Journal article

Regulation of pharmaceutical prices: Evidence from a reference price reform in Denmark

Ulrich Kaiser, Susan J Mendez, Thomas Ronde, Hannes Ullrich

Journal of Health Economics | ELSEVIER | Published : 2014

Abstract

Reference price systems for prescription drugs constitute widely adopted cost containment tools. Under these regimes, patients co-pay a fraction of the difference between a drug's pharmacy retail price and a reference price that is set by the government. Reference prices are either externally (based on drug prices in other countries) or internally (based on domestic drug prices) determined. We study the effects of a change from external to internal reference pricing in Denmark in 2005. We find that the reform led to substantial reductions in retail prices, reference prices and patient co-payments as well as to sizable decreases in overall producer revenues and health care expenditures. The r..

View full abstract

Grants

Awarded by Swiss National Science Foundation


Funding Acknowledgements

We thank Friedrich Breyer, Jean-Pierre Dube, TomasoDuso, Werner Guth, Felix Hoffler, Adam Lederer, Marc Rysman, Andrew Toole, and Peter Zweifel for helpful comments. We also benefited from comments received at the Symposium of the German Economic Association of Business Administration in Vallendar, the Economics Seminar Ottobeuren, the European conference on Health Economics in Helsinki, the European Association for Research in Industrial Economics in Istanbul, the International Industrial Organization Conference in Boston, the North American Summer Meeting of the Econometric Society in Los Angeles, the annual meeting of the German Economic Association in Dusseldorf, as well as seminar presentations in Aarhus, Berlin, Dusseldorf, Konstanz, Mannheim, Munich, and Zurich. The paper also gained greatly from extensive discussions with Kurt Brekke, Jaime Espin, Margaret Kyle, and Saul Lach. We are indebted to Jorgen Clausen of the Danish Association of the Pharmaceutical Industry (Laegemiddel Industri Foreningen; LIF) for data provision and data advice. Comments received from two anonymous referees and our editor Richard Frank helped to improve the paper substantially. Excellent medical advice was provided to us by the MDs Marit Otto, Roland Knudsen, and in particular Johannes Schmid. Financial support from the Economic Policy Research Network and the Swiss National Science Foundation (grants 100018-135257 and PBZHP1-143346) is gratefully acknowledged.