How Do Drug Prices Respond to a Change from External to Internal Reference Pricing?

Evidence from a Danish Regulatory Reform

Ulrich Kaiser, Susan J. Mendez

    Research output: Working paperResearch

    Abstract

    We study the effects of a change in the way patient reimbursements are calculated on the prices of pharmaceuticals using quasi-experimental data for Denmark which switched from external (where reimbursements are based on prices of similar products in foreign countries) to internal reference pricing (where they are based on the cheapest domestic substitute). We analyze three therapeutic classes with different treatment durations and show that the reform led to substantial price decreases for our lifelong treatment and to less substantial price reductions for our medium duration treatment while we do not find significant effects on our acute treatment. Moreover, the reform did only affect generics and did not impact original products or parallel imports.
    Original languageEnglish
    Place of PublicationBonn
    PublisherIZA
    Number of pages11
    Publication statusPublished - Jan 2015
    SeriesIZA Discussion Paper
    Number8759

    Cite this

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    KW - Treatment duration

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