Reference Pricing for Pharmaceuticals
Prices for therapeutically similar drugs vary widely in the United States. In response to this price variation, some insurers have experimented with using reference pricing to encourage enrollees to choose lower costdrugs within therapeutic drug classes.
The RETA Trust, a national association of 55 Catholic organizations, implemented reference pricing for 1,302 outpatient drugs from 78 therapeutic classes in July 2013 in an effort to sensitize enrollees to the price of their medications and encourage the use of less expensive alternatives. RETA limited prescription payment to the price of the cheapest medication in a therapeutic drug class, using that price as the reference price for each class.
Enrollees were still permitted to use the more expensive medications if they desired, but were responsible for paying the difference between the lower reference price and the price of the more expensive drug. If there was a valid medical reason why a patient needed the more expensive drug, the physician could request a clinical exemption and secure coverage for the patient.
Prior to implementation of reference pricing, between July 2010 and July 2013, low priced drug use rose 2.9% for RETA, from 59.5% to 62.4%; and 2% for comparison group, the Labor Union Trust, from 64.1% to 66.1%. Would establishing reference pricing for the RETA group further increase the proportion of lower cost prescriptions as compared to the Labor Union Trust, which did not implement the same type of program?
View our article New England Journal of Medicine Association of Reference Pricing with Drug Selection and Spending.
In the first quarter after implementation, the use of low-price drugs rose 7.3%, from 62.4% to 69.7% for RETA, while there was no significant change for the Labor Union Trust.
The average price paid per pharmaceutical by RETA decreased by 13.9% following implementation, a savings of about $9.24 per monthly prescription. Following the implementation of reference pricing, cost-sharing increased by 5.2% for RETA enrollees (see graph).
RETA saved an estimated total of $1.34 million on pharmaceuticals between 2013-2014, indicating that the implementation of reference pricing was an effective way to encourage the use of less expensive prescriptions.
For more information on Reference Pricing for Pharmaceuticals:
Article: New England Journal of Medicine, Association of Reference Pricing with Drug Selection and Spending(link is external)