Health Affairs, 22, no. 3 (2003): 16-30 doi: 10.1377/hlthaff.22.3.16 © 2003 by Project HOPE	New Online   New Issue: China & India   Obesity In China   Pay Cuts For Medicare Docs   Access To Care Woes

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Prescription Drugs

Reference Pricing For Drugs: Is It Compatible With U.S. Health Care?

To control spending on prescription drugs, health insurance systems abroad have experimented in recent years with a novel form of patient cost sharing called "reference pricing." Under this approach, the insurer covers only the prices of low-cost, benchmark drugs in therapeutic clusters that are deemed to be close substitutes for one another in treating specific illnesses. Patients who desire a higher-price substitute in a cluster must then pay the full difference between the retail price of that drug and the reference price covered by the insurer. This paper explores the difficult trade-offs that policymakers must make in designing such a system, drawing where relevant from experience abroad.

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