Abstract

Background

Countries with expanding healthcare coverage (CEHCs) increasingly use external reference pricing (ERP) for pharmaceuticals. The ERP policies must aim to optimize efficiency, minimize disturbances, and maximize access to effective therapies for all patients.

Objective

This research aims to deduce best practices for prudent ERP regulations from past experiences and currently applied policies and to guide policymakers in CEHCs in implementing robust ERP policies.

Methods

The literature was reviewed for methods and effects of ERP for pharmaceuticals. Pharmaceutical pricing experts from Asia, the Middle East, Russia, and South Africa were surveyed for current approaches to ERP in their respective countries.

Results

Key determinants of ERP relate to scope, number, and choice of reference countries; price definitions; computation rules; frequency; and stringency of applying ERP. The scarce evidence shows that ERP seems to lead to narrower price windows with the risk of reducing prices in high-price countries and raising prices in low-price countries. Moreover, launch delays and indirect price effects are often observed. The ERP policies in CEHCs are often applied in isolation, not always in a consistent and transparent manner, neglecting its indirect effects.

Conclusion

Policymakers should consider a set of requirements when introducing ERP, including clear definitions and decision criteria in full transparency. External reference pricing should inform and serve as a benchmark for pricing decisions, rather than being used as the sole pricing mechanism. External reference pricing is primarily a tool to support decisions regarding on-patent pharmaceuticals, and for off-patent products, competition may prove more effective in reducing prices than ERP.