TY - JOUR AU - Danzon,Patricia M. AU - Ketcham,Jonathan D. TI - Reference Pricing of Pharmaceuticals for Medicare: Evidence from Germany, the Netherlands and New Zealand JF - National Bureau of Economic Research Working Paper Series VL - No. 10007 PY - 2003 Y2 - October 2003 UR - http://www.nber.org/papers/w10007 L1 - http://www.nber.org/papers/w10007.pdf N1 - Author contact info: Patricia M. Danzon Health Care Management Department The Wharton School University of Pennsylvania 3641 Locust Walk Philadelphia, PA 19104 Tel: 215/898-0694 Fax: 215/573-2157 E-Mail: danzon@wharton.upenn.edu Jonathan D. Ketcham Associate Professor Department of Marketing, Box 4106 W.P. Carey School of Business Arizona State University 300 E. Lemon Street Tempe, AZ 85287-4106 E-Mail: ketcham@asu.edu M1 - published as Patricia M. Danzon, Jonathan D. Ketcham. "Reference Pricing of Pharmaceuticals for Medicare: Evidence from Germany, the Netherlands, and New Zealand," in David M. Cutler and Alan M. Garber, editors, "Frontiers in Health Policy Research, Volume 7" MIT Press (2004) AB - This paper describes three prototypical systems of therapeutic reference pricing (RP) for pharmaceuticals -- Germany, the Netherlands, and New Zealand -- and examines their effects on the availability of new drugs, reimbursement levels, manufacturer prices and out-of-pocket surcharges to patients. RP for pharmaceuticals is not simply analogous to a defined contribution approach to subsidizing insurance coverage. Although a major purpose of RP is to stimulate competition, theory suggests that this is unlikely and this is confirmed by the empirical evidence. Other effects of RP differ across countries in predictable ways, reflecting each country's system design and other cost control policies. New Zealand's RP system has reduced reimbursement and limited the availability of new drugs, particularly more expensive drugs. Compared to these three countries, if RP were applied in the US, it would likely have a more negative effect on prices of on-patent products, due to the more competitive US generic market, and a more negative effect on R&D and on the future supply of new drugs, due to the much larger US share of global pharmaceutical sales. ER -