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November 28, 2018

Industry experts believe External Reference Pricing is coming to the US

External Reference Pricing is the practice of using the price of a product in foreign countries to derive a benchmark for setting or negotiating the price of a product within a specific country.

By GBI Research

On October 25, 2018, the Trump administration proposed limiting Medicare’s spending on drugs by implementing an International Pricing Index, which could allow the government to control drug prices.

On November 20, 2018, Sen. Bernie Sanders proposed a bill that had similar elements of the proposal made by the Trump administration.

The proposed International Pricing Index intends to match the payments made by the US government to the rates paid in other countries.

Most high-income countries such as Japan, Canada, South Korea and EU countries already use this cost-containment policy to control drug prices.

It is known as External Reference Pricing (ERP) or International Reference Pricing in these countries.

GBI Research’s latest report Constrained Public Healthcare Budgets and the Pharmaceutical Industry – Featuring Expert Panel Views From Industry Survey, 2018 conducted a targeted industry survey of 46 experts and key opinion leaders to gather insight and opinions on the current and future pricing/reimbursement environment caused by constrained healthcare budgets.

One of the surveys was on the future pricing and reimbursement environment in the US.

In the survey, 20% of US respondents believed that ERP was very likely to be implemented in the next five years.

30% believed it likely to be implemented, 30% were unsure and 20% believed it unlikely to be implemented.

The respondents also provided their opinions on implementation of other cost-containment policies such as value-based contracts, biosimilars promotion, generics promotion, health technology assessment and tendering.

50% of the respondents believed that policies promoting the use of generics are likely to be continued in the next five years.

ERP is the practice of using the price of a product in foreign countries to derive a benchmark for setting or negotiating the price of a product within a specific country.

The scope and methodology design of ERP varies according to the country.

For example, Japan uses average prices in France, Germany, UK and US as reference, whereas Spain uses the lowest prices from EU countries as a reference.

Related report: Constrained Public Healthcare Budgets and the Pharmaceutical Industry – Featuring Expert Panel Views From Industry Survey, 2018 

For more insight and data, visit the GBI Research report store.

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