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Prediction of Change in Prescription Ingredient Costs and Co-payment Rates under a Reference Pricing System in South Korea

Open ArchivePublished:January 28, 2017DOI:https://doi.org/10.1016/j.vhri.2016.07.011

      Abstract

      Background

      The reference pricing system (RPS) establishes reference prices within interchangeable reference groupings. For drugs priced higher than the reference point, patients pay the difference between the reference price and the total price.

      Objectives

      To predict potential changes in prescription ingredient costs and co-payment rates after implementation of an RPS in South Korea.

      Methods

      Korean National Health Insurance claims data were used as a baseline to develop possible RPS models. Five components of a potential RPS policy were varied: reference groupings, reference pricing methods, co-pay reduction programs, manufacturer price reductions, and increased drug substitutions. The potential changes for prescription ingredient costs and co-payment rates were predicted for the various scenarios.

      Results

      It was predicted that transferring the difference (total price minus reference price) from the insurer to patients would reduce ingredient costs from 1.4% to 22.8% for the third-party payer (government), but patient co-payment rates would increase from a baseline of 20.4% to 22.0% using chemical groupings and to 25.0% using therapeutic groupings. Savings rates in prescription ingredient costs (government and patient combined) were predicted to range from 1.6% to 13.7% depending on various scenarios. Although the co-payment rate would increase, a 15% price reduction by manufacturers coupled with a substitution rate of 30% would result in a decrease in the co-payment amount (change in absolute dollars vs. change in rates).

      Conclusions

      Our models predicted that the implementation of RPS in South Korea would lead to savings in ingredient costs for the third-party payer and co-payments for patients with potential scenarios.

      Keywords

      Introduction

      The South Korean National Health Insurance (NHI) system is managed by the government as a single payer and covers virtually all of its citizens, spending more than 7% of its gross domestic product on health care [
      • Cho M.H.
      • Yoo K.B.
      • Lee H.Y.
      • et al.
      The effect of new drug pricing systems and new reimbursement guidelines on pharmaceutical expenditures and prescribing behavior among hypertensive patients in Korea.
      ,
      Organisation for Economic Cooperation and Development
      OECD Statistics Health Expenditure and Financing.
      ]. Pharmaceutical spending in South Korea was estimated at 20.6% of total health expenditures in 2013 and was much higher than the average (16.6%) estimated by the Organisation for Economic Cooperation and Development for 36 developed nations [
      Organisation for Economic Cooperation and Development
      OECD Health Data 2015.
      ]. In South Korea, prescription drug expenditures paid by the NHI have increased about 13.2% annually from 2001 to 2010 [
      • Bae G.
      • Park C.
      • Lee H.
      • et al.
      Effective policy initiatives to constrain lipid-lowering drug expenditure growth in South Korea.
      ]. The Korean government has adopted several drug pricing policies in an attempt to slow the growth of spending on prescriptions. In 2006, the government introduced the Drug Expenditure Rationalization Plan, which established a positive list system and price negotiations between the National Health Insurance Corporation (NHIC) and pharmaceutical manufacturers [
      • Lee I.H.
      • Bloor K.
      • Hewitt C.
      • et al.
      The effects of new pricing and copayment schemes for pharmaceuticals in South Korea.
      ]. The Drug Reimbursement Examination Committee of the Health Insurance Review and Assessment Service (HIRA) determines reimbursement eligibility for new drugs on the basis of clinical usefulness, cost-effectiveness, budget impact, present status of reimbursement, and prices in other countries [
      • Toumi M.
      • Rémuzat C.
      • Vataire A.-L.
      • et al.
      External Reference Pricing of Medicinal Products: Simulation-Based Considerations for Cross-Country Coordination.
      ,
      • Lee H.
      • Kim J.
      Delisting policy reform in South Korea: failed or policy change?.
      ]. As part of this pricing reform, the Korean government has also re-evaluated drugs that had been previously listed, in some cases reducing the reimbursement amount or withdrawing the drug from the list of insured products [
      • Bae G.
      • Park C.
      • Lee H.
      • et al.
      Effective policy initiatives to constrain lipid-lowering drug expenditure growth in South Korea.
      ,
      • Ey B.
      Drug re-evaluation system, health technology assessment, cost-effectiveness, social value.
      ]. In 2012, according to a new pricing system using the principle that the same active ingredients should have the same prices, the price of listed drugs decreased by 14.2% on average [
      • Cho M.H.
      • Yoo K.B.
      • Lee H.Y.
      • et al.
      The effect of new drug pricing systems and new reimbursement guidelines on pharmaceutical expenditures and prescribing behavior among hypertensive patients in Korea.
      ]. Despite these reforms, pharmaceutical expenditures have continued to rise 2.5% annually from 2010 to 2013 [
      • Kim D.S.
      • Lee S.O.
      • Park J.H.
      • et al.
      Report of Drugs Consumption.
      ,
      • Kwon H.-Y.
      • Yang B.
      • Godman B.
      Key components of increased drug expenditure in South Korea: implications for the future.
      ]. Patients have shown a preference for branded or high-priced generic medications even though their co-pay on lower priced generics is reduced [
      • Lee E.K.
      • Kim D.S.
      Analysis of perception on the bioequivalence-assured generic drugs.
      ,
      • Shin J.Y.
      • Choi S.E.
      The volume and the price of generic drug consumption in Korea prescription drug market.
      ]. Previous pricing policies have targeted manufacturers to reduce prices; it is, however, necessary to also address behaviors of patients, physicians, and pharmaceutical companies in tandem to reduce overall health expenditures [
      • Lee E.K.
      Study for Implementation Reference Pricing in Korea.
      ].
      A new type of policy, the reference pricing system (RPS), is being considered to encourage the use of low-cost drugs, promoting cost-consciousness among patients [
