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The American Journal of Managed Care November 2012
Automated Telephone Calls to Enhance Colorectal Cancer Screening: Economic Analysis
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Utilization of HER2 Genetic Testing in a Multi-Institutional Observational Study
Katrina A. B. Goddard, PhD; Erin J. Aiello Bowles, MPH; Heather Spencer Feigelson, PhD, MPH; Laurel A. Habel, PhD; Sharon Hensley Alford, PhD; Catherine A. McCarty, PhD, MPH; Larissa Nekhlyudov, MD, MPH; Adedayo A. Onitilo, MD, MSCR, FACP; Alanna K. Rahm, PhD, MS; and Jennifer A. Webster, MS
Value-Based Purchasing
Sarah Thomas, MS; and Margaret O'Kane, MHS
Hospital Admissions and MS: Temporal Trends and Patient Characteristics
Charity Evans, PhD; Elaine Kingwell, PhD; Feng Zhu, MSc; Joel Oger, MD, FRCPC, FAAN; Yinshan Zhao, PhD; and Helen Tremlett, PhD
Validating the Adapted Diabetes Complications Severity Index in Claims Data
Hsien-Yen Chang, PhD; Jonathan P. Weiner, DrPH; Thomas M. Richards, MSEE; Sara N. Bleich, PhD; and Jodi B. Segal, MD, MPH
Patient-Centered Medical Home Cost Reductions Limited to Complex Patients
Thomas J. Flottemesch, PhD; Louise H. Anderson, PhD; Leif I. Solberg, MD; Patricia Fontaine, MD, MS; and Stephen E. Asche, MA
Care Coordination Agreements: Barriers, Facilitators, and Lessons Learned
Emily Carrier, MD, MSc; Marisa K. Dowling, BA; and Hoangmai H. Pham, MD, MPH
How Comorbidities and Preoperative Expenditures Correlate With Postoperative Adverse Outcomes
Chih-Hsiung Wu, MD, PhD; Rei-Ming Chen, PhD; Hsiao-Chien Tsai, MD; Chuen-Chau Chang, MD, PhD; Hang Chang, MD, PhD; Chien-Chang Liao, PhD; and Ta-Liang Chen, MD, PhD
Physician Factors That Influence Patient Referrals to End-of-Life Care
Alexis Coulourides Kogan, BS; Richard Brumley, MD; Kathleen Wilber, PhD; and Susan Enguidanos, PhD
Active Pharmacovigilance and Healthcare Utilization
Jennifer S. Haas, MD, MSPH; Elissa Klinger, SM; Lucas Xavier Marinacci, BA; Phyllis Brawarsky, MPH; E. John Orav, PhD; Gordon D. Schiff, MD; and David W. Bates, MD, MSc
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A Systematic Review of Reference Pricing: Implications for US Prescription Drug Spending
Joy Li-Yueh Lee, MS; Michael A. Fischer, MD, MS; William H. Shrank, MD, MSHS; Jennifer M. Polinski, ScD, MPH; and Niteesh K. Choudhry, MD, PhD

A Systematic Review of Reference Pricing: Implications for US Prescription Drug Spending

Joy Li-Yueh Lee, MS; Michael A. Fischer, MD, MS; William H. Shrank, MD, MSHS; Jennifer M. Polinski, ScD, MPH; and Niteesh K. Choudhry, MD, PhD
Reference pricing is an effective cost-containment tool widely used in other countries; it may be an attractive policy strategy for the US healthcare system.
Given rising pharmaceutical expenditures and the widespread use of reference pricing as a costcontainment instrument abroad, we systematically reviewed the evidence evaluating reference pricing policies. We performed a structured electronic search of peer-reviewed journals for studies published before that reported on the effects of reference pricing policies on medication use, payer and patient spending, and resource consumption. Our search yielded 16 studies describing 9 reference-pricing policies from 6 countries. Reference-pricing policies led to decreases in drug prices and increases in utilization of targeted medications, while also reducing payer and patient expenditures. In addition, these policies did not lead to increased use of medical services, such as physician office visits and hospitalization. These results suggest that reference pricing may be an attractive policy strategy for the US healthcare system.

(Am J Manag Care. 2012;18(11):e429-e437)
  • Reference pricing has been widely used in other countries as a cost-containment instrument.

  • Reference pricing policies lead to decreases in drug prices, as well as payer and patient expenditures.

  • Reference pricing policies do not lead to increased use of medical services.

