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Do pharmaceutical reference and index pricing policies have effects on drug use, health care utilisation, health outcomes and costs?

Pharmaceutical pricing and purchasing policies are used to determine or affect the prices that are paid for drugs. Examples are price controls, maximum prices, price negotiations, reference pricing, index pricing and volume-based pricing policies. This review found evidence for reference pricing and index pricing. In reference drug pricing, which is a reimbursment tool, a reference drug is chosen amongst drugs that are considered as therapeutically similar, and the price of the reference drug is reimbursed. For drugs that are more expensive than the reference drug, the patient has to pay the expenses above the reference price. An index price is the maximum refundable price to pharmacies for drugs within an index group. An index group consists of therapeutically interchangeable drugs. The price is refunded independent of which drug is dispensed.

 

Key messages

  • The use of reference pricing policies made by governments, non-government organisations or private insurers compared to not setting such pricing policies:
  • Can reduce third party drug expenditures by inducing a shift in drug use towards less expensive drugs produces no adverse effects on health
  • Reference pricing may not lead to any difference in total use of drugs and drug expenditures
  • It is not known whether reference pricing affects drug prices, health care utilisation and any of the health outcomes meas-ured.
  • Index pricing may slightly reduce the price of the generic drug compared with no intervention and may not lead to any differ-ence on the price of the brand drug.
  • Some other factors must be considered when assessing whether the intervention effects are likely to be transferable to other settings because all of the studies included were devel-oped in high-income countries.

Background

Large amounts of health care money are spent on drugs and these amounts are increasing. These increases put pressure on policy makers and insurers to control drug expenditures and to do so without causing adverse effects on health or increasing health care utilisation or other costs. Pharmaceutical pricing and purchasing policies intend to determine or affect the prices that are paid for drugs. They can be targeted at different components of drug prices – such as wholesale prices, retail prices, drug taxes and reimbursement prices. These policies can have an impact on drug expenditures in two main ways – directly, through price changes, and indirectly, through drug use changes related to the price changes. This summary shows evidence related with reference pricing and index pricing.



About the systematic review underlying this summary

Review Objective: To determine the effects of pharmaceutical pricing and purchasing policies on drug use, healthcare utilisation, health outcomes and costs (expenditures).

What the review authors searched forWhat the review authors found
Interventions Randomised controlled trials (RCT), non-randomised controlled trials (CCT), con-trolled repeated measures studies (CRM), interrupted time series analyses (ITS) and controlled before-after studies (CBA) of policies on price and purchasing that de-termine or are intended to affect the price that is paid for drugs

11 studies were found. Some of them had more than one design i.e. different designs for different out-comes

7 ITS

1 ITS/CBA/CRM

1 CRM/RM

2 CBA/RM

This review found evidence for reference pricing (10 studies) and index pricing (1 study).

Participants Health care consumers and providers
In all the Canadian studies the patients were Pharmacare beneficiaries: senior citizens aged 65 years and older. The other studies included all beneficiaries of national drug insurance plans, including vulnerable groups of people from all ages.
Settings Large jurisdiction or system of care. Juris-dictions could be regional, national or in-ternational. Studies within organisations, such as health maintenance organisations were included if the organisation was multi-sited and served a large population.

The reference pricing studies: Canada (6), USA (1), Australia (1),
Germany (1) and Sweden (1).
The index pricing study was from Norway (1)

Outcomes Drug use (prescribed, dispensed or actual-ly used), Healthcare utilisation, Health out-comes, Costs (expenditures), including drug costs and prices, other health care costs and policy administration costs. Seven studies reported a single effect measure (one outcome) and four did not specify a primary out-come. None of the studies presented data on all out-comes and none reported administration costs
Date of most recent search: October 2005
Limitations: This review has minor limitations.

