depends on whether to retain the IRP and approaches taken for medicines without MIP11.

Values, challenges, and responses associated with high-priced potential cures: perspectives of diverse stakeholders in South Korea

BackgroundThe emergence of high-priced potential cures has sparked significant health policy discussions in South Korea, where the healthcare system is funded through a single-payer National Health Insurance model. We conducted focus group interviews (FGIs) and accompanying surveys with diverse stakeholders to comprehensively understand related issues and find better solutions to the challenges brought by these technologies.MethodsFrom October to November 2022, 11 FGIs were conducted with stakeholders from various sectors, including government payers, policy and clinical experts, civic and patient organisations, and the pharmaceutical industry, involving a total of 25 participants. These qualitative discussions were supplemented by online surveys to effectively capture and synthesise stakeholder perspectives.ResultsAffordability was identified as a critical concern by 84% of stakeholders, followed by clinical uncertainty (76%) and limited value for money (72%). Stakeholders expressed a preference for both financial-based controls and outcome-based pricing strategies to mitigate these challenges. Despite the support for outcome-based refunds, payers raised concerns about the feasibility of instalment payment models, whether linked to outcomes or not, due to the specific challenges of the Korean reimbursement system and the potential risk of ‘cumulative liabilities’ from ongoing payments for previously administered treatments. In addition, the FGIs highlighted the need for clear budgetary limits for drugs with high uncertainties, with mixed opinions on the creation of special silo funds (64.0% agreement). Less than half (48%) endorsed the use of external reference pricing, currently applied to such essential drugs in South Korea. A significant majority (84%), predominantly non-pharma stakeholders, advocated for addressing cost-effectiveness uncertainty through re-assessment once long-term clinical data become available.ConclusionsThis study uncovers a broad agreement among stakeholders on the need for more effective value assessment methodologies for high-priced potential cures, stressing the importance of more robust and comprehensive re-assessment supported by long-term data collection, rather than primarily relying on external reference pricing. Each type of stakeholders exhibited a cautious approach to their specific uncertainties, suggesting that new funding strategies should accommodate these uncertainties with predefined guidelines and agreements prior to the initiation of managed entry agreements.

”What’s up with price controls?” Stakeholders’ views on the regulation of pharmaceutical pricing in Malaysia

Escalating costs have made the accessibility of drugs one of the biggest challenges faced by the Malaysian government. The government agreed to regulate drug prices by means of external reference pricing, but its proposed policy had a setback owing to much opposition from the pharmaceutical industry. The policy did gain support from the public and from non-governmental organisations because it ensured easy access to affordable medicines. Comments from public consultations with key stakeholders were used to explore stakeholders’ perceptions of the external reference pricing policy. A total of 140 comments were analysed for this study. Stakeholders’ views were classified as being from the Socioeconomic, industrial, and government sectors. To summarise, the government must carefully manage and consider stakeholders’ views to ensure a sound policy. Using Mendelow’s stakeholder mapping, this study mapped out stakeholders’ views in a systematic approach. The classification of different stakeholders’ views and recommendations led to suggestions for reviewing current practices in pharmaceutical pricing regulations in the Malaysian healthcare system. The analyses can be extended to other countries that face similar concerns.

Implementation of the policy of external reference pricing for medicines: a review of international approaches

Implementation of the policy of external reference pricing for medicines: a review of international approaches

