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A re-examination of the impact of reference pricing on anti-hypertensive drug plan expenditures in British Columbia

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  • Paul Grootendorst
  • David Stewart

    (Brogan Inc., Ottawa, Ont., Canada)

Abstract

Reference pricing (RP) limits drug plan reimbursement of interchangeable medicines to a reference price, which is typically equal to the price of the lowest-cost interchangeable drug; any cost above that is borne by the patient. Much of the evidence of the effects of RP comes from 'before and after' studies of the RP scheme adopted by Pharmacare, the publicly funded drug plan for seniors and others in British Columbia, Canada. We critically assess the identifying assumption inherent in the before and after design - namely, that pre-RP trends accurately predict counterfactual outcomes - in the context of estimating the impact of RP on Pharmacare's expenditure on anti-hypertensive drugs for its senior beneficiaries. We use similar data from a public plan that has not introduced RP to estimate the effects on drug expenditures of patent expiration, secular changes in prescribing patterns and various other factors common to all Canadian public drug plans that could potentially confound the before and after estimates of the effect of RP on drug plan expenditures. We find that controlling for such factors reduces estimates of drug plan savings attributable to RP of the Calcium Channel Blockers by about half. Copyright © 2006 John Wiley & Sons, Ltd.

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Bibliographic Info

Article provided by John Wiley & Sons, Ltd. in its journal Health Economics.

Volume (Year): 15 (2006)
Issue (Month): 7 ()
Pages: 735-742

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Handle: RePEc:wly:hlthec:v:15:y:2006:i:7:p:735-742

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Web page: http://www3.interscience.wiley.com/cgi-bin/jhome/5749

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  1. Lopez-Casasnovas, Guillem & Puig-Junoy, Jaume, 2000. "Review of the literature on reference pricing," Health Policy, Elsevier, Elsevier, vol. 54(2), pages 87-123, November.
  2. Whitney K. Newey & Kenneth D. West, 1986. "A Simple, Positive Semi-Definite, Heteroskedasticity and AutocorrelationConsistent Covariance Matrix," NBER Technical Working Papers, National Bureau of Economic Research, Inc 0055, National Bureau of Economic Research, Inc.
  3. Paul V. Grootendorst & Lisa R. Dolovich & Anne M. Holbrook & Adrian R. Levy & Bernie J. O'Brien, 2002. "The Impact of Reference Pricing of Cardiovascular Drugs on Health Care Costs and Health Outcomes: Evidence from British Columbia--Volume I: Summary," Social and Economic Dimensions of an Aging Population Research Papers, McMaster University 70, McMaster University.
  4. Paul V. Grootendorst & John K. Marshall & Anne M. Holbrook & Lisa R. Dolovich & Bernie J. O'Brien & Adrian R. Levy, 2004. "The Impact of Differential Cost Sharing of Non-Steroidal Anti-Inflammatory Agents on the Use and Costs of Analgesic Drugs," Social and Economic Dimensions of an Aging Population Research Papers, McMaster University 115, McMaster University.
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Cited by:
  1. Fiorio, Carlo V. & Siciliani, Luigi, 2010. "Co-payments and the demand for pharmaceuticals: Evidence from Italy," Economic Modelling, Elsevier, Elsevier, vol. 27(4), pages 835-841, July.
  2. Kalo, Zoltan & Muszbek, Noemi & Bodrogi, Jozsef & Bidlo, Judit, 2007. "Does therapeutic reference pricing always result in cost-containment?: The Hungarian evidence," Health Policy, Elsevier, Elsevier, vol. 80(3), pages 402-412, March.
  3. Aki Kangasharju & Joni Hokkanen & Ismo Linnosmaa & Hannu Valtonen, 2012. "Generic substitution policy, prices and market structure: evidence from a quasi-experiment in Finland," Working Papers, Government Institute for Economic Research Finland (VATT) 35, Government Institute for Economic Research Finland (VATT).
  4. Matteo Galizzi & Simone Ghislandi & Marisa Miraldo, 2011. "Effects of Reference Pricing in Pharmaceutical Markets," PharmacoEconomics, Springer, Springer, vol. 29(1), pages 17-33, January.
  5. Tom Stargardt, 2010. "The impact of reference pricing on switching behaviour and healthcare utilisation: the case of statins in Germany," The European Journal of Health Economics, Springer, Springer, vol. 11(3), pages 267-277, June.
  6. Panos G. Kanavos & Sotiris Vandoros, 2011. "Determinants of branded prescription medicine prices in OECD countries," LSE Research Online Documents on Economics, London School of Economics and Political Science, LSE Library 36351, London School of Economics and Political Science, LSE Library.

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