Reference pricing of pharmaceuticals for Medicare: evidence from Germany, The Netherlands, and New Zealand.

Patricia M. Danzon, Jonathan D. Ketcham

Research output: Contribution to journalReview articlepeer-review

59 Scopus citations


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 the achievement of this goal 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 United States, it would likely have a more negative effect on prices of onpatent products because of the more competitive U.S. generic market, and on research and development (R&D) and the future supply of new drugs, because of the much larger U.S. share of global pharmaceutical sales.

Original languageEnglish (US)
Pages (from-to)1-54
Number of pages54
JournalFrontiers in health policy research / National Bureau of Economic Research
StatePublished - 2004
Externally publishedYes


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