Reference Pricing of Pharmaceuticals: Evidence from Germany, the Netherlands and New Zealand

This paper describes three prototypical systems of therapeutic reference pricing (RP) for pharmaceuticals -Germany, the Netherlands, and New Zealand -and examines their effects on the availability of new drugs; manufacturer prices, reimbursement levels, and out-of-pocket surcharges to patients; and market shares of originator and generic products. The results differ across countries in predictable ways, depending on system design and other cost control policies. The most aggressive RP system has severely limited the availability of new drugs, particularly more expensive drugs, disproportionately reduced reimbursement and sales for originator products and exposed patients to outof-pocket costs. We find little evidence that therapeutic referencing has stimulated competition. JEL classification: I1, L11, L65