Impact of cross-reference pricing on pharmaceutical prices: manufacturers' pricing strategies and price regulation.
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 euro in Germany will reduce maximum reimbursement prices in the former EU-15 countries from 0.15 euros in Austria to 0.36 euros in Italy.


CONCLUSIONS
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.
Stargardt
Tom
T
Department of Health Care Management, Faculty of Economics and Management, Berlin University of Technology, Berlin, Germany. tom.stargardt@tu-berlin.de
Schreyögg
Jonas
J
D003132:Commerce / Q000191:economics*; D017850:Economics, Pharmaceutical; D005858:Germany; D033161:Government Regulation; D004364:Pharmaceutical Preparations / Q000191:economics*; D012051:Reimbursement Mechanisms / Q000458:organization & administration
D004364:Pharmaceutical Preparations