Aaserud M, Dahlgren AT, Kösters JP, Oxman AD, Ramsay C, Sturm H. Pharmaceutical policies: effects of reference pricing, other pricing, and purchasing policies. Cochrane Database of Systematic Reviews 2006, Issue 2. Art. No.: CD005979. DOI: 10.1002/14651858.CD005979. See in Pubmed

Summary of findings

This review includes 11 studies evaluating the effects of pharmaceutical pricing and purchasing policies. All of them were done in developed countries (Canada, USA, Australia, Germany, Sweden and Norway). None of the studies presented data on all outcomes. The studies provided data on drug use (7 studies), drug expenditures from a drug insurer’s perspective (5), drug prices (3), health outcomes (2), and health care utilisation (4). None of the studies reported effects on patient drug expenditures or other costs (either intervention costs or those in other parts of the health service).

 

1) Reference pricing

Ten out of the 11 studies in the review evaluated this intervention.

  • Reference pricing may increase the use of reference drugs and decrease the use of cost share drug compared with no in-tervention.
  • Reference pricing may not lead to any difference in total use drugs and drug expenditures
  • It is not known whether reference pricing affects drug prices, health care utilisation and any of the health outcomes meas-ured
Outcomes Impact No of Participants
(studies)
Quality of the evidence
(GRADE)

Drug use:

Reference Drug

Use of reference drug increased by 60 to 196% immediately after a transition period following the introduction of the policy. At follow up (6 months to a year) the relative increase of the drug was larger in one study and smaller in two.

(4 studies)


Drug use:

Cost share drug

Use of cost share drug decreased immediately by 19 to 42%. In 1 out of 3 studies that provided data at 6 months, a larger reduction was observed.
(4 studies)

Total use of drugs The effect was smaller and not consistent (-9% to +11%). (2 studies)
Drug expenditures There was a trend towards an immediate reduction in expenditures for the drug in the reference group targeted (ranging from -5% to 50%) (4 studies)
Drug prices A reduction in drug prices was shown ranging from 11% to 26% for different reference drug groups. (2 studies)
Health outcomes and health care utilisation There were no significant differences in any of the health outcomes and health care utilisation measured. (4 studies)
p: p-value GRADE: GRADE Working Group grades of evidence (see above and last page)

2) Index pricing

This review identified one study from Norway evaluating this intervention.

  • Index pricing may reduce the use of brand drug and increase the use of a generic drug compared with no intervention
  • Index pricing may slightly reduce the price of the generic drug compared with no intervention and may not lead to any differ-ence on the price of the brand drug

 

Index pricing

Patient or population: No specific information provided
Settings
: Norway, national public drug insurance  
Intervention
: Index pricing on six groups of active substances
Comparison
: No index pricing 
Outcomes Impact No of Participants
(studies)
Quality of the evidence
(GRADE)
Comments

Drug use:
Reference Drug

Use of generic drug increased by 114% (immediate) and 55% (six months) after a transition period following the introduction of the index pricing system

(1 study)


The effects on use of drugs in the index pricing groups were not analyzed appropriately in the study´s report. Results from reanalysis by reviewers
Drug use:
Brand Drug
Use of brand drug decreased, relatively, by 29 % (immediate) and 43% (after six months)



Drug prices Generic and brand drug prices were both reduced but the latter was not statically significant. Generic drug prices were reduced more (relatively) than the brand drugs. Long-term effects were slightly larger than the short-term effects (-5.3% vs. -4.0% for generic drugs; -1.1% vs. -0.8% for brand drugs) (1 study) The reduction in brand drug prices was not statistically significant
p: p-value GRADE: GRADE Working Group grades of evidence (see above and last page

Relevance of the review for low-income countries

FindingsInterpretation*
APPLICABILITY

 

  • The target population were vulnerable groups covered by national insurance plans. The studies included a reduced group of drugs.
  • All of the 11 studies included were developed in high-income countries. Thus there is uncertainty regarding the transferability of the results to low and middle-income country settings and other drug classes. 