External reference pricing for medicines in Ukraine: latest trends

Compared to the previous year, the share of healthcare expenditure in the state budget of Ukraine has decreased, which is associated with increased funding for the security and defense sector. In terms of gross domestic product, healthcare spending has reduced to 2.8 %, which corresponds to the figures for 2019. These circumstances indicate the importance of proper budget utilization, including effectively regulating medicine prices. One of the key elements of rational healthcare budget usage is the development and implementation of external reference pricing (ERP). A well-formulated and implemented ERP policy for pharmaceuticals contributes to improving patient access to essential medicines (EMs). The aim of this study is to analyze the current status of ERP implementation in Ukraine and provide recommendations for improving this policy. Materials and methods. During the research process, an analysis of the ERP’s current regulatory framework was conducted, and ERP implementation in Ukraine was assessed according to adherence to the 14 best practice principles of ERP proposed by Sullivan, Kanavos & Kalo in 2015. Results. In Ukraine, ERP has been introduced for medicines from the National Essential Medicine Lists (NEML) and the “Affordable Medicines” program. The Ministry of Health (MoH) of Ukraine has approved a Register of marginal wholesale prices for medicines purchased with state budget funds and subject to price regulation. Currently, the register includes 1239 medicinal products, of which 1233 are from NEML and 6 have undergone Health Technology Assessment (HTA). Approximately 58 % of medicines have a set price through ERP, 24 % are regulated by internal reference pricing (IRP), and nearly 18 % have declared prices. This indicates a lack of uniformity in approaches to price regulation for medicines and requires further improvements. According to the latest update of the Register of medicines for reimbursement under the state medical guarantees program, there are 486 medicines, including 72 insulins and 21 immunosuppressive medicines (184 medicines are provided with co-payment). Different approaches, including different reference countries and price calculation algorithms, are applied for the price regulation of medicines in NEML and the “Affordable Medicines” program. An assessment of the implementation of the ERP system in Ukraine based on the 14 best practice principles of ERP proposed by Sullivan, Kanavos & Kalo in 2015 showed that the current policy does not adhere to all principles. Conclusions. The analysis revealed different approaches to pricing for medicines NEML and the “Affordable Medicines” program, indicating the need for harmonizing pricing policies for different lists. The adoption of a unified positive list can contribute to improving pricing policies and efficient resource utilization. Collecting, disseminating, and exchanging data on drug prices is crucial to support transparency in pricing and its control. Regular monitoring of prices in the market will help ensure compliance with pricing policies and take appropriate measures in case of violations. The implementation of a unified pricing regulation policy for medicines in Ukraine is an important step towards European integration and compliance with international standards.

How does external reference pricing work in developing countries: evidence from Iran.

Introduction: Governments apply different pricing policies to ensure public accessibility, availability, and affordability of medicines. In this way, external reference pricing (ERP) because of its easy implementation is used widely across countries. However, ERP is completely path dependent, and it would both bring pros and cons, related to its implementing strategy which makes understanding of its impact in different countries challenging. In this study, we examine the performance of the ERP approach in Iran as a pricing tool. Method: We conducted a cross-sectional descriptive study. Although Iran officially uses a reference country basket for ERP, in this study, we use different reference countries based on socioeconomic comparability, access to their price data, medicine pricing approaches, and pharmaceutical expenditure to examine the effect of reference countries as well as the method performance. Then, an empirical study was applied to a list of selected samples of medicines in the Iranian market to compare their price with our new reference countries. Then, we discuss the performance of ERP process based on the real prices in the Iranian pharmaceutical market. Result: The prices of 57 medicines, which contain about 69.2% of the imported Iran pharma market in value, were compared with their prices in selected reference countries. It was found that 49.1% of prices were more expensive in at least one of the reference countries, and in 21% of products, the average price in Iran was higher than the average price in reference countries. Conclusion: Achieving efficient and fair pricing of pharmaceuticals between and within countries is still a complex conceptual and policy problem that ERP in short term can handle. ERP cannot be considered a perfect tool for pricing alone, although its effectiveness is acceptable. It is expected that using other pricing methods alongside the ERP will improve patients' access to medicines. In Iran, we use value base pricing as the main pricing method for every new molecule. Then, we use other methods such as ERP as a complementary method.