      • Pentecost M.J.
      Reference pricing.
      ,
      • Lee J.L.
      • Fischer M.A.
      • Shrank W.H.
      • et al.
      A systematic review of reference pricing: implications for US prescription drug spending.
      ,
      • Galizzi M.M.
      • Ghislandi S.
      • Miraldo M.
      Effects of reference pricing in pharmaceutical markets: a review.
      ]. The RPS is a policy strategy that establishes a reimbursement level, or “reference price,” within the same class of therapeutically interchangeable drugs, a “reference group” [
      • Lee J.L.
      • Fischer M.A.
      • Shrank W.H.
      • et al.
      A systematic review of reference pricing: implications for US prescription drug spending.
      ]. The third-party payer, in this case the NHI, reimburses only up to the established reference price for all products in a reference group, and patients are responsible for paying the difference between the reference price and the price of a more costly drug [
      • Pentecost M.J.
      Reference pricing.
      ,
      • Lee J.L.
      • Fischer M.A.
      • Shrank W.H.
      • et al.
      A systematic review of reference pricing: implications for US prescription drug spending.
      ,
      • Ghislandi S.
      • Armeni P.
      • Jommi C.
      The impact of generic reference pricing in Italy, a decade on.
      ]. Various countries have accepted the RPS, using various groupings (such as chemical, therapeutic, or combined reference groups) and different levels of reimbursement (such as the lowest price, 30% less than the price of the original product, or the average price in a group) [
      • Dylst P.
      • Vulto A.
      • Simoens S.
      The impact of reference-pricing systems in Europe: a literature review and case studies.
      ] (Appendix A). In 2002, the Korean government attempted to introduce a policy that would use the RPS, which would apply for only 11 therapeutic groups, but it was withdrawn because of health care providers, manufacturers, and patients’ concern about the increased cost burden to patients and the small number of interchangeable generics [
      Korea Ministry of Health and Welfare
      The Introduction Plan of Reference Pricing System.
      ,
      • Song B.
      The Reference Pricing System Is Not Appropriate.
      ]. The present Korean co-payment scheme sets a certain percentage of total medical expenditures that patients pay (Fig. 1) [
      • Bae G.
      • Park C.
      • Lee H.
      • et al.
      Effective policy initiatives to constrain lipid-lowering drug expenditure growth in South Korea.
      ]. On the basis of the original proposal to institute the RPS in South Korea, if the drug price was higher than the reference value chosen, patients would have been required to pay the original co-payment rate plus the difference between the drug price and the reference price [
      • von der Schulenburg F.
      • Vandoros S.
      • Kanavos P.
      The effects of drug market regulation on pharmaceutical prices in Europe: overview and evidence from the market of ACE inhibitors.
      ].
      Fig. 1
      Fig. 1The diagram of Korea National Health Insurance before and after the reference pricing system.
      Reductions in pharmaceutical expenditures have been seen by other countries that have adopted the RPS [
      • Dylst P.
      • Vulto A.
      • Simoens S.
      The impact of reference-pricing systems in Europe: a literature review and case studies.
      ] (Appendix B). The institution of the RPS was associated with a decrease in drug prices by 5% to 40%, subject to the reimbursement policy or pharmaceutical environment in various countries [
      • Lee J.L.
      • Fischer M.A.
      • Shrank W.H.
      • et al.
      A systematic review of reference pricing: implications for US prescription drug spending.
      ,
      • Galizzi M.M.
      • Ghislandi S.
      • Miraldo M.
      Effects of reference pricing in pharmaceutical markets: a review.
      ,
      • Puig-Junoy J.
      Impact of European pharmaceutical price regulation on generic price competition: a review.
      ,
      • Zuidberg C.
      The Pharmaceutical System of the Netherlands. PPRI Reports.
      ]. Prescription drug expenditures on specific classes decreased, and generic market shares increased across countries after introducing the RPS [
      • Galizzi M.M.
      • Ghislandi S.
      • Miraldo M.
      Effects of reference pricing in pharmaceutical markets: a review.
      ,
      • Schneeweiss S.
      • Soumerai S.B.
      • Glynn R.J.
      • et al.
      Impact of reference-based pricing for angiotensin-converting enzyme inhibitors on drug utilization.
      ,
      • Schneeweiss S.
      • Soumerai S.B.
      • Maclure M.
      • et al.
      Clinical and economic consequences of reference pricing for dihydropyridine calcium channel blockers.
      ,
      • Giuliani G.
      • Selke G.
      • Garattini L.
      The German experience in reference pricing.
      ]. The RPS showed a switch to less expensive drugs, whereas studies based on a large number of patient-level observations showed no association between the introduction of the RPS and the health outcomes [
      • Galizzi M.M.
      • Ghislandi S.
      • Miraldo M.
      Effects of reference pricing in pharmaceutical markets: a review.
      ,
      • Stargardt T.
      The impact of reference pricing on switching behaviour and healthcare utilisation: the case of statins in Germany.
      ,
      • Grootendorst P.
      • Stewart D.
      A re-examination of the impact of reference pricing on anti-hypertensive drug plan expenditures in British Columbia.
      ,
      • Ghislandi S.
      • Krulichova I.
      • Garattini L.
      Pharmaceutical policy in Italy: towards a structural change?.
      ]. In 2012, the NHIC and the HIRA committees have reconsidered the RPS as a drug price reduction policy, noting that the RPS may cause patient behavior to change when they are responsible for a bigger share of the high-priced drugs, unlike previous drug price regulations [
      • Lee E.K.
      Study for Implementation Reference Pricing in Korea.
      ]. In 2013, the HIRA report recommended that the RPS would encourage the use of low-priced drugs or generics, recommending that the policy should be considered as a long-term project after implementing a smaller pilot program for only one or two therapeutic groups [
      • Kim S.O.
      • Lee J.H.
      • Shin J.Y.
      Development Load Map for Management of Drug Expenditures on Korea National Health Insurance.
      ]. The Korean NHIC also reported that the RPS would support the generic substitution in 2016 [

