Review of the literature on reference pricing

This paper reviews the literature on reference pricing (RP) in pharmaceutic al markets. The RP strategy for cost containment of expenditure on drugs is analyzed as part of the procurement mechanism. We review the existing lite rature and the state-of-the-art regarding RP by focusing on its economic ef fects. Tn particular, we consider: (1) the institutional context and proble m-related factors which appear to underline the need to implement an RP str ategy; i.e. its nature, characteristics and the sort of health care problem s commonly addressed; (2) how RP operates in practice; that is, how third p arty-payers (the insurers/ buyers) have established the RP systems existing on the international scene (i.e. information methods, monitoring procedure s and legislative provisions); (3) the range of effects resulting from part icular RP strategies (including effects on choice of appropriate pharmaceut icals, insurer savings, total drug expenditures, prices of referenced and n on-referenced products and dynamic efficiency, (4) the market failures whic h an RP policy is supposed to address and the main advantages and drawbacks which emerge from an analysis of its effects. Results suggest that RP syst ems achieve better their postulated goals (1) if cost inflation in pharmace uticals is due to high prices rather than to the excess of prescription rat es. (2) when the larger. is the existing difference in prices among equival ent drugs, and (3) more important is the actual market for generics. (C) 20 00 Elsevier Science Ireland Ltd. All rights reserved.