On the welfare analysis of external reference pricing and reimbursement policy

On the welfare analysis of external reference pricing and reimbursement policy

Reference Pricing as a Deterrent to Entry: Evidence from the European Pharmaceutical Market

External reference pricing (ERP), the practice of benchmarking domestic drug prices to foreign prices, generates an incentive for firms to withhold products from low-income countries. Using a novel moment inequality approach, we estimate a structural model to measure how ERP policies affect access to innovative drugs across Europe. We find that ERP increases entry delays in eight low-income European countries by up to one year per drug. The European Union could remove these delays without replacing ERP by compensating firms through lump-sum transfers at the cost of around €18 million per drug. (JEL L13, L51, L65)

The impact of external reference pricing on pharmaceutical costs and market dynamics

Growth in the cost of prescription drugs in the US has generated significant interest in the use of external reference pricing (ERP) to tie prices paid for drugs to those in other countries. We used data from the Pricentric ONE™ database, an international drug pricing database, to examine product launch timing, launch price, and price changes from January 2010 – October 2021 in both ERP and non-ERP settings, with a focus on 100 high-priced drugs of interest to Medicare and Medicaid. We found that ERP policies were associated with a 73% reduction in the likelihood of drug launch within 9 months of regulatory approval relative to non-ERP settings. In addition, while ERP was associated with statistically significant reductions in annual drug price changes, such policies did not impact launch price. In addition, no single ERP feature (e.g., number of countries referenced, ERP calculation) was materially associated with the outcomes of interest. We conclude that ERP policies do not appear to impact drug launch price and may delay access to new therapies, raising questions about the utility of such policies in the US and potential consequences abroad.

Reimbursement of combined antihypertensive medicenes in Ukraine: aspects of inclusion and external reference pricing

Cardiovascular diseases (CVD), in particular arterial hypertension (AH), are the main causes of morbidity and mortality, Ukraine is on the 1st place in Europe for mortality from these diseases. Modern clinical guidelines emphasize the use of combined antihypertensive drugs, and improving the accessibility of these medicines for Ukrainian patients with hypertension is relevant. In Ukraine, at the end of 2022, there were no combined antihypertensive drugs in the List of reimbursed drugs. Therefore, there is a need to develop scientific and practical approaches to improve the «Affordable Medicines» reimbursement program in accordance with modern trends in the treatment of hypertension.
 The aim of the study is to formulate scientific and practical proposals for the inclusion of combined antihypertensive drugs in the state reimbursement program «Affordable Medicines» and to improve external reference pricing.
 Оbjects of the study were Orders of the Ministry of Health of Ukraine, national and international clinical guidelines, WHO ATC/DDD methodology guidelines. The study used content analysis, methods of comparative and logical analysis.
 At the 1st stage of the study, it was found that the current legislation of Ukraine does not prohibit the inclusion of combined antihypertensive drugs in the National List of Essential Medicines, and it is not limited solely to WHO recommendations. In the second stage of the study, it is proposed to use the data of pharmacoepidemiological studies and data of studies of actual consumption of combinated antihypertensive drugs in Ukraine, for further state HTA assessment and inclusion in the National List of Essential Medicines and «Affordable Medicines» program. The third and fourth stages of the study showed that the mechanism of external reference pricing needs to be improved and an algorithm for conducting external reference pricing for combined antihypertensive drugs, consisting of five consecutive stages, was developed and proposed.
 The current regulatory framework of Ukraine provides the possibility of including combined antihypertensive drugs in the state program «Affordable Medicines», and the initiation of the inclusion of medicines is within the competence of the Ministry of Health and the NHSU. A scientific and practical approach to the use of pharmaco-epidemiological research data to identify the most used doses of combined antihypertensive drugs as potential candidates for inclusion in the «Affordable Medicines» program is proposed. A scientific and practical algorithm for external reference pricing for combinated antihypertensive drugs was developed, considering current regulatory and methodological aspects.

How the West Controls Pharmaceutical Prices: Lessons for Malaysia

Drug price in Malaysia has increased substantially over the years. Malaysian policymakers may learn from the Western countries on how to control pharmaceutical spending. We conducted a review to assess the pharmaceutical strategies adopted in Western countries to curb pharmaceutical pricing and compared it with the current Malaysian system. The study found that the European countries adopted a regulated pharmaceutical market. In this regulated market, the price of the drugs will be determined using external reference pricing. The reimbursement and pricing of the drugs are also based on a set of guidelines rather than arbitrary nature. Additionally, the health technology assessment in the European countries utilised rating systems to categorise the added therapeutic benefit of the drugs. This rating system will add more information for price negotiation between the government and pharmaceutical manufacturers. Furthermore, cost-effectiveness analysis is also being incorporated into the decision-making process to ascertain the optimal use of scarce health resources. On top of that, pooled procurement system has been established in order to benefit from the higher volume purchasing. These measures may help Malaysia to ensure that the pharmaceutical spending remain sustainable and that Malaysians, will continue to have access toward a high-quality and affordable healthcare in the future.