      Choi ET, Kim SJ. Generic substitution plan. 2016. Available from: Dailypharm.com, 2016.

      ]. Nevertheless, because the potential effects of an RPS in Korea (for both the government and the patients) have not been estimated, the introduction of the RPS in Korea continues to be debated.
      To our knowledge, no research has been conducted predicting the potential change in prescription drug expenditures under various scenarios after the introduction of an RPS in South Korea. Therefore, the purpose of this study was to predict the expected changes in prescription ingredient costs and co-payment rates after implementation of the RPS under various scenarios in South Korea.

      Methods

       Data Source

      Data for this study were extracted from the Korean National Health Insurance Claims Database (KNHICD). These claims encompass medical utilization for about 97% of the South Korean population [
      • Kwon H.Y.
      • Hong J.M.
      • Godman B.
      • et al.
      Price cuts and drug spending in South Korea: the case of antihyperlipidemic agents.
      ]. Korean health insurance includes payment for outpatient visits, inpatient visits, emergency care, and prescription drugs [
      • Bae G.
      • Park C.
      • Lee H.
      • et al.
      Effective policy initiatives to constrain lipid-lowering drug expenditure growth in South Korea.
      ]. All drugs (except patented drugs [
      • Galizzi M.M.
      • Ghislandi S.
      • Miraldo M.
      Effects of reference pricing in pharmaceutical markets: a review.
      ], orphan drugs, and therapeutically noninterchangeable drugs), which were prescribed and dispensed in inpatient and outpatient settings for 4 months, for the months of January, April, July, and October in 2011 were included in this study. Prices of drugs, which were lowered after a new drug pricing regulation in 2012, were used to predict the effects of the RPS in the future.

