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Variations in external reference pricing implementation: does it matter for public policy?

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Abstract

Background

External reference pricing (ERP) seeks to rationalize prices and contain costs using foreign prices as a reference for the determination of domestic prices and is often used as the starting point for the facilitation of negotiations between health authorities and pharmaceutical manufacturers.

Methods

A systematic literature review was used to identify characteristics of ERP implementation across 29 countries. Primary data collection, in the form of surveys directed at key stakeholders, was also used to supplement data in instances where information received from the systematic literature review was outdated or minimal. Findings from the systematic literature review and primary evidence from key stakeholders were bench-marked against 14 best practice principles inherent to an optimal ERP system.

Results

Significant heterogeneity in ERP implementation across countries was identified. Country basket size, pricing calculation, and frequency of price revisions varied between countries. Belgium, France, and South Africa were more likely to adhere to the best practice principles, whilst Bulgaria, Hungary, and Romania had the most instances of non-adherence.

Conclusion

The observed heterogeneity has policy implications for governments including globally declining pharmaceutical prices, launch delays in lower income countries, reduced incentive for continued R&D, and reduced access to medicines. Overcoming this issue to ensure that ERP is beneficial to all stakeholders will require a focus on developing sustainable, transparent, simple, and stable systems using a set of key guidelines that should maximize the benefits of the pricing policy.

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Acknowledgements

We would like to thank Mackenzie Mills, Erica Visintin, Olina Efthymiadou, and David Taylor for their valuable input in earlier versions of the paper and two anonymous referees for helpful comments and suggestions. We are indebted for the input and insights received from country respondents to our survey. This paper was developed in the context of the LSE Health—Medical Technology Research Group Pharmaceutical Regulation program. Finally, we thank Pfizer Ltd. for financial support through an unrestricted educational grant. All outstanding errors remain our own.

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Authors and Affiliations

  1. Department of Health Policy and LSE Health, Medical Technology Research Group, Cowdray House, London School of Economics and Political Science, Houghton Street, London, WC2A 2AE, UK

    Jennifer Gill, Anna-Maria Fontrier, Dionysis Kyriopoulos & Panos Kanavos

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  1. Jennifer Gill
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  2. Anna-Maria Fontrier
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Correspondence to Jennifer Gill.

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Gill, J., Fontrier, AM., Kyriopoulos, D. et al. Variations in external reference pricing implementation: does it matter for public policy?. Eur J Health Econ 20, 1375–1397 (2019). https://doi.org/10.1007/s10198-019-01100-y

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