title: Impact of cross-reference pricing on pharmaceutical prices: manufacturers' pricing strategies and price regulation.
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 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.
authors.affiliation: Department of Health Care Management, Faculty of Economics and Management, Berlin University of Technology, Berlin, Germany. tom.stargardt@tu-berlin.de
authors.forename: Tom
authors.initials: T
authors.lastname: Stargardt
authors.forename: Jonas
authors.initials: J
authors.lastname: Schreyögg
mesh_terms: D003132:Commerce / Q000191:economics*; D017850:Economics, Pharmaceutical; D005858:Germany; D033161:Government Regulation; D004364:Pharmaceutical Preparations / Q000191:economics*; D012051:Reimbursement Mechanisms / Q000458:organization & administration
chemical_list: D004364:Pharmaceutical Preparations