       Development of Models for the RPS in South Korea

      To estimate the effect of possible RPS models, five features of a potential RPS policy were used when calculating the range of estimated costs: various levels of equivalence groupings, various methods of setting the reference price, inclusion of co-payment reduction programs, a reduction in prices by the manufacturers, and changes in prescribing patterns to less costly drugs.
      First, in European countries, where implementation of the RPS is common, levels of equivalence (reference groups) are defined on the basis of the Anatomical Therapeutic Chemical (ATC) classification system [
      • Galizzi M.M.
      • Ghislandi S.
      • Miraldo M.
      Effects of reference pricing in pharmaceutical markets: a review.
      ,
      • Dylst P.
      • Vulto A.
      • Simoens S.
      The impact of reference-pricing systems in Europe: a literature review and case studies.
      ]. The ATC codes are divided into different levels and grouped by their chemical, pharmacological, and therapeutic properties to function on the organ or system [
      World Health Organization
      ATC/DDD Index 2015.
      ]. In this study, two categories of reference groups were used: 1) a chemical ingredient comparable group (chemical level), which used the same fifth level of ATC code (products with same active ingredient, e.g., amlodipine, felodipine, cimetidine, and ranitidine), dosage form, and dose (strength) and 2) a therapeutic and pharmacological comparable group (therapeutic level), which included the same fourth level of ATC code (chemically different but therapeutically and pharmacologically related products, e.g., selective calcium channel blockers and H2-receptor antagonists), dosage form, and dose (strength) [
      • Galizzi M.M.
      • Ghislandi S.
      • Miraldo M.
      Effects of reference pricing in pharmaceutical markets: a review.
      ] (Appendix C).
      Second, the level of reimbursement (a reference price) was calculated using five methods:1) weighted average, the average for multiplications of drug price and quantity divided by quantity dispensed during study period; 2) mean, the arithmetic mean of all prices of drugs in a reference group; 3) mean without outliers, the arithmetic mean after removing prices higher than upper 10% and less than lower 10% for only reference groups including more than 10 drugs; 4) median, the median of all prices of drugs in a reference group; and 5) 33rd percentile, the price that is located at 33% from the minimum price within a reference group (note that the 33rd percentile is used for the German RPS). Many countries have accepted the lowest price as a reference price; this study, however, excluded the lowest price because it would be improbable that Korea would choose this method on the basis of other pricing regulations in Korea.
      Third, the Germany government gives a co-pay discount for patients who choose a product priced at least 30% lower than the reference price [
      • Lee E.K.
      Study for Implementation Reference Pricing in Korea.
      ]. The Korean government may establish a co-pay reduction program for drugs priced lower than the reference price to encourage the use of generic drugs priced at the reference price or lower. In this study, it was assumed that this program would be applied for all drugs priced lower than the reference price, for drugs priced at least 10% lower than the reference price, or for drugs priced at least 20% lower than the reference price.
      Fourth, there was a decline in prices for products that are included in the RPS in other countries [
      • Dylst P.
      • Vulto A.
      • Simoens S.
      Reference pricing systems in Europe: characteristics and consequences.
      ]. Pharmaceutical companies may lower prices if their product is priced higher than the reference price to avoid loss of market share. For instance, in Germany, prices for antiulcerants decreased by 12.2% and prices of products were reduced by 11% in Sweden [
      • Galizzi M.M.
      • Ghislandi S.
      • Miraldo M.
      Effects of reference pricing in pharmaceutical markets: a review.
      ,
      • Pavenik N.
      Do pharmaceutical prices respond to potential patient out-of-pocket expenses?.
      ]. With reference to price reductions in other countries, this study assumed that pharmaceutical companies may lower their medications’ price by 5%, 10%, or 15% to attract prescribers’ or patients’ demand so as not to lose market share.
      Fifth, prescribers may change prescribing patterns to use lower priced drugs because patients may be sensitive to an additional co-payment [
      • Galizzi M.M.
      • Ghislandi S.
      • Miraldo M.
      Effects of reference pricing in pharmaceutical markets: a review.
      ]. In other countries, the RPS resulted in some switching from a more expensive drug to one with a price lower than the reference price. For instance, 9.3% of patients switched from high-priced cost-sharing calcium channel blockers to no-cost drugs after the RPS introduction in Canada [
      • Schneeweiss S.
      • Soumerai S.B.
      • Maclure M.
      • et al.
      Clinical and economic consequences of reference pricing for dihydropyridine calcium channel blockers.
      ]. In Germany, 48.7% of patients who were previously treated with atorvastatin with a price higher than the reference price switched to other statins included by the RPS [
      • Stargardt T.
      The impact of reference pricing on switching behaviour and healthcare utilisation: the case of statins in Germany.
      ]. The percentage of prescriptions switched to less expensive drugs by the prescriber was assumed to be 10%, 20%, or 30% in this study. Because of weak communication between physicians and patients, the percent change was not predicted to be more than 30%.
      The three models (chemical-level model, therapeutic-level model, and hybrid groupings [the combination of chemical groups and therapeutic groups] model) for these analyses were developed using basic structures and scenarios. The chemical-level and therapeutic-level models covered all patients. The hybrid groupings model, however, was limited to outpatient prescription medication use because, according to the Korea Hospital Association, inpatients do not play a role in deciding what medications they receive while hospitalized compared with outpatients [
      Korean Ministry of Health and Welfare
      The Public Hearing of the Reference Pricing System in Korea.
      ]. Similar to some European countries such as Germany and the Netherlands, a combination of possible changes for both chemical ingredient groups and therapeutic comparable groups was used [
      • Dylst P.
      • Vulto A.
      • Simoens S.
      The impact of reference-pricing systems in Europe: a literature review and case studies.
      ]. The potential changes for therapeutic (ATC level 4) groups were applied for only the following groups: antihypertensives, cholesterol-lowering medications, peptic ulcer medications, and nonsteroidal anti-inflammatory drugs, which were the most frequently prescribed drug groups in 2011 [
      Health Insurance Review and Assessment Service
      2013 Statistic of Reimbursement Drugs.
      ]. All other potential changes were applied to chemical ingredient (ATC level 5) groups. In addition, the baseline co-payment rate was assumed to be discounted by 10% to lessen the impact of patients who would experience the RPS for the first time.

       Calculation of Change in Prescription Drug Expenditures and Co-payment Rates

      In the RPS, the third-party payer reimburses up to the reference price. The change in prescription ingredient costs was calculated by subtracting the reference price from the actual drug price, and then multiplying this difference by the quantity prescribed. In Equation 1, it was assumed that the quantity and pattern of medications prescribed would be the same before and after the RPS. For the therapeutic and pharmacological comparable group (ATC level 4), the daily cost (i.e., a reimbursement price × most frequent quantity per day) was used because dosing could differ between therapeutically similar medications.
      C1=(P0P1)Q0.
      (1)


      C1is the change in prescription ingredient costs; P0 is the original price for all drugs; P1 is the original price for all drugs if at reference price or lower, but same as reference price if higher than reference price; and Q0 is the quantity prescribed during the study period. The prescription ingredient costs were defined as the total amount that pharmacies or hospitals pay for the drug products.
      Patients may be required to pay the difference between the price of drug and the reference price if they want drugs that are priced higher than the reference price. Thus, the change in prescription ingredient costs would result in savings to the third-party payer (i.e., the government) but would increase the co-payment costs for patients. This would lead to a change in co-payment rates and reimbursement rates as calculated using the following equations:
      CR(%)=[(C0+C1)/R]×100,
      (2)


      RR(%)=100CR(%).
      (3)


      CR is co-payment rate, RR is reimbursement rate, R is total medical expenditures, C0 is original co-payment, and C1 is additional co-payment (change in ingredient costs). The total medical expenditures included ingredient costs, patient counseling fees, and compounding fees for outpatients, and dispensing fees, surgery or treatment fees, and clinical test costs for inpatients (Fig. 1). The total medical expenditures were used to calculate patients’ overall co-payment rates.
      If it is assumed that there will be no change in pricing and prescribing patterns, the total ingredient costs will not be different before and after the RPS. Nevertheless, on the basis of results from the RPS in European countries, it is expected that changes in pricing and prescribing will occur [
      • Galizzi M.M.
      • Ghislandi S.
      • Miraldo M.
      Effects of reference pricing in pharmaceutical markets: a review.
      ]. Equation 4 is proposed to identify how much savings in prescription ingredient costs might occur after the RPS:
      P0QP0Q0P2Q1.
      (4)


