Used properly, there is little doubt prescription drugs save the health care system millions of dollars a year. Just a generation ago an illness that could be completely debilitating or required months of hospitalization can now be treated with a drug that helps the patient live a full and productive life.

But in any drug insurance system, public or private, a key issue is still the rising cost. In some countries and in some provinces of Canada reference pricing has been used to control those costs. Its principle is simple: drugs which are judged to be interchangeable are classified in therapeutic classes, and a reimbursement ceiling is set up for the whole class, generally equivalent to the lowest or the median price in the group.

Use as Needed: The mixed impact of reference pricing on prescription drug costs examines experience of reference pricing through several jurisdictions. AIMS’ research fellows Brian Ferguson and Julia Witt, take a look at Germany, the Netherlands, New Zealand and British Columbia.

They conclude that reference pricing works well only if it is used appropriately.

To read the complete paper, click here.