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Reference pricing in Finnish pharmaceutical markets: pre-policy evaluation

Galizzi, Matteo M., Ghislandi, Simone, Hokkanen, Joni, Kangasharju, Aki, Linnosmaa, Ismo, Miraldo, Marisa and Valtonen, Hannu (2009) Reference pricing in Finnish pharmaceutical markets: pre-policy evaluation. Reports of the Ministry of Social Affairs and Health (2009:25). Ministry of Health and Social Affairs, Finland, Helsinki, Finland. ISBN 9789520028350

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Abstract

Finland introduced the reference pricing system to the pharmaceutical market at the beginning of April 2009. This paper evaluates the effects of the reform from the ex-ante perspective. The reform will potentially affect the prices, structure, competition and total expenditure of the market. This study takes all these perspectives into account in making an overall synthesis of the results. Evaluation is based on past Finnish experiences concerning the generic substitution policy, in force since 1 April 2003, and a literature survey of studies evaluating the effects of reference pricing abroad. The data include information on the number of firms selling as well as the prices and sales volumes of pharmaceuticals in eight ATC groups between 1997-2007, comprising pharmaceuticals both inside and outside the substitution scheme. The results indicate that generic substitution increased the number of firms in the pharmaceutical market. However, the effect on competition was clearly lower than that on prices. Generic substitution reduced prices by 60 per cent by the end of 2007. The literature survey suggests that reference pricing will reduce pharmaceutical prices by 10-29 per cent. The effects are presumably country-specific, since regulation schemes vary over countries and reference pricing is only one part of the schemes. Since generic substitution has already dramatically reduced prices in Finland, we believe that the effect of reference pricing in Finland will be closer to the conservative estimate. Our results on the demand elasticities of blood pressure medicines (statines) with respect to changes in prices suggest that the total pharmaceutical expenditure can be expected to decline with declining prices. Combining all the results, we expect that the reference pricing will decrease prices by 10 percent and the total pharmaceutical expenditure by 5 percent.

Item Type: Monograph (Report)
Official URL: http://www.stm.fi/en/frontpage
Additional Information: © 2009 The Authors
Divisions: Social Policy
Subjects: H Social Sciences > HD Industries. Land use. Labor
Sets: Departments > Social Policy
Research centres and groups > LSE Health and Social Care
Date Deposited: 19 Feb 2015 15:55
Last Modified: 19 Nov 2019 15:56
URI: http://eprints.lse.ac.uk/id/eprint/61011

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