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Reference Pricing of Pharmaceuticals for Medicare: Evidence from Germany, the Netherlands, and New Zealand

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Author Info

  • Danzon Patricia M.

    (University of Pennsylvania, and NBER)

  • Ketcham Jonathan D.

    (University of California, Berkeley, and University of California, San Francisco)

Abstract

This paper describes three prototypical systems of therapeutic reference pricing (RP) for pharmaceuticals—Germany, the Netherlands, and New Zealand—and examines their effects on the availability of new drugs, reimbursement levels, manufacturer prices, and out-of-pocket surcharges to patients. RPfor pharmaceuticals is not simply analogous to a defined contribution approach to subsidizing insurance coverage. Although a major purpose of RPis to stimulate competition, theory suggests that the achievement of this goal is unlikely, and this is confirmed by the empirical evidence. Other effects of RPdiffer across countries in predictable ways, reflecting each country’s system design and other cost-control policies. New Zealand’s RPsystem has reduced reimbursement and limited the availability of new drugs, particularly more expensive drugs. Compared to these three countries, if RP were applied in the United States, it would likely have a more negative effect on prices of on-patent products because of the more competitive U.S. generic market, and on research and development (R&D) and the future supply of new drugs, because of the much larger U.S. share of global pharmaceutical sales.

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File URL: http://www.degruyter.com/view/j/fhep.2004.7.1/fhep.2004.7.1.1050/fhep.2004.7.1.1050.xml?format=INT
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Bibliographic Info

Article provided by De Gruyter in its journal Forum for Health Economics & Policy.

Volume (Year): 7 (2004)
Issue (Month): 1 (January)
Pages: 1-56

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Handle: RePEc:bpj:fhecpo:v:7:y:2004:n:2

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References

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  1. Alan Woodfield, 2001. "Augmenting Reference Pricing of Pharmaceuticals in New Zealand with Strategic Cross-Product Agreements," PharmacoEconomics, Springer Healthcare | Adis, vol. 19(4), pages 365-377.
  2. Lopez-Casasnovas, Guillem & Puig-Junoy, Jaume, 2000. "Review of the literature on reference pricing," Health Policy, Elsevier, vol. 54(2), pages 87-123, November.
  3. Danzon, Patricia M. & Chao, Li-Wei, 2000. "Cross-national price differences for pharmaceuticals: how large, and why?," Journal of Health Economics, Elsevier, vol. 19(2), pages 159-195, March.
  4. Zweifel, Peter & Crivelli, Luca, 1996. "Price Regulation of Drugs: Lessons from Germany," Journal of Regulatory Economics, Springer, vol. 10(3), pages 257-73, November.
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Cited by:
  1. Brekke, Kurt R. & Grasdal, Astrid L. & Holms, Tor Helge, 2009. "Regulation and pricing of pharmaceuticals: Reference pricing or price cap regulation?," European Economic Review, Elsevier, vol. 53(2), pages 170-185, February.
  2. Calfee, John E. & DuPr�, Elizabeth & Villarreal, Mario, 2006. "An Exploratory Analysis of Pharmaceutical Price Disparities and Their Implications Among Six Developed Nations," Working paper 534, Regulation2point0.
  3. Kurt R. Brekke & Ingrid Königbauer & Odd Rune Straume, 2006. "Reference Pricing of Pharmaceuticals," CESifo Working Paper Series 1825, CESifo Group Munich.
  4. repec:hal:wpaper:halshs-00566800 is not listed on IDEAS
  5. Kurt R. Brekke & Tor Helge Holmås & Odd Rune Straume, 2010. "Reference Pricing, Competition, and Pharmaceutical Expenditures: Theory and Evidence from a Natural Experiment," CESifo Working Paper Series 3258, CESifo Group Munich.
  6. Nebibe Varol & Joan Costa-i-Font & Alistair McGuire, 2011. "Explaining Early Adoption on New Medicines: Regulation, Innovation and Scale," CESifo Working Paper Series 3459, CESifo Group Munich.
  7. Königbauer, Ingrid, 2006. "Dealing with Rising Health Care Costs: The Case of Pharmaceuticals," Munich Dissertations in Economics 5640, University of Munich, Department of Economics.
  8. Götze, Ralf, 2010. "The changing role of the state in the Dutch healthcare system," TranState Working Papers 141, University of Bremen, Collaborative Research Center 597: Transformations of the State.
  9. Chiara Bonassi & Laura Magazzini & Fabio Pammolli & Massimo Riccaboni & Nicola Carmine Salerno, 2007. "Il prezzo di riferimento nel quadro regolatorio del mercato farmaceutico," Working Papers 04-2007, Competitività Regole Mecati (CERM).
  10. Alka Chadha & Åke Blomqvist, 2005. "Patent Races, “Me-Too” Drugs, and Generics: A Developing-World Perspective," Departmental Working Papers wp0513, National University of Singapore, Department of Economics.
  11. Chiara Bonassi & Fabio Pammolli & Massimo Riccaboni & Nicola Carmine Salerno, 2007. "Regolazione, innovazione e ciclo di vita dei prodotti - per una riforma del pricing al lancio e della governance della spesa nella farmaceutica pubblica," Working Papers 02-2007, Competitività Regole Mecati (CERM).
  12. Boris Augurzky & Silja Göhlmann & Stefan Gress & Jürgen Wasem, 2006. "The Effects of Reference Pricing on Ex-factory Prices of Rx Drugs in Germany – A Panel Data Approach," RWI Discussion Papers 0046, Rheinisch-Westfälisches Institut für Wirtschaftsforschung.
  13. Koenig, Pamina & MacGarvie, Megan, 2011. "Regulatory policy and the location of bio-pharmaceutical foreign direct investment in Europe," Journal of Health Economics, Elsevier, vol. 30(5), pages 950-965.
  14. Ivan Moreno-Torres, 2011. "Generic drugs in Spain: price competition vs. moral hazard," Working Papers XREAP2011-04, Xarxa de Referència en Economia Aplicada (XREAP), revised May 2011.
  15. Pamina Koenig & Megan Macgarvie, 2009. "Regulatory policy and the location of bio-pharmaceutical FDI in Europe," PSE Working Papers halshs-00566800, HAL.

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