International Reference Pricing for Prescription Drugs Presents Administrative Complications

Setting maximum prices for prescription drugs in one country based on prices other countries pay, a process known as international reference pricing, has drawn interest as the US aims to lower drug prices. However, according to a commentary published in Value in Health, the strategy brings four specific implementation challenges.

First is a lack of international price transparency, wrote corresponding author Leah Z. Rand, DPhil, and coauthor Aaron S. Kesselheim, MD, JD, MPH, both of Harvard Medical School, Boston, Massachusetts. Specifically, they explained, drug list prices for other countries do not reflect negotiated discounts and rebates with manufacturers, which are often confidential.

The commentary states that a second challenge involves drugs widely used in the US but not available in countries with national health system formularies that deem them a poor use of health care resources. A third complication is frequent price revisions in many countries when introducing competitor drugs. In contrast, a bill passed by the US House of Representatives in December 2019 allows for inflation-based price increases, even when other countries do not.

“If US policy allows for price increases while simultaneously referencing prices that will decrease over time, the two requirements will pull prices in opposite directions,” the authors pointed out.

Finally, cross-referencing prices between countries is a problem because price changes in one country ripple out to others and compound the effects of the price decrease, the commentary explains.

“If the [US] wants to appropriately price drugs and contain their costs and avoid the downsides of international reference pricing, it should also conduct its own assessments to determine how much drugs are worth and negotiate from that position,” the authors wrote. “Policymakers should also start to address important questions such as whether pharmaceutical profit should be capped, which is one cost-control policy used in the referenced countries.”

Reference

Rand LZ, Kesselheim AS. International reference pricing for prescription drugs in the United States: administrative limitations and collateral effects. Value Health. 2021;24(4):473-476. doi:10.1016/j.jval.2020.11.009