      S is the savings in prescription ingredient costs under expected scenarios, P2 is the decreased price by manufacturers if their original price is higher than the reference price, Q1 is the change in quantity prescribed because of switching from high-cost drugs to reference-price drugs.
      A co-pay reduction program would reduce patient co-payments only if they used drugs priced at the reference price or lower. The discounted co-payment was defined as the amount after the sum of quantity of drug multiplied by the difference between the reference price and the price of a drug is subtracted from the original co-payment, if a drug is priced lower than the reference price.
      (P3P4)Q1(P3P4)Q1),ifdrugpriceislowerthanreferenceprice.
      (5)


      C2 is the discounted co-payment under a co-pay reduction program, P3 is the reference price, and P4 is the price lower than the reference price.
      The 2015 exchange rate (US $ 1 = 1027.75 Korean won) was applied. SAS 9.3 for Windows (SAS Institute, Inc., Cary, NC) and Microsoft Excel 2010 were used to estimate change in prescription drug expenditures because of the RPS.

      Results

      We identified 13,323 individual drug products and 2,097 chemical ingredients in the KNHICD (Table 1). Total ingredient costs were $3,955 million and total medical expenditures were $11,655 million. Information from the national database showed that patients paid 20.8%, on average, for their health care services during 4 months in 2011. Among all prescribed drug products for both inpatients and outpatients, 8109 and 7578 products met our inclusion criteria for the analysis using the chemical grouping (ATC level 5) and the therapeutic grouping (ATC level 4), respectively. The KNHICD provided no actual ATC code, but an alternative code that corresponds with the ATC level 5. The alternative code was used for the chemical-level model. Nevertheless, missing observations were found when attempting to match drugs with the ATC level 4 code in the therapeutic-level model. The total ingredient costs were $2488 million and $2292 million for the chemical level and the therapeutic level, respectively. The hybrid grouping model that included only outpatient pharmacy claim data contained 6094 products, and the total ingredient cost for this model was $1789 million. The estimate rate of co-payment in the hybrid grouping model (25.4%) was higher than the co-payment rate in the chemical and therapeutic levels (20.4%).
      Table 1Korea health insurance claim data
      Total national health insurance claim dataReference pricing system (level of equivalence)
      Hospital or clinicCommunity pharmacyTotalChemical level
      These models included both inpatients and outpatients.
      Therapeutic level
      These models included both inpatients and outpatients.
      Hybrid grouping model
      This model included only outpatients of community pharmacies, and used combinations of chemical and therapeutic grouping.
      No. of active ingredients1,9031,5442,0971,034887819
      No. of reference groupsNANANA1,8537431,174
      No. of products12,45710,40613,3238,1097,5786,094
      Total ingredient cost ($)1,334,993,9792,619,775,2373,954,769,2162,487,561,3722,292,403,2111,789,292,568
      Total medical expenditure
      This includes ingredient cost, patient counseling fee, and compounding fee for outpatients, and dispensing fee, surgery or treatment fee, and clinical test cost for inpatients.
      ($)
      8,064,917,7583,589,994,64911,654,912,4079,267,751,8858,969,092,6782,675,319,715
      Co-pay rate (%)18.425.420.820.420.425.4
      NA, not applicable.
      low asterisk These models included both inpatients and outpatients.
      This model included only outpatients of community pharmacies, and used combinations of chemical and therapeutic grouping.
      This includes ingredient cost, patient counseling fee, and compounding fee for outpatients, and dispensing fee, surgery or treatment fee, and clinical test cost for inpatients.
      The estimated changes in prescription ingredient costs are presented in Table 2. Change rates ranged from 1.4% to 7.5% according to the level of reimbursement (the reference price) at the chemical level. Change rates of the therapeutic-level groupings ranged from 10.3% to 22.8%, which were higher than those of the chemical-level groupings for all levels of reimbursement. The change rates of the hybrid grouping model fell between those of chemical-level and therapeutic-level groupings. The rates of the average of reference price to the highest price per reference group ranged from 36.7% to 53.9%. Although the analysis using the weighted average costs showed the lowest change rate, the analysis using the 33rd percentile showed the highest change rate for all cases because this scenario would result in a large difference between the price of drugs and the lower reference price.
      Table 2Change in prescription ingredient costs by types of RPS
      Level of equivalenceOriginal total ingredient costs ($)Level of reimbursementTotal ingredient costs under RPS ($)Change
      Change ($) = Original total ingredient costs − Total ingredient costs under RPS.
      ($)
      Change rate
      Changerate(%)=Originaltotalingredientcosts−TotalingredientcostsunderRPSOriginaltotalingredientcosts.
      (%)
      Chemical level2,487,561,372Weighted average2,452,142,00635,419,3661.4
      2,487,561,372Mean2,359,338,325128,223,0465.2
      2,487,561,372Mean without outliers2,377,759,283109,802,0894.4
      2,487,561,372Median2,390,953,56596,607,8073.9
      2,487,561,37233rd percentile2,300,233,495187,327,8777.5
      Therapeutic level2,292,403,211Weighted average2,056,802,344235,600,86610.3
      2,292,403,211Mean1,980,415,837311,987,37413.6
      2,292,403,211Mean without outliers1,971,534,981320,868,23014.0
      2,292,403,211Median2,006,339,135286,064,07512.5
      2,292,403,21133rd percentile1,769,925,743522,477,46822.8
      Hybrid grouping model1,789,292,568Weighted average1,714,142,28075,150,2884.2
      1,789,292,568Mean1,653,306,333135,986,2357.6
      1,789,292,568Mean without outliers1,658,674,211130,618,3577.3
      1,789,292,568Median1,674,777,844114,514,7246.4
      1,789,292,56833rd percentile1,601,416,849187,875,72010.5
      RPS, reference pricing system.
      low asterisk Change ($) = Original total ingredient costs − Total ingredient costs under RPS.
      Changerate(%)=OriginaltotalingredientcostsTotalingredientcostsunderRPSOriginaltotalingredientcosts.
      Overall reimbursement rates for the government were decreased and co-payment rates for patients were increased regardless of the type of RPS because of the extra co-payment of high-cost drugs to patients (Table 3). At the chemical level, all co-payment rates were higher (20.7–22.0%) than the baseline co-payment rate (20.4%). Co-payment rates for therapeutic levels were increased up to 25.0% when the 33rd percentile was used as a reference price. The hybrid grouping model had co-payment rates ranging from 25.0% to 28.3% depending on various reference prices (baseline was 22.9%).
      Table 3Estimated additional co-payment and co-pay rate by types of RPS
      Original total medical expenditure ($)Level of reimbursement(rate of average to highest price per group)Insurer portion ($)Patient portion ($)Co-pay rate
      Co-payrate(%)=Originalco−payment+Additionalco−paymentTotalmedicalexpenditures.
      (%)
      Reimbursement rate
      Reimbursement rate (%) = 100 (%) – Co-pay rate (%).
      (%)
      Original co-paymentAdditional co-payment
      Chemical level
      The price when there is no impact of RPS.
      9,267,751,885Original price
      The price when there is no impact of RPS.
      7,377,130,5011,890,621,385020.479.6
      9,267,751,885Weighted average (53.5%)7,348,936,6861,883,395,83435,419,36620.779.3
      9,267,751,885Mean (52.7%)7,275,064,9561,864,463,883128,223,04621.578.5
      9,267,751,885Mean without outliers (53.0%)7,289,728,0381,868,221,758109,802,08921.378.7
      9,267,751,885Median (53.8%)7,300,230,6861,870,913,39296,607,80721.278.8
      9,267,751,88533rd percentile (50.8%)7,228,017,5101,852,406,498187,327,87722.078.0
      Therapeutic level
      20.4% is a baseline co-pay rate of chemical and therapeutic levels.
      8,969,092,678Original price7,139,397,7721,829,694,906020.479.6
      8,969,092,678Weighted average (44.7%)6,951,859,4821,781,632,330235,600,86622.577.5
      8,969,092,678Mean (46.5%)6,891,055,8221,766,049,482311,987,37423.276.8
      8,969,092,678Mean without outliers (46.2%)6,883,986,6611,764,237,787320,868,23023.276.8
      8,969,092,678Median (42.4%)6,911,690,7681,771,337,835286,064,07522.977.1
      8,969,092,67833rd percentile (36.7%)6,723,505,7081,723,109,503522,477,46825.075.0
      Hybrid grouping model
      22.9% is a baseline co-pay rate of the hybrid grouping model (combination of chemical and therapeutic groupings).
      2,675,319,715Original price2,063,741,628611,578,087022.977.1
      2,675,319,715Weighted average (53.1%)2,005,770,696594,398,73175,150,28825.075.0
      2,675,319,715Mean (51.7%)1,958,841,846580,491,633135,986,23526.873.2
      2,675,319,715Mean without outliers (52.3%)1,962,982,627581,718,730130,618,35726.673.4
      2,675,319,715Median (53.9%)1,975,404,970585,400,021114,514,72426.273.8
      2,675,319,71533rd percentile (48.4%)1,918,814,298568,629,697187,875,72028.371.7
      RPS, reference pricing system.
      low asterisk Co-payrate(%)=Originalcopayment+AdditionalcopaymentTotalmedicalexpenditures.
      Reimbursement rate (%) = 100 (%) – Co-pay rate (%).
      20.4% is a baseline co-pay rate of chemical and therapeutic levels.
      § The price when there is no impact of RPS.
      || 22.9% is a baseline co-pay rate of the hybrid grouping model (combination of chemical and therapeutic groupings).
      Assuming these different scenarios, such as changes in pricing and prescribing, were plausible after introducing the RPS in South Korea, savings rates of prescription ingredient costs from the social perspective were estimated to range from 1.6% to 13.7% (Fig. 2). Using the 33rd percentile as the level of reimbursement showed the highest savings rates for both the therapeutic-level and the hybrid grouping model.
      Fig. 2
      Fig. 2Savings rate on prescription ingredient costs for chemical-level model, therapeutic- level model, and hybrid grouping model under scenarios. Note. Savingsrate(%)=Originalprescriptioningredientcosts($)Prescriptioningredientcostsunderexpectedscenarios($)Originalprescriptioningredientcosts($)
      Instead of only estimating changes in percentages of co-payments (i.e., co-payment rates), the authors also assessed changes in absolute co-payment—in dollars. Co-payment dollars were less than the original co-pay amount depending on the types of co-payment reduction program instituted (Fig. 3). In the hybrid grouping model, all scenarios that included a co-pay reduction program showed a smaller co-payment than baseline ($612 million). Co-payments for chemical level or the hybrid grouping model were estimated to be lower than the original co-payment without a co-payment reduction program, assuming a decline in prices by 15% and a switch of 30% of the prescriptions to drugs priced lower than the reference price. The co-pay reduction program could help decrease co-payment rates lower than the baseline (Appendix D, Appendix E).
      Fig. 3
      Fig. 3Patient co-payments for chemical-level, therapeutic-level, and hybrid grouping models under scenarios. Note. Baseline represents original co-payments for patients before the reference pricing system. Baseline co-pay rate: chemical level, 20.4%; therapeutic level, 20.4%; hybrid grouping model, 22.9%.
      Fig. 3
      Fig. 3Patient co-payments for chemical-level, therapeutic-level, and hybrid grouping models under scenarios. Note. Baseline represents original co-payments for patients before the reference pricing system. Baseline co-pay rate: chemical level, 20.4%; therapeutic level, 20.4%; hybrid grouping model, 22.9%.

