“Reference Pricing” to Improve Costs in Medication Selection

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A recent study (JC Robinson et al. NEJM 2017; 377: 658-65) examined the topic of “reference pricing” and how this could be used to lower costs of medication usage.

“Under reference pricing, the insurer or employer establishes a maximum contribution it will make toward the price of a drug or procedure, and the patient pays the remainder.”

In this study, the authors examined 1302 drugs and more than 1.1 million prescriptions (2010-2014). Specifically, the authors compared RETA Trust, a national association of 55 Catholic organizations, which implemented reference pricing and compared costs with  a labor union that maintained a drug formulary with copayments similar to RETA Trust but did not implement reference pricing. Key findings:

  • “Implementation of reference pricing was associated with a higher percentage of prescriptions that were filled for the lowest-priced reference drug within its therapeutic class” (increase in 7%) along with a lower average price paid per prescription (-13.9%) than the comparison group.
  • Reference pricing was associated with increase in copayment by patients (5.2%)
  • Reference pricing was associated with reduced spending for employers by $1.34 million and increase in copays for employees by $0.12 million than in the comparison group.

Reference pricing has been associated with decreases of 10-12% in medication costs in European nations, as well.

The authors conclude: “Reference pricing may be one instrument for influencing drug choices by patients…pharmaceutical manufacturers who wish to charge premium prices may need to supply evidence of commensurately premium performance.”

My take: Although in concept reference pricing makes sense, I do worry that patients may be pushed towards less effective medications as not all medications in the same class are equally-effective.

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This graph shows the percentages of prescriptions for the lowest-priced drugs before and after implementation of reference pricing for RETA Trust. Union Trust is the comparison control.