HPR5 Reimbursement of Pharmaceuticals in Turkey: Comparison With Approvals of the FDA Between 2010-2021

Turkey has a highly regulated pharmaceutical market with profound challenges for market approval, pricing and reimbursement decisions. The external and internal reference pricing procedures, low value of exchange rate used in pricing, high statutory discounts required from companies during reimbursement applications, the complex system with imported drugs and alternative reimbursement mechanisms have contributed to the decreased willingness of companies to launch new molecules or new indications for already available ones. This study’s main aim is to have a picture of the new molecule and indication reimbursement trends of Turkey in comparison to FDA approvals between 2010-2021.

Implementation of medicines pricing policies in sub-Saharan Africa: systematic review

BackgroundHigh medicine prices contribute to increasing cost of healthcare worldwide. Many patients with limited resources in sub-Saharan Africa (SSA) are confronted with out-of-pocket charges, constraining their access to medicines. Different medicine pricing policies are implemented to improve affordability and availability; however, evidence on the experiences of implementations of these policies in SSA settings appears limited. Therefore, to bridge this knowledge gap, we reviewed published evidence and answered the question: what are the key determinants of implementation of medicines pricing policies in SSA countries?MethodsWe identified policies and examined implementation processes, key actors involved, contextual influences on and impact of these policies. We searched five databases and grey literature; screening was done in two stages following clear inclusion criteria. A structured template guided the data extraction, and data analysis followed thematic narrative synthesis. The review followed best practices and reported using PRISMA guidelines.ResultsOf the 5595 studies identified, 31 met the inclusion criteria. The results showed thirteen pricing policies were implemented across SSA between 2003 and 2020. These were in four domains: targeted public subsides, regulatory frameworks and direct price control, generic medicine policies and purchasing policies. Main actors involved were government, wholesalers, manufacturers, retailers, professional bodies, community members and private and public health facilities. Key contextual barriers to implementation were limited awareness about policies, lack of regulatory capacity and lack of price transparency in external reference pricing process. Key facilitators were favourable policy environment on essential medicines, strong political will and international support. Evidence on effectiveness of these policies on reducing prices of, and improving access to, medicines was mixed. Reductions in prices were reported occasionally, and implementation of medicine pricing policy sometimes led to improved availability and affordability to essential medicines.ConclusionsImplementation of medicine pricing policies in SSA shows some mixed evidence of improved availability and affordability to essential medicines. It is important to understand country-specific experiences, diversity of policy actors and contextual barriers and facilitators to policy implementation. Our study suggests three policy implications, for SSA and potentially other low-resource settings: avoiding a ‘one-size-fits-all’ approach, engaging both private and public sector policy actors in policy implementation and continuously monitoring implementation and effects of policies.Systematic review registrationPROSPERO CRD42020178166

Budget cap and pay-back model to control spending on medicines: A case study of Bulgaria.

