Assessing the Consequences of External Reference Pricing for Global Access to Medicines and Innovation: Economic Analysis and Policy Implications.

Abstract

Background: External reference pricing (ERP) is used to set pharmaceutical prices to improve affordability, but its application may have negative consequences on patient access-thus, equity-across countries and on global innovation. With the United States contemplating ERP, negative effects could be magnified. Our aim: identify and quantify some major consequences of ERP. Research design, methods: Besides relying on databases and ERP modelling, we developed a heart failure case study. 4-step approach: 1) review ERP policies; 2) establish worldwide "price corridor"; 3) quantify patient access and health outcomes impact by ERP; 4) estimate ERP impact on innovation. Results: Our ERP referencing analysis highlights its perverse effects especially in lower-income countries. As counterstrategies to protect their revenues, manufacturers often implement tight list price corridors or launch avoidance/delays. Consequences include suboptimal patient access-hence, worse outcomes-illustrated by our case study: 500,000 + QALYs health loss. Additionally, the ensuing revenue reduction would likely cause innovation loss by one additional medicine that would have benefitted future patients. Conclusion: This research provides key insights on potential unintentional consequences of medicine price setting by ERP worldwide and under a new proposal for the United States. Our results can inform stakeholder discussions to improve patient access to innovative medicines globally.