  • Reference pricing may be an attractive policy strategy for the US healthcare system.
Rising expenditures for prescription drugs are a major problem for public and private payers in many countries. In the United States, prescription sales reached $300.3 billion in 2009, a 5.3% increase from the previous year.1 Pharmaceutical cost-control measures frequently involve increasing patient cost-sharing, for example through tiered formularies.2 While these approaches effectively reduce drug spending for payers, they can also cause patients to reduce their use of essential medications; this may have adverse clinical consequences which can increase rather than decrease total healthcare expenditure.3-6 In other countries, “reference pricing” has been used as a cost-containment instrument that appears not to have the undesirable effects of other pharmacy benefit designs.7 This policy strategy sets a standard price or reimbursement level for a group of therapeutically interchangeable drugs, often based on the price of the lowest cost member in the class. Manufacturers of other products may price their products above or below this level and patients are responsible for any costs above the reference price. In the American context, the policy is sometimes described as a “maximum allowable cost (MAC) program.”8

Reference drug pricing has been advocated as a policy solution in the United States.9 For example, Pearson and Bach have proposed that reference pricing be used by Medicare, with coverage and reimbursement decisions informed by comparative effectiveness research.10 Even though domestic experience with reference pricing has been extremely limited, its widespread international adoption, beginning in Germany in 1989, followed by the Netherlands in 1991 and New Zealand in 1993 and more than half a dozen countries since, provides an evidence base on which to estimate its potential role in the United States.11,12 Accordingly, we systematically reviewed the scientific literature to understand the effects of reference pricing on medication use, payer and patient spending, and resource consumption.


We performed a structured electronic search of peer-reviewed journals using PubMed, EconLit, Embase, Business Source Complete, and the National Bureau of Economic Research for studies published before May 2012 that reported on the effects of reference drug pricing policies on medication use, payer and patient spending, and resource consumption.

Our electronic search strategy included medical subject headings and keywords related to pharmaceuticals (eg, “economics, pharmaceutical,” “drug utilization,” or “fees, pharmaceutical”), healthcare policy (eg “health government policy regulation,” “health policies”), and policy analysis (eg “health economics,” “cost and cost analysis”), in addition to those specifically related to reference pricing by name (“reference pricing,” “reference price,” “reference drug pricing”). Search terms were adjusted for each database while maintaining a common overall architecture.

Using predefined inclusion and exclusion criteria, abstracts were evaluated to identify potentially relevant articles. We retrieved the published version of all candidate articles and reviewed their reference lists to identify additional relevant studies. The review was limited to papers that evaluated the introduction of reference price policies on either specific or all drug classes within a health system, leaving out studies that evaluated incremental policy changes on reference pricing. In addition, we excluded studies that (1) did not evaluate the effects of a reference pricing policy on drugs, (2) did not present original data, or (3) did not assess our outcomes of interest.

Data on study populations and characteristics, results, and study quality were extracted from each article using a standardized protocol and reporting form. Specific information collected included study and analysis design (ie, cohort, cross-sectional, randomized control trial), policy design (ie, targeted medications, how the price is set), patient sample (ie national, provincial, private), drug classes, implementation date, and outcomes. Outcomes and study results were categorized into 3 groups: (1) drug prices, (2) utilization, switching, and adherence, and (3) expenditures and resource consumption. When not explicitly presented, we calculated percent change in expenditure and/or per capita savings based on the published findings.

Study quality was assessed with the Agency for Healthcare Research and Quality (AHRQ)13 tool for rating observational cohort studies. A study quality score from each study was calculated as a proportion of total points that each paper received. The studies were scored with a maximum of 9 points, 1 for each study domain evaluated, and judged on the presence of key study elements such as study question, comparability of subjects, and outcome measurement.


Our search yielded 16 studies describing 9 reference-pricing policies from 6 countries (Figure 1).8,9,14-28 All the studies were published in the last decade. Of the policies examined, 1 was applied regionally in British Columbia, Canada, 2 were applied in private, employer-sponsored health plans (1 in Canada and 1 in the United States), and the remaining policies were implemented on a national level in Germany, Norway, and Spain (Table 1). The 9 policies encompassed 2 types of reference pricing, “generic reference pricing” and “therapeutic reference pricing.” Four of the 9 policies (evaluated by 5 out of 16 studies) pertained to generic reference pricing and the other 5 (11 out of 16 studies) pertained to therapeutic reference pricing. Generic reference pricing (or “maximum allowable cost”) involves only off-patent drugs within a certain therapeutic class while therapeutic reference pricing (or “therapeutic maximum allowable cost”) pertains to all eligible products, on- and off-patent, within a therapeutic class.

