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Applied Health Economics and Health Policy
Published in: Applied Health Economics and Health Policy 4/2006

01-12-2006 | Original Research Article

Impact of Cross-Reference Pricing on Pharmaceutical Prices

Manufacturers’ Pricing Strategies and Price Regulation

Authors: Dipl.-Vw. Tom Stargardt, Jonas Schreyögg

Published in: Applied Health Economics and Health Policy | Issue 4/2006

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Abstract

Objective

Several EU countries are determining reimbursement prices of pharmaceuticals by cross-referencing prices of foreign countries. Our objective is to quantify the theoretical cross-border spill-over effects of cross-reference pricing schemes on pharmaceutical prices in the former EU-15 countries.

Methods

An analytical model was developed estimating the impact of pharmaceutical price changes in Germany on pharmaceutical prices in other countries in the former EU-15 using cross-reference pricing. We differentiated between the direct impact (from referencing to Germany directly) and the indirect impact (from referencing to other countries that conduct their own cross-reference pricing schemes).

Results

The relationship between the direct and indirect impact of a price change depends mainly on the method applied to set reimbursement prices. When applying cross-reference pricing, the reimbursement price is either determined by the lowest of foreign prices (e.g. Portugal), the average of foreign prices (e.g. Ireland) or a weighted average of foreign prices (e.g. Italy). If the respective drug is marketed in all referenced countries and prices are regularly updated, a price reduction of € 1.00 in Germany will reduce maximum reimbursement prices in the former EU-15 countries from €0.15 in Austria to €0.36 in Italy.

Discussion

On one side, the cross-border spill-over effects of price reductions are undoubtedly welcomed by decision makers and may be favourable to the healthcare system in general. On the other side, these cross-border spill-over effects also provide strong incentives for strategic product launches, launch delays and lobbying activities, and can affect the effectiveness of regulation.

Conclusions

To avoid the negative effects of cross-reference pricing, a weighted index of prices from as many countries as possible should be used to determine reimbursement prices in order to reduce the direct and indirect impact of individual countries.
Appendix
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Metadata
Title
Impact of Cross-Reference Pricing on Pharmaceutical Prices
Manufacturers’ Pricing Strategies and Price Regulation
Authors
Dipl.-Vw. Tom Stargardt
Jonas Schreyögg
Publication date
01-12-2006
Publisher
Springer International Publishing
Published in
Applied Health Economics and Health Policy / Issue 4/2006
Print ISSN: 1175-5652
Electronic ISSN: 1179-1896
DOI
https://doi.org/10.2165/00148365-200605040-00005

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