Drug cost containment policies in Italy: are they really effective in the long-run? The case of minimum reference price

Abstract

The aim of this paper is to evaluate the long-run effects of the minimum reference price (MRP) policy adopted recently in Italy in order to contain drug expenditure. This evaluation is based upon an econometric model of the demand for drugs in Italy, based on data covering the period from 1963 to 1994. With this model we can assess not only the effects of the MRP policy on expenditure trends, but also its redistributive effects between consumers, firms and the government. Results from the simulation exercises have proved that the tendency of the pharmaceutical expenditure is to raise again after few years of control, even with the introduction of the MRP. Changes in the up-ward trends can be obtained only with joint intervention on both supply and demand side. At the same time, a cost containment policy that acts on prices can have serious implications in terms of welfare.