      Discussion

      This study assessed the effects of the RPS that may occur after the introduction of the policy in South Korea. Our literature review has indicated that savings rates for drug expenditures were 2.1% to 18%, although each study analyzed different classes of drugs in different reimbursement systems (Appendix B). This is consistent with our findings that the establishment of an RPS policy in South Korea may reduce prescription ingredient costs by 1.6% to 13.7%, assuming similar shifts that have been reported in other countries. Regarding patient costs, this study found that a co-pay reduction program and reductions in “co-pay rate designated by law” could be used to lessen patients’ financial burden. The results provided that the price reduction, switching to less costly drugs, and discount program may deter cost-shifting to patients.
      The reference group is usually defined by an active ingredient substance class (ATC level 5), a therapeutic class (ATC level 4), or a combination of these methods [
      • Dylst P.
      • Vulto A.
      • Simoens S.
      The impact of reference-pricing systems in Europe: a literature review and case studies.
      ]. Estimated savings in ingredient costs were different depending on the criteria used to cluster these medications. In European countries, the therapeutic level generally showed greater magnitude in price reduction than the chemical level [
      • Brekke K.R.
      • Konigbauer I.
      • Straume O.R.
      Reference pricing of pharmaceuticals.
      ,
      • Grootendorst P.V.
      • Marshall J.K.
      • Holbrook A.M.
      • et al.
      The impact of reference pricing of nonsteroidal anti-inflammatory agents on the use and costs of analgesic drugs.
      ]. We also found that the therapeutic group had a larger savings rate than the chemical group for all scenarios. When a difference between the price of the most expensive drug and the least expensive drug is large, potential savings are greater [
      • Galizzi M.M.
      • Ghislandi S.
      • Miraldo M.
      Effects of reference pricing in pharmaceutical markets: a review.
      ].The therapeutic group generally has a larger variance in price because of having a greater number of interchangeable drugs than the chemical group. In addition, savings at the chemical level would not be significant in Korea because the government has already seen a reduction in the prices of listed drugs on the basis of the rule that medications with the same ingredients are required to be priced the same [
      • Cho M.H.
      • Yoo K.B.
      • Lee H.Y.
      • et al.
      The effect of new drug pricing systems and new reimbursement guidelines on pharmaceutical expenditures and prescribing behavior among hypertensive patients in Korea.
      ]. Our results showed that applying changes only at the therapeutic level would lead to significant savings for the third-party payer (i.e., the government), but it would result in an increase in co-payment for patients. There have been debates about whether all drugs in therapeutic groupings are, in fact, interchangeable. Changes in savings and co-payments in the hybrid grouping model were estimated to fall between those in the chemical level and the therapeutic level. Germany and Hungry introduced only chemical groupings in the beginning, and scaled up to add classes with therapeutic comparability in their RPS [
      • Dylst P.
      • Vulto A.
      • Simoens S.
      Reference pricing systems in Europe: characteristics and consequences.
      ]. Korea may also move progressively to therapeutic groupings for specific classes after applying chemical groupings in the beginning.
      Most European countries define the reference price around or lower than the average price or at the lowest price in the reference group [
      • Vogler S.
      The impact of pharmaceutical pricing and reimbursement policies on generics uptake: implementation of policy options on generics in 29 European countries—an overview.
      ]. A lower reference price usually results in higher savings for the government; the mechanism to set the reference price, however, should be chosen carefully because it may lead to patient financial burden when patients do not have enough information about medications or the patients’ choices are limited. In this study, the 33rd percentile resulted in the highest co-payment rate (up to 28.3%) for patients. Several European countries experienced that the RPS may generate savings only at its introduction point, and may be limited to the “one-off” impact of the introduction because the policy may discourage price competition in the long-term [
      • von der Schulenburg F.
      • Vandoros S.
      • Kanavos P.
      The effects of drug market regulation on pharmaceutical prices in Europe: overview and evidence from the market of ACE inhibitors.
      ,
      • Dylst P.
      • Vulto A.
      • Simoens S.
      Reference pricing systems in Europe: characteristics and consequences.
      ]. Generic manufacturers did not show a voluntary price reduction if a drug had a price lower than the reference price even when there were other lower priced drugs in the same reference group [
      • Puig-Junoy J.
      Impact of European pharmaceutical price regulation on generic price competition: a review.
      ,
      • Puig-Junoy J.
      • Moreno-Torres I.
      Do generic firms and the Spanish public purchaser respond to consumer price differences of generics under reference pricing?.
      ]. If the manufacturers have prices higher than the reference price, they set a drug price close to the level of the reference price rather than reduce prices to be lower than the reference price [
      • Puig-Junoy J.
      Impact of European pharmaceutical price regulation on generic price competition: a review.
      ]. In Korea, the government has already introduced other drug pricing regulations, which may cause manufacturers to oppose further reductions sought by the introduction of RPS. Thus, the reference price may need to be revisited and adjusted over time on the basis of market changes to continue to show savings. For example, German policymakers have reduced the reference prices 5 times between 1995 and 2005 [
      • Augurzky B.
      • Gohlmann S.
      • Gress S.
      • et al.
      Effects of the German reference drug program on ex-factory prices of prescription drugs: a panel data approach.
      ]. In Belgium, the government has progressively reduced the reference prices between 2001 and 2003 [
      • Simoens S.
      • De Bruyn K.
      • Bogaert M.
      • et al.
      Pharmaceutical policy regarding generic drugs in Belgium.
      ].
      Policymakers should encourage generic substitution to achieve the aim of RPS, which is to not only save on drug expenditures but also help patients to continue to benefit from the drugs. Generic substitution is used to allow health care providers to substitute a generic product for a brand name product within the interchangeable group [
      • Gothe H.
      • Schall I.
      • Saverno K.
      • et al.
      The impact of generic substitution on health and economic outcomes: a systematic review.
      ]. It provides companies with incentives to reduce prices to have their products dispensed because it enhances price competition when more expensive drugs are substituted with cheaper alternatives [
      • von der Schulenburg F.
      • Vandoros S.
      • Kanavos P.
      The effects of drug market regulation on pharmaceutical prices in Europe: overview and evidence from the market of ACE inhibitors.
      ]. It is necessary to provide regulations, and also to have educational campaigns about this new policy to promote the use of low-cost drugs. In Italy, if a product is priced higher than the reference level, pharmacists must inform patients that cheaper substitutes are available, unless the prescriber notes “not-substitutable” on the prescription [
      • Ghislandi S.
      • Armeni P.
      • Jommi C.
      The impact of generic reference pricing in Italy, a decade on.
      ].In Korea, physicians prefer to prescribe expensive generic drugs [
      • Shin J.Y.
      • Choi S.E.
      The volume and the price of generic drug consumption in Korea prescription drug market.
      ,
      • Lee I.
      • Park S.
      • Lee E.
      Generic utilization in the Korean national health insurance market: cost, volume and influencing factors.
      ]. The patient’s role in the pharmaceutical market is usually limited because physicians can choose a prescription drug on behalf of patients who have limited professional medical information [
      • von der Schulenburg F.
      • Vandoros S.
      • Kanavos P.
      The effects of drug market regulation on pharmaceutical prices in Europe: overview and evidence from the market of ACE inhibitors.
      ]. The physician-patient communication is more limited in Korea because the relationship between a physician and a patient is practically vertical in the Korean society [
      • Park J.Y.
      • Choi Y.H.
      A study on physician-patient relationship scale development.
      ]. We recommend the implementation of a hybrid grouping model for outpatient medications—rather than for inpatient medications—because patients do not have much say in choosing inpatient medications.
      All products in the same reference group must have bioequivalence to promote a substitution. If drugs are not interchangeable in benefit and risk, substitution may result in negative impacts on health outcomes and increase the use of other health care services [
      • Grootendorst P.
      • Holbrook A.
      Evaluating the impact of reference-based pricing.
      ]. In many countries with RPS, the policy leads to a change in prescribing patterns, and achieved cost savings without any measurable negative effect on patient health outcomes and utilization [
      • Lee J.L.
      • Fischer M.A.
      • Shrank W.H.
      • et al.
      A systematic review of reference pricing: implications for US prescription drug spending.
      ,
      • Dylst P.
      • Vulto A.
      • Simoens S.
      The impact of reference-pricing systems in Europe: a literature review and case studies.
      ].
      The effect of the RPS on research and development is still controversial. Some argue that the RPS may limit the incentives for manufacturers to invest in the research and development of new products. Nevertheless, the RPS might lead manufacturers to look for innovative investments to increase expected profit rather than “me-too” drug [
      • Galizzi M.M.
      • Ghislandi S.
      • Miraldo M.
      Effects of reference pricing in pharmaceutical markets: a review.
      ,
      • Brekke K.R.
      • Grasdal A.L.
      • Holmås T.H.
      Regulation and pricing of pharmaceuticals: reference pricing or price cap regulation?.
      ].

