Evaluating reference-based pricing: initial findings and prospects

Abstract

Reference-based pricing is a controversial policy mechanism used to control pharmaceutical expenditures. After its implementation in some European countries, the British Columbia government introduced a version of reference-based pricing in October 1995. The authors reviewed previous studies of reference-based pricing in other countries and conducted a preliminary assessment of the impacts of the BC system by analysing secondary utilization and cost data. After the introduction of reference-based pricing in other jurisdictions within the Organisation for Economic Cooperation and Development, there was a temporary reduction in the rate of growth of total pharmaceutical expenditures, followed by a return to previous growth trends in subsequent years. Similarly, initial data from BC showed dramatic declines in annual expenditures for drugs within referenced categories (from $42.0 million the year before reference-based pricing was introduced to $23.7 million the year after). Although early evidence suggests that reference-based pricing in BC is indeed reducing drug expenditures, much more research is needed to make a final determination of its success. A more comprehensive and longitudinal evaluation of reference-based pricing is needed and should take into account a wide range of non-cost impacts, the most important of which are the effects on health outcomes.