Pharmaceutical policies: effects of reference pricing, other pricing, and purchasing policies.

Large amounts of health care money are spent on drugs, and these amounts are increasing. Spending more on drugs could mean less money for hospitals, doctors or even other non-health care services. There is therefore a pressure to control the costs of drugs, without decreasing health benefits.

This review found 11 studies that evaluated two ways that governments, non-government agencies and health insurance companies have used to try to control costs. Ten studies evaluated reference pricing and one study evaluated index pricing. The review did not find any rigorous studies that evaluated other pricing policies, such as direct price controls, maximum prices and price negotiations, although such policies are commonly used.

When reference pricing is used, one 'reference drug' is chosen from a group of drugs that are equally effective and safe. The price for the reference drug is covered, but if people want a more expensive drug from that group they have to pay the difference in price. This review found that reference pricing resulted in less use of the more expensive drugs and more use of reference drugs. This generally decreased the amount spent on drugs by third party payers (such as government drug insurance plans). Reference pricing was not found to have adverse effects on health. Nor did it increase the use of health services, with the possible exception of an increased number of consultations when reference pricing is started, when patients switch from a more expensive drug to a reference drug. The studies were mostly well designed. However, most of the studies involved senior citizens in British Columbia and it is not certain what the effect of reference pricing would be in other places or for other drugs.

When index pricing is used, an 'index price' is set for a group of similar drugs. The index price is the amount that a pharmacy receives from the government or insurance company when one of the drugs from the group is dispensed. By choosing drugs that are cheaper than the index price the pharmacies can keep the difference. This should lead to an increase in the dispensing of cheaper drugs. This may also lead to the pharmaceutical companies lowering their prices to ensure that pharmacies choose their drugs. One study from Norway found that index pricing led to a small decrease in drug prices.