       Study Limitations

      Our study had a few limitations. The first limitation is that our study was constrained by the short time frame. The change in prescription drug expenditures could not be estimated in the longitudinal analysis. If the government changes the reference prices over time, or there is a change in morbidity of patients, the prediction of the effects of the RPS would need adjustment. Because this study assumed that total demand was equal before and after the RPS, other potential influences, such as the change in co-payment rates, were not considered.
      Second, assumed scenarios could be modified to be more suitable for the pharmaceutical environment in South Korea, because they are based on experiences of other countries with the RPS. Although the parameters used in the scenarios were determined on the basis of the effect of the RPS in other countries, they may not represent the situation accurately in Korea after the RPS. The percentage of prescriptions switched to less costly drugs may be lower in South Korea because of long-term beliefs and established patterns. A survey of physicians, pharmacists, and patients, which would assess their perception of generic substitution, may be of benefit.
      Third, specific therapeutic classes may show different changes. Previous studies that reported the effect of RPS analyzed specific classes such as proton pump inhibitors, or statins [
      • Stargardt T.
      The impact of reference pricing on switching behaviour and healthcare utilisation: the case of statins in Germany.
      ,
      • Marshall J.K.
      • Grootendorst P.V.
      • O'Brien B.J.
      • et al.
      Impact of reference-based pricing for histamine-2 receptor antagonists and restricted access for proton pump inhibitors in British Columbia..
      ]. Because this study was designed to analyze nationwide drug expenditures, we could not compare the results of the same therapeutic classes with other studies.

      Conclusions

      This study predicted potential changes in prescription ingredient costs and co-payment rates, applying scenarios that included various levels of equivalence groupings, reference pricing techniques, a co-pay reduction program, a reduction in manufacturer prices, and prescription switches to less costly drugs, after the introduction of the RPS in South Korea. Our predictions indicated that there would be savings in prescription drug expenditures for the third-party payer (government) but an RPS policy may result in an additional financial burden for patients. In some scenarios, however, patients would also save money because of reduced manufacturer pricing, switching to lower priced medications, or a government-supported co-pay reduction program. In the hybrid grouping model, cost-shifting to patients was limited and both the patient and the government could save on drug expenditures even without a co-pay discount. Cooperation between the government, manufacturers, health care providers, and patients is essential to achieve positive effects of the RPS.
      Source of financial support: This study was funded by an unrestricted research grant from the Health Insurance Review and Assessment Service in South Korea.

      Appendix A

      Appendix AApplication of RPS in various countries
      CountryYear started
      Level 1: chemical; level 2: pharmacological or therapeutic; level 3: therapeutic combinations grouping.
      Reference group (level of equivalence)Reference price (level of reimbursement)
      Australia
      • Galizzi M.M.
      • Ghislandi S.
      • Miraldo M.
      Effects of reference pricing in pharmaceutical markets: a review.
      1990 (level 1)Chemical, pharmacological, and therapeuticLowest price in group
      1998 (level 2)
      Belgium
      • Galizzi M.M.
      • Ghislandi S.
      • Miraldo M.
      Effects of reference pricing in pharmaceutical markets: a review.
      ,
      • Puig-Junoy J.
      Impact of European pharmaceutical price regulation on generic price competition: a review.
      ,
      • Simoens S.
      • De Bruyn K.
      • Bogaert M.
      • et al.
      Pharmaceutical policy regarding generic drugs in Belgium.
      2001Chemical30% less than the price of the original product
      Canada
      • Lee J.L.
      • Fischer M.A.
      • Shrank W.H.
      • et al.
      A systematic review of reference pricing: implications for US prescription drug spending.
      ,
      • Galizzi M.M.
      • Ghislandi S.
      • Miraldo M.
      Effects of reference pricing in pharmaceutical markets: a review.
      1994 (level 1)Chemical, pharmacological, and therapeuticLowest price in group
      1995 (level 2)
      Czech Republic
      • Puig-Junoy J.
      Impact of European pharmaceutical price regulation on generic price competition: a review.
      1995Chemical, pharmacological, and therapeuticLowest price in group
      Denmark
      • Puig-Junoy J.
      Impact of European pharmaceutical price regulation on generic price competition: a review.
      1993ChemicalLowest price in reimbursement or substitution group
      Finland
      • Puig-Junoy J.
      Impact of European pharmaceutical price regulation on generic price competition: a review.
      2009ChemicalLowest price plus €1.5
      France
      • Puig-Junoy J.
      Impact of European pharmaceutical price regulation on generic price competition: a review.
      2003ChemicalAverage of generics with one active ingredient
      Germany
      • Lee J.L.
      • Fischer M.A.
      • Shrank W.H.
      • et al.
      A systematic review of reference pricing: implications for US prescription drug spending.
      ,
      • Galizzi M.M.
      • Ghislandi S.
      • Miraldo M.
      Effects of reference pricing in pharmaceutical markets: a review.
      ,
      • Lee Y.J.
      • Park J.H.
      • Shin H.H.
      • et al.
      Reference pricing: case study and implication.
      1989 (level 1)Chemical, pharmacological, and therapeuticPrice cap of 33rd percentile price-in-price range of group with chemical equivalence
      1991 (level 2)
      1992 (level 3)
      Greece
      • Puig-Junoy J.
      Impact of European pharmaceutical price regulation on generic price competition: a review.
      2006PharmacologicalLowest price in group
      Hungary
      • Galizzi M.M.
      • Ghislandi S.
      • Miraldo M.
      Effects of reference pricing in pharmaceutical markets: a review.
      ,
      • Dylst P.
      • Vulto A.
      • Simoens S.
      Reference pricing systems in Europe: characteristics and consequences.
      1997 (level 1)Chemical, pharmacological, and therapeuticLowest price in group
      2003 (level 2)
      Italy
      • Galizzi M.M.
      • Ghislandi S.
      • Miraldo M.
      Effects of reference pricing in pharmaceutical markets: a review.
      2001ChemicalLowest price in group
      Netherlands
      • Puig-Junoy J.
      Impact of European pharmaceutical price regulation on generic price competition: a review.
      ,
      • Zuidberg C.
      The Pharmaceutical System of the Netherlands. PPRI Reports.
      1991Chemical, pharmacological, and therapeuticLowest price in group
      New Zealand
      • Galizzi M.M.
      • Ghislandi S.
      • Miraldo M.
      Effects of reference pricing in pharmaceutical markets: a review.
      1993TherapeuticLowest price in group
      Poland
      • Puig-Junoy J.
      Impact of European pharmaceutical price regulation on generic price competition: a review.
      1998Chemical, pharmacologicalLowest price in group
      Portugal
      • Puig-Junoy J.
      Impact of European pharmaceutical price regulation on generic price competition: a review.
      2003ChemicalPrice of most expensive generic
      Spain
      • Lee J.L.
      • Fischer M.A.
      • Shrank W.H.
      • et al.
      A systematic review of reference pricing: implications for US prescription drug spending.
      ,
      • Galizzi M.M.
      • Ghislandi S.
      • Miraldo M.
      Effects of reference pricing in pharmaceutical markets: a review.
      2000ChemicalAverage of the prices of three cheapest products
      RPS, reference pricing system.
      low asterisk Level 1: chemical; level 2: pharmacological or therapeutic; level 3: therapeutic combinations grouping.