Central and Eastern European countries (CEEC) have among the highest rates of increase in healthcare expenditure. External reference pricing, generics and biologics price capping, regressive scale for price setting, health technology assessment (HTA), and positive drug lists for reimbursed medicines are among the variety of implemented cost-containment measures aimed at reducing and controlling the rising cost for pharmaceuticals. The aim of our study was to analyze the influence of a recently introduced measure in Bulgaria-budget capping in terms of overall budget expenditure. A secondary goal was to analyze current and extrapolate future trends in the healthcare and pharmaceutical budget based on data from 2016 to 2021. The study is a retrospective, observational and prognostic, macroeconomic analysis of the National Health Insurance Fund's (NHIF) budget before (2016-2018) and after (2019-2021) the introduction of the new budget cap model. Subgroups analysis for each of the three new budget groups of medicines (group A: medicines for outpatient treatment, prescribed after approval by a committee of 3 specialists; group B: all other medicines out of group A; and group C: oncology and life-saving medicines out of group A) was also performed, and the data were extrapolated for the next 3 years. The Kruskal-Wallis test was applied to establish statistically significant differences between the groups. During 2016-2021, healthcare services and pharmaceutical spending increased permanently, observing a growth of 82 and 80%, respectively. The overall healthcare budget increased from European €1.8 billion to 3.3 billion. The subgroup analysis showed a similar trend for all three groups, with similar growth between them. The highest spending was observed in group C, which outpaced the others mainly due to the particular antineoplastic (chemotherapy) medicines included in it. The rising overall healthcare cost in Bulgaria (from European €1.8 billion to 3.3 billion) reveals that implementation of a mechanism for budget predictability and sustainability is needed. The introduced budget cap is a relatively effective measure, but the high level of overspending and pay-back amount (from European €34 billion to 59 billion during 2019-2021) reveals that the market environmental risk factors are not well foreseen and practically implemented.

The fixed basket multilateral Walsh index for international price and real expenditure comparisons

The multilateral Walsh index is the only symmetric average fixed basket price index that satisfies transitivity, country symmetry, and invariance to proportional changes in quantities. Superior axiomatic properties and empirical results demonstrate suitability of the index for international price comparisons. • Advocates fixed-basket multilateral Walsh (MW) index for international comparisons. • Characterizes the MW based on three important axioms for international comparisons. • Characterizes MW index without an artificial assumption that goods prices can be zero. • Shows that MW satisfies identity, monotonicity and other axioms. • Empirical application of MW using the 2017 International Comparison Program data.

Pharmaceutical regulation, pricing, coverage and policy reform in the United States of America

The United States (US) is the largest economy in the world and the largest pharmaceutical market, accounting for 40% of the global expenditure on pharmaceuticals and almost half of the global pharmaceutical pipeline. This review describes prescription drug regulation, pricing and coverage in the US and provides perspectives for policy reform. With an unregulated market-based pricing system for drugs, the US pays on average 3 to 4 times higher prices for branded prescription drugs than other industrialized countries. Challenges posed by rising drug prices create affordability problems that threaten the American population’s health as well as the sustainability of the US healthcare system. The US stands out as the country with the highest health expenditure per capita, at about 17% of its gross domestic product, and with pharmaceuticals representing over 12% of the total health expenditure. Health coverage is strongly dependent on employmentbased private insurance, with government programs like Medicare and Medicaid providing coverage to older and poorer populations, respectively. Coverage for outpatient prescription drugs is included in most, if not all, private health insurance plans and government programs. Although some drug pricing policy reforms have been proposed in recent years, no major nationwide initiatives have been successful in the US thus far. High drug prices might not only impact the US care system’s efficiency, but can also have a ripple effect to other countries like Brazil that use the US for external reference pricing, even if those countries may have other price regulation mechanisms in place. This is particularly important for new therapies for which no other international prices may be available in the global market besides the one from the US. The growing budgetary pressures from rising drug prices underscore the need for US drug pricing reform and highlight the need for global pricing mechanisms that can help ensure early access to new technologies at fairer prices.

International Comparison of Drug Prices with Malaysia: A Systematic Review

High drug price is a hot topic in Malaysia. In this systematic review of drug price comparison studies, we report on international comparison of drug prices with Malaysia. We systematically searched PubMed, Cochrane Library, ScienceDirect and Scopus for peer-reviewed articles. Only studies that made comparison internationally were included. Cost-effectiveness studies, budget impact analysis or costing studies were excluded. A total of 10 studies were included. Nine studies compared the price with median international reference prices (IRPs). Only one study compared the price with another country. The drug price in Malaysia for both government and public sectors was higher than IRP. This review provides the information that the drug price in Malaysia is higher than the international standard. The number of published studies in the drug pricing area is still inadequate with only one study that compares Malaysia drug price with another country. More studies are needed to improve Malaysia’s drug pricing system.