Managing Pharmaceutical Expenditures: Estimating the Effect of Internal Reference Pricing for Three Pharmacological Categories

Background: Internal reference pricing (IRP) is one of the pharmaceutical pricing approaches, which iswidely favored by health policymakers in different countries as a cost-containment tool for managingmedicine expenditure. Evidence related to the implementation of this method confirms its usefulness inreducing pharmaceutical costs. Accordingly, the purpose of this study was to calculate potential changesin pharmaceutical expenditure using the IRP method for products belonging to three pharmaceuticalcategories in the pharmaceutical system of Iran.Methods: This routine data study assessed the potential effect of IRP in three pharmaceutical categoriesincluding statins, non-steroidal anti-inflammatory drugs, and proton pump inhibitors (PPIs). Twoscenarios for reference groups (levels ۴ and ۵ of the ATC code) and four scenarios for the reference price(i.e., the minimum, median, mean, and the mean of three minimum prices in the reference group) wereconsidered in this regard, and the price and sales data source was the report published by the IranianFood and Drug Administration. Then, cost changes were calculated with each hypothetical scenario. Itwas assumed that other intervening factors remain unchanged, including consumers and prescribers’behavior.Results: Based on the results, the two largest potential saving effects belonged to the minimum pricescenario and the mean of the scenario of the three minimum prices, respectively. However, the resultsshowed that the consequence of using a price scenario other than the minimum price as the referenceprice is highly related to the details of the distribution of prices in the related reference group. In addition,appropriate decisions regarding outlier products (e.g., imported products) might have extremely importanteffects on the result, especially for the mean price scenario. The minimum price scenario concomitantwith a premium for superior products can also be considered, but part of it is outside the scope of thisstudy and requires independent research.Conclusion: Thus if an appropriate scenario is selected for the reference price and group, the IRP methodhas the potential to reduce the costs of medicines. Therefore, pharmaceutical policymakers must payenough attention to the details of planning this system and the needed procedure for updating the detailsof this system.