Applicability of these interventions to low and middle-income country  settings depends on several factors such as:

  • Availability of adequate incentives for patients, physicians, pharmacists and pharmaceutical companies to comply with the reference price system
  • There should be significant price differences between the drugs in a reference group before the reference price system is introduced, with relatively high prices on the drugs most used.
  • Provision of  clinical and managerial information support for users  the availability  and access to drugs.
  • The quality of generics drugs should be considered.
The existence of a regulatory framework which allows generic substitution and/or prescribing by International Non-Proprietary Name (INN) could be important for a better system perform 
EQUITY
Overall, the targeted population was the beneficiaries of national health insurance plans. However the included studies provided little data regarding differential effects of the interventions for disadvantaged populations within the studied beneficiaries.

 

  • Some interventions relied on technologies such as pharmaceutical drugs, may not always be appropriate when attempting to contact low income households. Implementation of pricing reference in such settings may exacerbate health inequities in population without health care access
  • Doctors should be directly asked to recomend the less expensive medicine included in the reference or index pricing policy to the underserved population.
ECONOMIC CONSIDERATIONS

 

  • Some of the findings summarised here are based on two- level measures: inmediate and short-term effects after the interventions. The review did not address the long-term effects and how support should best be provided.
  • Price levels could modify the effects of reference drug pricing.
  • Reasonable mechanisms for exemptions for patients that need it for medical reasons
  • None of the studies provided a full analysis of cost-effectiveness.

 

  • It is not clear if the effects on drug prices would be mantained in the long term. Studies with short-term follow up showed different trends on the effect on prices. 
  • To achieve savings there should be significant price differences between the drugs in a reference group before the reference price system is introduced, with relatively high prices on the drugs most used.
  • Too limited exemptions could lead to higher co-payments of the most effective drugs  and incentive the prescription  of less effective drugs by physicians. Too generous exemptions could reduce the savings, by not shifting the drug use towards cheaper drugs.
MONITORING & EVALUATION
Evaluations in the majority of included studies focus on relatively short term outcomes

 

  • Longer-term analyses would provide important supplementary evidence although the risk for bias related to other confounding interventions could increase with the length of the observation period.
  • Availability of pharmaceutical bioequivalence studies are needed to implement safe policies.
  • It is important to have a clear legal provision of what are generics in each country

*Judgements made by the authors of this summary, not necessarily those of the review authors, based on the findings of the review and consultation with researchers and policymakers in low and middle-income countries. For additional details about how these judgements were made see:  http://supportsummaries.org/support-summaries/how-support-summaries-are-prepared/

Additional information

Related literature

Austvoll-Dahlgren A, Aaserud M, Vist G, Ramsay C, Oxman AD, Sturm H, Kösters JP, Vernby , Å. Pharmaceutical policies: effects of cap and co-payment on rational drug use. Cochrane Database of Systematic Reviews: Reviews 2008 Issue 1

 

Sturm Heidrun, Austvoll-Dahlgren Astrid AA, Aaserud Morten, Oxman Andrew D, Ramsay Craig, Vernby Åsa, Kösters Jan Peter. Pharmaceutical policies: effects of financial incentives for prescribers. Cochrane Database of Systematic Re-views: Reviews 2007 Issue 3

 

Aaserud M, Dahlgren AT, Sturm H, Kösters JP, Hill S, Furberg CD, Grilli R, Henry DA, Oxman AD, Ramsay C, Ross-Degnan D, Soumerai SB. Pharmaceutical poli-cies: effects on rational drug use, an overview of 13 reviews (protocol). Cochrane Database of Systematic Reviews: 2006 Issue 2

 

This summary was prepared by

Gabriel Bastías & Gabriel Rada, School of Medicine, Pontificia Universidad Católi-ca de Chile, Chile

 

Conflict of interest

None declared. For details, see conflicts of interest

 

Acknowledgements

This summary has been peer reviewed by: Morten Aaserud, Norway; Sabine Vogler, Austria; Anban Pillay, South Africa; Esperança Sevene, Alda do Rosário Elias Mariano and Julie Cliff, Mozambique.

 

This summary should be cited as

Bastías G, Rada G. Do pharmaceutical pricing and purchasing policies have ef-fects on drug use, health care utilisation, health outcomes and costs? A SUPPORT Summary of a systematic review. September 2009.



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