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Effects of the German reference drug program on ex‐factory prices of prescription drugs: a panel data approach

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  • Boris Augurzky
  • Silja Göhlmann
  • Stefan Greß
  • Jürgen Wasem

Abstract

This paper examines effects of the German social health insurance system's reference drug program (RDP) for prescription drugs on ex‐factory prices. Moreover, we analyze whether manufacturers adapt prices of their products that are not subject to reference pricing as a consequence of changes in reference prices of their products that are subject to reference pricing. We use econometric panel data methods based on a large panel data set of nearly all German prescription drugs on a monthly basis between October 1994 and July 2005. They provide information on ex‐factory prices, reference prices, manufacturers, type of prescription drug, and market entries and exits. Our results show that there is no full price adjustment: A 1%‐change in reference prices leads to a 0.3%‐change in market prices. Price adjustment, however, is fast – it mostly happens in the first month. Furthermore, the first introduction of a reference price reduces market prices of the affected products by approximately 7%. Finally, we observe a significant time effect that is positive in the market without reference prices and negative in the market with reference prices. Copyright © 2008 John Wiley & Sons, Ltd.

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  • Boris Augurzky & Silja Göhlmann & Stefan Greß & Jürgen Wasem, 2009. "Effects of the German reference drug program on ex‐factory prices of prescription drugs: a panel data approach," Health Economics, John Wiley & Sons, Ltd., vol. 18(4), pages 421-436, April.
    • Handle: RePEc:wly:hlthec:v:18:y:2009:i:4:p:421-436
    DOI: 10.1002/hec.1376
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    1. Patricia M. Danzon & Jonathan D. Ketcham, 2004. "Reference Pricing of Pharmaceuticals for Medicare: Evidence from Germany, the Netherlands, and New Zealand," NBER Chapters, in: Frontiers in Health Policy Research, Volume 7, pages 1-54, National Bureau of Economic Research, Inc.
    2. Schneeweiss, Sebastian, 2007. "Reference drug programs: Effectiveness and policy implications," Health Policy, Elsevier, vol. 81(1), pages 17-28, April.
    3. Nina Pavcnik, 2002. "Do Pharmaceutical Prices Respond to Potential Patient Out-of-Pocket Expenses?," RAND Journal of Economics, The RAND Corporation, vol. 33(3), pages 469-487, Autumn.
    4. Puig-Junoy, Jaume, 2007. "The impact of generic reference pricing interventions in the statin market," Health Policy, Elsevier, vol. 84(1), pages 14-29, November.
    5. Zweifel, Peter & Crivelli, Luca, 1996. "Price Regulation of Drugs: Lessons from Germany," Journal of Regulatory Economics, Springer, vol. 10(3), pages 257-273, November.
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    Cited by:

    1. Herr, A. & Suppliet, M., 2011. "Co-Payment Exemptions and Reference Prices: an Empirical Study of Pharmaceutical Prices in Germany," Health, Econometrics and Data Group (HEDG) Working Papers 11/18, HEDG, c/o Department of Economics, University of York.
    2. Annika Herr & Torben Stühmeier & Tobias Wenzel, 2023. "More cost‐sharing, less cost? Evidence on reference price drugs," Health Economics, John Wiley & Sons, Ltd., vol. 32(2), pages 413-435, February.
    3. Izabela Jelovac, 2015. "On the relationship between the negotiated prices of pharmaceuticals and the patients' co-payment," Economics Bulletin, AccessEcon, vol. 35(1), pages 481-493.
    4. Aysegul Timur & Gabriel Picone & Jeffrey DeSimone, 2011. "Has the European union achieved a single pharmaceutical market?," International Journal of Health Economics and Management, Springer, vol. 11(4), pages 223-244, December.
    5. Michael Mueller & Alexander Frenzel, 2015. "Competitive pricing within pharmaceutical classes: evidence on “follow-on” drugs in Germany 1993–2008," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 16(1), pages 73-82, January.
    6. Simone Ghislandi & Patrizio Armeni & Claudio Jommi, 2013. "The impact of generic reference pricing in Italy, a decade on," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 14(6), pages 959-969, December.
    7. Matthias Stoll & Christian Kollan & Frank Bergmann & Johannes Bogner & Gerd Faetkenheuer & Carlos Fritzsche & Kirsten Hoeper & Heinz-August Horst & Jan van Lunzen & Andreas Plettenberg & Stefan Reuter, 2011. "Calculation of Direct Antiretroviral Treatment Costs and Potential Cost Savings by Using Generics in the German HIV ClinSurv Cohort," PLOS ONE, Public Library of Science, vol. 6(9), pages 1-12, September.
    8. Suppliet, Moritz & Herr, Annika, 2016. "Cost-Sharing and Drug Pricing Strategies : Introducing Tiered Co-Payments in Reference Price Markets," Other publications TiSEM 4d692f0e-8577-4392-b413-2, Tilburg University, School of Economics and Management.
    9. Hanna Koskinen & Elina Ahola & Leena Saastamoinen & Hennamari Mikkola & Jaana Martikainen, 2014. "The impact of reference pricing and extension of generic substitution on the daily cost of antipsychotic medication in Finland," Health Economics Review, Springer, vol. 4(1), pages 1-10, December.
    10. Herr, Annika, 2012. "Rationalisierung und Wettbewerb im Arzneimittelmarkt," DICE Ordnungspolitische Perspektiven 31, Heinrich Heine University Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
    11. 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.
    12. Matteo Galizzi & Simone Ghislandi & Marisa Miraldo, 2011. "Effects of Reference Pricing in Pharmaceutical Markets," PharmacoEconomics, Springer, vol. 29(1), pages 17-33, January.
    13. Herr, Annika & Stühmeier, Torben & Wenzel, Tobias, 2014. "Reference pricing and cost-sharing: Theory and evidence on German off-patent drugs," VfS Annual Conference 2014 (Hamburg): Evidence-based Economic Policy 100556, Verein für Socialpolitik / German Economic Association.

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