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Reference pricing effectively encourages patients to spend significantly less on prescription drugs, according to research published in NEJM.
Under the reference pricing strategy, the insurer or employer establishes its maximum contribution toward the price of therapeutically similar drugs, and the patient must pay the remainder out of pocket.
The insurer/employer contribution is based on the price of the lowest-priced drug in the therapeutic class, called the reference drug.
“If the patient chooses a cheap or moderately priced option, the employer’s contribution will cover most of the cost,” said study author James C. Robinson, PhD, of the University of California at Berkeley.
“However, if the patient insists on a particularly high-priced option, he or she will need to make a meaningful payment from personal resources.”
It has been theorized that this policy would encourage patients to save money by selecting cheaper drugs. However, little is known about how the policy has actually influenced patient spending.
The new study showed that reference pricing was associated with significant changes in drug selection and spending for patients covered by employment-based insurance in the US.
Researchers analyzed changes in prescriptions and pricing for 1302 drugs in 78 therapeutic classes in the US, before and after an alliance of private employers began using reference pricing.
The trends were compared to a cohort without reference pricing. The study’s dataset included 1.1 million prescriptions reimbursed from 2010 to 2014.
Implementation of reference pricing was associated with a 7% increase in prescriptions filled for the low-price reference drug within its therapeutic class, a 14% decrease in average price paid, and a 5% increase in consumer cost-sharing.
In the first 18 months after implementation, employers’ spending dropped $1.34 million, and employees’ cost-sharing increased $120,000.
Based on these findings, Dr Robinson and his colleagues concluded that reference pricing may be one instrument for influencing patients’ drug choices and drug prices paid by employers and insurers. The team believes that, in the future, pharmaceutical companies charging “premium prices” may need to demonstrate that their drugs provide “premium performance.”
“There is huge and unjustified variation within and across geographic areas in the prices charged for almost every test and treatment, drug and device, office visit and hospitalization,” Dr Robinson said.
“It’s not a surprise when one considers that most patients are covered by health insurance and, hence, do not shop among competing providers on the basis of price. Some providers look at price-unconscious consumer demand and ask themselves, ‘Why don’t we raise our prices?’”
This research was funded by the US Agency for Healthcare Research and Quality and the Genentech Foundation. 
Reference pricing effectively encourages patients to spend significantly less on prescription drugs, according to research published in NEJM.
Under the reference pricing strategy, the insurer or employer establishes its maximum contribution toward the price of therapeutically similar drugs, and the patient must pay the remainder out of pocket.
The insurer/employer contribution is based on the price of the lowest-priced drug in the therapeutic class, called the reference drug.
“If the patient chooses a cheap or moderately priced option, the employer’s contribution will cover most of the cost,” said study author James C. Robinson, PhD, of the University of California at Berkeley.
“However, if the patient insists on a particularly high-priced option, he or she will need to make a meaningful payment from personal resources.”
It has been theorized that this policy would encourage patients to save money by selecting cheaper drugs. However, little is known about how the policy has actually influenced patient spending.
The new study showed that reference pricing was associated with significant changes in drug selection and spending for patients covered by employment-based insurance in the US.
Researchers analyzed changes in prescriptions and pricing for 1302 drugs in 78 therapeutic classes in the US, before and after an alliance of private employers began using reference pricing.
The trends were compared to a cohort without reference pricing. The study’s dataset included 1.1 million prescriptions reimbursed from 2010 to 2014.
Implementation of reference pricing was associated with a 7% increase in prescriptions filled for the low-price reference drug within its therapeutic class, a 14% decrease in average price paid, and a 5% increase in consumer cost-sharing.
In the first 18 months after implementation, employers’ spending dropped $1.34 million, and employees’ cost-sharing increased $120,000.
Based on these findings, Dr Robinson and his colleagues concluded that reference pricing may be one instrument for influencing patients’ drug choices and drug prices paid by employers and insurers. The team believes that, in the future, pharmaceutical companies charging “premium prices” may need to demonstrate that their drugs provide “premium performance.”
“There is huge and unjustified variation within and across geographic areas in the prices charged for almost every test and treatment, drug and device, office visit and hospitalization,” Dr Robinson said.
“It’s not a surprise when one considers that most patients are covered by health insurance and, hence, do not shop among competing providers on the basis of price. Some providers look at price-unconscious consumer demand and ask themselves, ‘Why don’t we raise our prices?’”
This research was funded by the US Agency for Healthcare Research and Quality and the Genentech Foundation.
Reference pricing effectively encourages patients to spend significantly less on prescription drugs, according to research published in NEJM.
Under the reference pricing strategy, the insurer or employer establishes its maximum contribution toward the price of therapeutically similar drugs, and the patient must pay the remainder out of pocket.
The insurer/employer contribution is based on the price of the lowest-priced drug in the therapeutic class, called the reference drug.
“If the patient chooses a cheap or moderately priced option, the employer’s contribution will cover most of the cost,” said study author James C. Robinson, PhD, of the University of California at Berkeley.
“However, if the patient insists on a particularly high-priced option, he or she will need to make a meaningful payment from personal resources.”
It has been theorized that this policy would encourage patients to save money by selecting cheaper drugs. However, little is known about how the policy has actually influenced patient spending.
The new study showed that reference pricing was associated with significant changes in drug selection and spending for patients covered by employment-based insurance in the US.
Researchers analyzed changes in prescriptions and pricing for 1302 drugs in 78 therapeutic classes in the US, before and after an alliance of private employers began using reference pricing.
The trends were compared to a cohort without reference pricing. The study’s dataset included 1.1 million prescriptions reimbursed from 2010 to 2014.
Implementation of reference pricing was associated with a 7% increase in prescriptions filled for the low-price reference drug within its therapeutic class, a 14% decrease in average price paid, and a 5% increase in consumer cost-sharing.
In the first 18 months after implementation, employers’ spending dropped $1.34 million, and employees’ cost-sharing increased $120,000.
Based on these findings, Dr Robinson and his colleagues concluded that reference pricing may be one instrument for influencing patients’ drug choices and drug prices paid by employers and insurers. The team believes that, in the future, pharmaceutical companies charging “premium prices” may need to demonstrate that their drugs provide “premium performance.”
“There is huge and unjustified variation within and across geographic areas in the prices charged for almost every test and treatment, drug and device, office visit and hospitalization,” Dr Robinson said.
“It’s not a surprise when one considers that most patients are covered by health insurance and, hence, do not shop among competing providers on the basis of price. Some providers look at price-unconscious consumer demand and ask themselves, ‘Why don’t we raise our prices?’”
This research was funded by the US Agency for Healthcare Research and Quality and the Genentech Foundation.