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, the strategy brings with it four specific implementation challenges, according to a commentary published in Value in Health.

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.

A second challenge involves drugs widely used in the United States but not available in countries with national health system formularies that deem them a poor use of health care resources, the commentary states. A third complication is frequent price revisions, which occur in many countries when competitor drugs are introduced. 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 of 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 United States 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