In Germany, a committee of healthcare providers and sickness funds, with input from manufacturers, decides how drugs are to be grouped and sets the reference prices. The reference prices were always below the price of the highest cost product in the group and above the lowest third of the market price.14 Norway and Spain follow similar practices and manufacturers may adjust their product prices in response. Norway’s national referencing pricing policies have since been repealed because savings in expenditures were not as great as expected.15 Regulators in British Columbia, Canada, select specific products to be reference drugs rather than set a reference price. An independent advisory committee decides which therapeutic group of products will be subject to the program as well as the products that will not face any cost sharing under reference pricing.18 In Canada, the reference price program for nonsteroidal anti-inflammatory drugs (NSAIDs) was introduced 18 months after a generic substitution policy was put in place for the same class.17 In Spain, several other cost-containment policies were implemented around the time of the introduction of the reference pricing system in 2000, including markup adjustments of the margins obtained by manufacturers, wholesalers, and pharmacies in 1999 and 2000 and the compulsory reduction of ex-factory prices in 1999 and 2000.28 No other policies had these concurrent changes.

The studies were generally of good methodological quality, with scores ranging from 56% to 100% on the AHRQ scale (mean of 82%). While the majority of studies focused on 1 or 2 classes of drugs, others focused on a wider range of unrelated classes. Most of the studies on the British Columbia policy, for example, focused on individual classes of cardiovascular medication (eg, angiotensin-converting enzyme [ACE] inhibitors, nitrates, calcium channel blockers) while the study by Brekke et al on Norway’s policy targeted antidepressants, antiulcerants, antihistamines, ACE inhibitors, and statins.15 Target classes were not specified by Augurzky et al, while Puig-Junoy examined the effects of reference pricing on 4 top-selling representative products rather than specific drug classes.14,21

Drug Prices

Four of the 9 reference price policies were associated with significant reductions in the price of the targeted drug classes, with a mean reduction of 11.5% (range 7%-24%) (Figure 2). In Spain, prices fell for the highest priced products of 3 out of the 4 targeted classes, but there was no change in the price of omeprazole.21 In British Columbia, Canada, the price of calcium channel blockers fell by $0.80 per median monthly dose (standard deviation: $0.60), but this change was not statistically significant, likely because drug prices are set at a national level in Canada and thus manufacturers cannot easily adjust the price of products in response to the introduction of a regionally applied reference pricing policy.24

Utilization and Switching

The reference pricing policies had varying effects on utilization of the targeted drug classes (Table 2). Grootendorst found a 101% increase in the use of unrestricted (referent) NSAIDs associated with the reference pricing policy introduced in British Columbia in 1997.17 Pavnick also observed an increase in the use of anti-ulcerants after Germany began its policy in 1989, but the 6.4% (standard error 16.2%) change was not statistically significant.19

In several evaluations, results were presented separately for those agents for which prices fell in response to reference pricing. Mabasa and Ma observed a 12% decrease in the use of proton pump inhibitors as a class; the use of the referent drug, rabeprazole, increased by 21%.8 Likewise, Schneeweiss et al observed a 60% increase in the use of calcium channel blockers whose prices were affected (P <.0001), but saw no changes in utilization of other antihypertensive medications.24 Puig-Junoy found a decrease of 1% to 12% in the use of drugs whose prices fell after the change to reference pricing, perhaps because the Spanish reference pricing system evaluated was introduced in conjunction with a number of other policies aimed at decreasing overall drug utilization.29

The policies led to an increase in switching from more expensive drugs to those that fell in price because of reference pricing and a decrease in switching away from referent drugs to more expensive drugs. For example, Schneeweiss et al observed that 9% of patients switched from a cost-sharing calcium channel blocker to one with a price that fell below the reference price.24 Stargardt et al observed that 49% of patients on atorvastatin, which was above the reference price, switched to another statin following policy implementation, while only 4% of patients on statins at or below the price switched to another statin. The policies were also associated with significant improvements in medication adherence.24-26 Stargardt reported nonadherence to be significantly lower for patients treated with statins at the reference price compared with atorvastatin, which was above the reference price (31.1 vs 39.0%, P <.001).26

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