External Reference Pricing Doesn’t Lower High Drug Launch Prices

A recently published paper in Health Policy OPEN finds that external reference pricing (ERP) policies don’t result in lower drug launch prices. The study, which investigated 100 high-priced drugs, also reported that ERP policies slowed the launch of new drugs, lowering the odds of them hitting the market within 9 months of approval by 73%. ERP policies were, however, associated with decreases in annual cost.

According to the authors, “In descriptive analysis, prices declined annually on average in ERP dyads, whereas they increased in non-ERP dyads (mean annual price change: -$26 per unit vs. +$111 for no ERP, p < 0.001; median annual price change: -$0.03 per unit vs. 0.003 for no ERP, rank sum p < 0.001). In mixed-effects regression analysis (displayed in Appendix S6), ERP dyads experienced average annual price changes 0.65 standard deviations lower than the mean for their drug type in comparison to non-ERP dyads (p = 0.003), representing monetary changes ranging from -$0.03 to -$2,410 per unit..”

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(Source: Health Policy OPEN, March 24^th, 2023)