Overview of external reference pricing systems in Europe

Area of Science:

• Health economics
• Pharmaceutical policy
• Drug pricing regulation

Background:

• External reference pricing (ERP) is a key drug price regulation tool in the European Union (EU).
• Its theoretical ability to modulate prices up or down is widely utilized by policymakers to manage pharmaceutical expenditures.
• This study examines ERP systems across 31 European countries, including EU Member States, Iceland, Norway, and Switzerland.

Purpose of the Study:

• To provide an overview of External Reference Pricing (ERP) systems in 31 European countries.
• To analyze the processes, potential issues, and impact of ERP on pharmaceutical prices.
• To discuss cross-country coordination challenges related to ERP within the EU.

Main Methods:

• A systematic literature review identified and characterized ERP use in selected European countries.
• The review assessed ERP's impact on pharmaceutical prices and explored cross-country coordination issues.
• Consultations with competent authorities and international organizations supplemented the literature review.

Main Results:

• External Reference Pricing (ERP) is applied in 29 of the 31 surveyed countries, primarily for publicly reimbursed medicines.
• Significant variations exist in ERP calculation methods (e.g., average price, lowest price) and the number of reference countries used.
• Limitations include unreliable price data, price heterogeneity, exchange rate volatility, and hidden discounts, leading to spill-over effects and company pricing strategies.

Conclusions:

• Despite widespread use, inconsistencies in ERP processes and data availability across European countries limit its effective implementation.
• The spill-over effect of ERP is a significant concern for pharmaceutical companies, influencing their launch sequence strategies.