The impact of external reference pricing on pharmaceutical costs and market dynamics

Date: March 30, 2023
Journal: Health Policy OPEN
Citation: Voehler D, Koethe BC, Synnott PG, Ollendorf DA, The impact of external reference pricing on pharmaceutical costs and market dynamics, Health Policy OPEN, Volume 4, 2023, 100093, ISSN 2590-2296, https://doi.org/10.1016/j.hpopen.2023.100093.

ABSTRACT

Growth in the cost of prescription drugs in the US has generated significant interest in the use of external reference pricing (ERP) to tie prices paid for drugs to those in other countries. We used data from the Pricentric ONE™ database, an international drug pricing database, to examine product launch timing, launch price, and price changes from January 2010 – October 2021 in both ERP and non-ERP settings, with a focus on 100 high-priced drugs of interest to Medicare and Medicaid. We found that ERP policies were associated with a 73% reduction in the likelihood of drug launch within 9 months of regulatory approval relative to non-ERP settings. In addition, while ERP was associated with statistically significant reductions in annual drug price changes, such policies did not impact launch price. In addition, no single ERP feature (e.g., number of countries referenced, ERP calculation) was materially associated with the outcomes of interest. We conclude that ERP policies do not appear to impact drug launch price and may delay access to new therapies, raising questions about the utility of such policies in the US and potential consequences abroad.

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