The implications of external price referencing on pharmaceutical list prices in Europe

Csanádi, Marcell; Kaló, Zoltán; Prins, Christian P.J.; Grélinger, E; Kiss, A; Fricke, Frank-Ulrich; Fuksa, Leos; Tesař, Tomáš; Manova, Manoela; Lorenzovici, László; Vokó, Zoltán; Garrison, Louis P.

doi:10.1016/j.hlpt.2018.07.005

Cited by 20 publications

(17 citation statements)

References 20 publications

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“…It has been highlighted in literature (28,(35)(36)(37) and in policy debate that the cost-containment capacity of EPR is strongly impaired by referencing to 'fake prices' (38) since the real prices are not known due to the con dential character of discounts and managed-entry agreements. Both scenarios of this study that considered discounts con rmed the loss of savings opportunities given the non-consideration of discounted prices in other countries.…”

Section: Discussionmentioning

confidence: 99%

Impact of changes in the methodology of external price referencing on medicine prices: discrete-event simulation

Vogler

Schneider

Lepuschütz

2020

Preprint

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Background: Several governments apply the policy of external price referencing (EPR), which considers the prices of a medicine in one or more other countries for the purpose of setting the price in the own country. Different methodological choices can be taken to design EPR. The study aimed to analyse whether, or not, and how changes in the methodology of EPR can impact medicine prices.Methods: The real-life EPR methodology as of Q1/2015 was surveyed in all European Union Member States (where applicable), Iceland, Norway and Switzerland through a questionnaire responded by national pricing authorities. Different scenarios were developed related to the parameters of the EPR methodology. Discrete-event simulations of fictitious prices in the 28 countries of the study that had EPR were run over 10 years. The continuation of the real-life EPR methodology in the countries as surveyed in 2015, without any change, served as base case.Results: In most scenarios, after ten years, medicine prices in all or most surveyed countries were – sometimes considerably – lower than in the base case scenario. But in a few scenarios medicine prices increased in some countries. Consideration of discounts (an assumed 20% discount in five large economies and the mandatory discount in Germany, Greece and Ireland) and determining the reference price based on the lowest price in the country basket would result in higher price reductions (on average -47.2% and -34.2% compared to the base case). An adjustment of medicine price data of the reference countries by purchasing power parities would lead to higher prices in some more affluent countries (e.g. Switzerland, Norway) and lower prices in lower-income economies (Bulgaria, Romania, Hungary, Poland). Regular price revisions and changes in the basket of reference countries would also impact medicine prices, however to a lesser extent.Conclusions: EPR has some potential for cost-containment. Medicine prices could be decreased if certain parameters of the EPR methodology were changed. If public payers aim to apply EPR to keep medicine prices at more affordable levels, they are encouraged to explore the cost-containment potential of this policy by taking appropriate methodological choices in the EPR design.

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Section: Discussionmentioning

confidence: 99%

Impact of changes in the methodology of external price referencing on medicine prices: discrete-event simulation

Vogler

Schneider

Lepuschütz

2020

Preprint

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“…It has been highlighted in literature (28,(34)(35)(36) and policy debate that the cost-containment capacity of EPR is strongly impaired by the referencing to 'fake prices' (37) since the real prices are not known due to the confidential character of discounts and managed-entry agreements. Both scenarios of this study that considered discounts confirmed the loss of saving opportunities due to the discounted prices in other countries.…”

Section: Discussionmentioning

confidence: 99%

“…Some studies showed that the introduction and implementation of EPR has contributed to lower medicine prices and/or savings in the public budgets (19)(20)(21)(22)(23)(24). Other research, however, pointed to the inferiority of EPR's ability as cost-containment tool compared to other pricing policies, such as valuebased pricing, or showed inconclusive results (25)(26)(27)(28).…”

Section: Introductionmentioning

confidence: 99%

Impact of changes in the methodology of external price referencing on medicine prices: discrete-event simulation

Vogler

Schneider

Lepuschütz

2020

Preprint

View full text Add to dashboard Cite

Background: Several governments apply the policy of external price referencing (EPR), which considers the prices of a medicine in one or more other countries for the purpose of setting the price in the own country. Different methodological choices can be taken to design the EPR policy. The study aimed to analyse whether, or not, and how changes in the methodology of EPR can impact medicine prices.Methods: The real-life EPR methodology as of Q1/2015 was surveyed in all European Union Member States, Iceland, Norway and Switzerland through a questionnaire responded by national pricing authorities. Different scenarios were developed related to the parameters of the EPR methodology. Discrete-event simulations of fictitious prices in the 28 countries of the study that had EPR in place were run for a period of 10 years. The continuation of the real-life EPR methodology in the countries as surveyed in 2015, without any change, served as base case.Results: Consideration of discounts (an assumed 20% discount in five large economies and the mandatory discount in Germany, Greece and Ireland) and determining the reference price based on the lowest price in the country basket would result in higher price reductions (on average -47.2% and -34.2% compared to the base case). An adjustment of medicine price data of the reference countries by purchasing power parities would lead to higher prices in some more affluent countries (e.g. Switzerland, Norway) and lower prices in lower-income economies (Bulgaria, Romania, Hungary, Poland). Regular price revisions and changes in the basket of reference countries would also impact medicine prices, however to a lesser extent.Conclusions: EPR has some potential for cost-containment. Medicine prices could be decreased further if certain parameters of the EPR methodology were changed. If public payers aim to apply EPR to keep medicine prices at more affordable levels, they are encouraged to explore the cost-containment potential of this policy and to take appropriate methodological choices in the design of EPR.

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“…Therefore, the mechanism is not to be claimed to be competitive with another pricing method, and it does not neglect the remarkable hypotheses hidden in the represented price of drugs. The possibility of using discount for offering lower prices has already been mentioned in other papers such as the study by (Csanádi et al, 2018). Another important subject regarding the possibility of domestic production of brand drugs is the value of the license.…”

Section: Introductionmentioning

confidence: 93%

A Model for Pricing the License of Brand-Name Drugs Using Cooperative Game Theory

MOSTOFI

JAIN

Mei

2020

International Joint Conference on Industrial Engineering and Operations Management Proceedings

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This study examines the license valuation process of brand-name drugs using cooperative game theory. Brand-name drugs are non-generic and patented products which are produced by a domestic company licensed by the main manufacturer. To achieve the study aims, first, the pricing process of drugs in the local market is briefly described, and then, the benefits of cooperation between the foreign company and domestic company and local government are explained to show how these benefits can be presented as a licensing contract in the valuation process. Also, the advantages of licensing are described by implementing the proposed model on a sample problem. Furthermore, the factors that risk this valuation are presented by analyzing the sensitivity of the parameters of the problem. The Nash bargaining solution is also borrowed in this paper so as to consider the bargaining power of the alliance members. Our results showed that the assumption of equal negotiation power distorts the results from the common royalty rate, but when more bargaining power is considered for the government, as the legislator, the results of the proposed mechanism more resemble the conventional approaches.

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The implications of external price referencing on pharmaceutical list prices in Europe

Cited by 20 publications

References 20 publications

Impact of changes in the methodology of external price referencing on medicine prices: discrete-event simulation

Impact of changes in the methodology of external price referencing on medicine prices: discrete-event simulation

Impact of changes in the methodology of external price referencing on medicine prices: discrete-event simulation

A Model for Pricing the License of Brand-Name Drugs Using Cooperative Game Theory

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