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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

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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  • Paul Grootendorst & David Stewart, 2006. "A re‐examination of the impact of reference pricing on anti‐hypertensive drug plan expenditures in British Columbia," Health Economics, John Wiley & Sons, Ltd., vol. 15(7), pages 735-742, July.
    • Handle: RePEc:wly:hlthec:v:15:y:2006:i:7:p:735-742
    DOI: 10.1002/hec.1103
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    References listed on IDEAS

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    1. Lopez-Casasnovas, Guillem & Puig-Junoy, Jaume, 2000. "Review of the literature on reference pricing," Health Policy, Elsevier, vol. 54(2), pages 87-123, November.
    2. 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 70, McMaster University.
    3. Lisa R. Dolovich & Anne M. Holbrook & Margaret Woodruff, 2002. "The Impact of Reference Pricing of Cardiovascular Drugs on Health Care Costs and Health Outcomes: Evidence from British Columbia -- Volume III: ACE and CCB Literature Review," Quantitative Studies in Economics and Population Research Reports 371, McMaster University.
    4. Newey, Whitney & West, Kenneth, 2014. "A simple, positive semi-definite, heteroscedasticity and autocorrelation consistent covariance matrix," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 33(1), pages 125-132.
    5. 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 115, McMaster University.
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    Cited by:

    1. 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;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 11(3), pages 267-277, June.
    2. Kanavos, Panos G. & Vandoros, Sotiris, 2011. "Determinants of branded prescription medicine prices in OECD countries," Health Economics, Policy and Law, Cambridge University Press, vol. 6(3), pages 337-367, July.
    3. Eduardo Costa & Carolina Santos, 2022. "Pharmaceutical pricing dynamics in an internal reference pricing system: evidence from changing drugs’ reimbursements," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 23(9), pages 1497-1518, December.
    4. Fiorio, Carlo V. & Siciliani, Luigi, 2010. "Co-payments and the demand for pharmaceuticals: Evidence from Italy," Economic Modelling, Elsevier, vol. 27(4), pages 835-841, July.
    5. Kalo, Zoltan & Muszbek, Noemi & Bodrogi, Jozsef & Bidlo, Judit, 2007. "Does therapeutic reference pricing always result in cost-containment?: The Hungarian evidence," Health Policy, Elsevier, vol. 80(3), pages 402-412, March.
    6. Dominik J. Wettstein & Stefan Boes, 2019. "Effectiveness of National Pricing Policies for Patent-Protected Pharmaceuticals in the OECD: A Systematic Literature Review," Applied Health Economics and Health Policy, Springer, vol. 17(2), pages 143-162, April.
    7. Matteo Galizzi & Simone Ghislandi & Marisa Miraldo, 2011. "Effects of Reference Pricing in Pharmaceutical Markets," PharmacoEconomics, Springer, vol. 29(1), pages 17-33, January.
    8. Hokkanen, Joni & Kangasharju, Aki & Linnosmaa, Ismo & Valtonen, Hannu, 2012. "Generic substitution policy, prices and market structure: evidence from a quasi-experiment in Finland," Working Papers 35, VATT Institute for Economic Research.
    9. Håkonsen, Helle & Horn, Anne Marie & Toverud, Else-Lydia, 2009. "Price control as a strategy for pharmaceutical cost containment--What has been achieved in Norway in the period 1994-2004?," Health Policy, Elsevier, vol. 90(2-3), pages 277-285, May.

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