Reference pricing is an activity in which everyone engages during commercial transactions: compare two competing products; if the more expensive one is not worth the premium, then buy the cheaper one. Who could object? When government agents make the decision on behalf of patients, however, the issue is not so clear. There are often a number of competing prescription drugs that address a given medical condition. Reference pricing occurs when a government takes away its citizens’ freedom to buy medicines of their choice for that condition, by taxing them and allocating the proceeds to drugs selected by a government appointed committee.

A reference pricing scheme has been proposed in Belgium, and we are pleased to contribute to the debate by offering The Fantasy of Reference Pricing and the Promise of Choice in BC's Pharmacare, a thorough analysis of the results of reference pricing in British Columbia (BC), Canada. Among Graham's findings:

• Reference pricing has not achieved its stated objectives
• Savings to the government have not been satisfactorily quantified
• The program did not cause manufacturers of restricted drugs to reduce their prices
• The program did not decrease costs in BC relative to other provinces
• Private pharmaceutical spending rose in BC under the program
• One potentially important cost of reference pricing, the destruction of incentives for innovating new medicines, is not borne by government agents

Click to Download
English	Français	Nederlander

Further Reading
Economic Effects of Germany's Reference Pricing Policy for Drugs
(Les effets économiques de la politique des "prix de référence" des médicaments en Allemagne)