Examining two approaches to U.S. drug pricing: international prices and therapeutic equivalency

Examining two approaches to U.S. drug pricing: international prices and therapeutic equivalency

Collection:
Health Policy and Services Research
Contributor(s):
Bipartisan Policy Center, issuing body.
Publication:
Washington, D.C. : Bipartisan Policy Center, October 2019
Language(s):
English
Format:
Text
Subject(s):
Costs and Cost Analysis
Drug Costs
Insurance, Health, Reimbursement
Therapeutic Equivalency
Europe
United States
Genre(s):
Technical Report
Abstract:
Scientific advances in the biomedical research and pharmaceutical sectors have led to new drug treatments for a multitude of acute and chronic illnesses. While policymakers value the need to support continued innovation, they also seek ways to increase the affordability and accessibility of drugs. Evidence shows that the high prices of drugs are prompting difficult choices, as patients delay taking or don't access therapies they cannot afford. Most Americans, across party lines, see policy options to curb prescription drug costs as a top priority. To date, many of the options to mitigate the high price of drugs have focused on increasing competition and transparency in the pharmaceutical sector as well as increasing value-based payments based on outcomes achieved. However, this report examines two additional tools: external reference pricing and internal reference pricing. External reference pricing uses international prices as a benchmark to set or negotiate the price of drugs. Internal reference pricing, which could be used in various scenarios to ensure that therapeutically equivalent drugs are priced similarly, encourages the use of the least costly alternative therapy. Agencies abroad commonly use both tools to restrain the high cost of drugs. While experts and officials have only recently proposed external reference pricing in the United States, it is currently employed in dozens of countries around the world, with many using the tool as the sole or main pricing policy. There is substantial heterogeneity among countries in how the tool is implemented with variation existing in the number of countries referenced, the calculation of the reference price, the specific sectors to which the policy applies, and the frequency of price revisions. While this variation makes it difficult to assess the overall impact on outcomes, studies generally demonstrate that external reference pricing leads to lower drug prices immediately, although this effect may diminish over time. Studies also suggest that more frequent monitoring and systematic price revisions may lead to greater price reductions, and additional data suggest larger savings could be garnered if real prices paid by payers (discounted prices) were used. There are some studies that point to unintended consequences, such as potential encouragement of higher pricing in low-income countries, manufacturer launch delays in countries with lower prices, and short-term discouragement of investment in research and development. Many countries around the world also use internal reference pricing to incentivize the uptake of therapeutically equivalent lower-cost drugs. Evidence suggests that internal reference pricing policies may reduce drug prices and expenditures by increasing the use of reference drugs rather than more expensive products. The U.S. government used internal reference pricing in a limited way, primarily through Medicare Part B policies, from 1995 to 2010. More recently, private-sector purchasers have been using this tool successfully to reduce employer spending on therapeutically equivalent prescription drugs. The varied use of external and internal reference pricing schemes in developed, market-oriented countries such as Germany, Switzerland, and Denmark, all of which have a relatively short time-to-market for pharmaceutical drugs, demonstrates that these tools could be effective in the United States to mitigate high drug prices.
Copyright:
The National Library of Medicine believes this item to be in the public domain. (More information)
Extent:
1 online resource (1 PDF file (34 pages))
Illustrations:
Illustrations
NLM Unique ID:
101767915 (See catalog record)
Permanent Link:
http://resource.nlm.nih.gov/101767915