      Appendix B

      Appendix BEffect of RPS in various countries
      CountryPriceQuantity or expendituresUtilizations and others
      Australia
      • Galizzi M.M.
      • Ghislandi S.
      • Miraldo M.
      Effects of reference pricing in pharmaceutical markets: a review.
      Usage rate of generic drugs increased 4.5– 11.0%
      Belgium
      • Galizzi M.M.
      • Ghislandi S.
      • Miraldo M.
      Effects of reference pricing in pharmaceutical markets: a review.
      ,
      • Simoens S.
      • De Bruyn K.
      • Bogaert M.
      • et al.
      Pharmaceutical policy regarding generic drugs in Belgium.
      Not significantExpenditures: decreased by 2.1%Switch to less costly drugs
      Market share of generics increased
      Canada
      • Lee J.L.
      • Fischer M.A.
      • Shrank W.H.
      • et al.
      A systematic review of reference pricing: implications for US prescription drug spending.
      ,
      • Galizzi M.M.
      • Ghislandi S.
      • Miraldo M.
      Effects of reference pricing in pharmaceutical markets: a review.
      ,
      • Schneeweiss S.
      • Soumerai S.B.
      • Maclure M.
      • et al.
      Clinical and economic consequences of reference pricing for dihydropyridine calcium channel blockers.
      ,
      • Grootendorst P.
      • Stewart D.
      A re-examination of the impact of reference pricing on anti-hypertensive drug plan expenditures in British Columbia.
      Not significant (calcium channel blocker not changed)Significant saving (ACE inhibiters decreased by 6%;calcium channel blocker and proton pump inhibitors decreased by 12%)Switch to less costly drugs
      Use of medical services increased
      Prescription duration increased
      No effect on health
      Denmark
      • Puig-Junoy J.
      Impact of European pharmaceutical price regulation on generic price competition: a review.
      Not significantExpenditures: decreased by 1.5%
      France
      • Puig-Junoy J.
      Impact of European pharmaceutical price regulation on generic price competition: a review.
      Decreased
      Germany
      • Lee J.L.
      • Fischer M.A.
      • Shrank W.H.
      • et al.
      A systematic review of reference pricing: implications for US prescription drug spending.
      ,
      • Galizzi M.M.
      • Ghislandi S.
      • Miraldo M.
      Effects of reference pricing in pharmaceutical markets: a review.
      ,
      • Giuliani G.
      • Selke G.
      • Garattini L.
      The German experience in reference pricing.
      ,
      • Stargardt T.
      The impact of reference pricing on switching behaviour and healthcare utilisation: the case of statins in Germany.
      Decreased by about 20% (antidiabetics decreased by 18.70%; anti-ulcerants decreased by 12.20%; brand name drugs decreased by 27%)Quantity: decreased by 4.1%Switch to less costly drugs
      Expenditures: statins decreased by 18%Use of medical services was ambiguous
      Effect on health (mortality and hospitalization rates) was not significant
      Hungary
      • Galizzi M.M.
      • Ghislandi S.
      • Miraldo M.
      Effects of reference pricing in pharmaceutical markets: a review.
      Not significantSignificant savingSwitch to less costly drugs
      Market share of generics increased
      Italy
      • Galizzi M.M.
      • Ghislandi S.
      • Miraldo M.
      Effects of reference pricing in pharmaceutical markets: a review.
      ,
      • Ghislandi S.
      • Krulichova I.
      • Garattini L.
      Pharmaceutical policy in Italy: towards a structural change?.
      Decreased by 40% compared with average in the EUExpenditures: decreased by 5%Switch to less costly drugs
      Market share of generics increased
      Netherlands
      • Puig-Junoy J.
      Impact of European pharmaceutical price regulation on generic price competition: a review.
      ,
      • Zuidberg C.
      The Pharmaceutical System of the Netherlands. PPRI Reports.
      Decreased by 5%(1991–1993)
      New Zealand
      • Puig-Junoy J.
      Impact of European pharmaceutical price regulation on generic price competition: a review.
      Not significantNot significantEffect on health was negative
      Spain
      • Lee J.L.
      • Fischer M.A.
      • Shrank W.H.
      • et al.
      A systematic review of reference pricing: implications for US prescription drug spending.
      ,
      • Galizzi M.M.
      • Ghislandi S.
      • Miraldo M.
      Effects of reference pricing in pharmaceutical markets: a review.
      Decreased/not significant(ranitidine decreased by 19.2%; omeprazole not changed; fluoxetine decreased by 10%)Expenditures: decreased by 4%Switch to less costly drugs
      Market share of generics increased
      ACE, angiotensin-converting enzyme; RPS, reference pricing system.

      Appendix C

      Appendix CExamples for the fourth and fifth levels of the ATC code
      ATC code (fourth level)ATC code (fifth level)Active ingredient
      C08CAC08CA01Amlodipine
      Selective calcium channel blockersC08CA02Felodipine
      C08CA03Isradipine
      C08CA04Nicardipine
      C08CA05Nifedipine
      C08CA06Nimodipine
      C08CA07Nisoldipine
      C08CA08Nitrendipine
      C08CA09Lacidipine
      C08CA10Nilvadipine
      C08CA11Manidipine
      C08CA12Barnidipine
      C08CA13Lercanidipine
      C08CA14Cilnidipine
      C08CA15Benidipine
      C08CA16Clevidipine
      C08CA55Nifedipine, combinations
      A02BAA02BA01Cimetidine
      H2-receptor antagonistsA02BA02Ranitidine
      A02BA03Famotidine
      A02BA04Nizatidine
      A02BA05Niperotidine
      A02BA06Roxatidine
      A02BA07Ranitidine bismuth citrate
      A02BA08Lafutidine
      A02BA51Cimetidine, combinations
      A02BA53Famotidine, combinations
      ATC, Anatomical Therapeutic Chemical.

      Appendix D

      Appendix DEstimated additional co-payment and co-payment rate by scenarios
      Co-pay reduction programNo co-pay reduction programFor drugs at least 20% lower than the reference priceFor drugs at least 10% lower than the reference priceFor all drugs lower than the reference price
      Change in price and RxLevel of reimbursementTotal medical expenditures ($)Original co-payment
      Baseline co-pay rate = 20.4%.
      ($)
      Additional co-payment ($)Co-pay rate
      Co-payrate(%)=Originalco−payment($)+Additionalco−payment($)Totalmedicalexpenditures($).
      (%)
      Additional co-payment ($)Co-pay rate
      Co-payrate(%)=Originalco−payment($)+Additionalco−payment($)Totalmedicalexpenditures($).
      (%)
      Additional co-payment ($)Co-pay rate
      Co-payrate(%)=Originalco−payment($)+Additionalco−payment($)Totalmedicalexpenditures($).
      (%)
      Additional co-payment ($)Co-pay rate
      Co-payrate(%)=Originalco−payment($)+Additionalco−payment($)Totalmedicalexpenditures($).
      (%)
      Chemical level
      Reduce the price by 5% and 10% of Rx changedWeighted average9,182,079,2991,870,834,92311,319,87420.5−11,867,67220.2−18,305,03520.2−85,672,58619.4
      Mean9,187,566,0421,860,395,64167,979,56721.051,588,42120.847,052,29920.822,379,95620.5
      Mean without outliers9,203,887,1321,865,085,40861,311,60320.942,983,21620.738,708,83020.718,633,90920.5
      Median9,229,007,0541,870,204,11661,339,82020.939,647,77420.736,773,53420.730,179,51820.6
      33rd percentile9,206,408,1731,851,762,238129,142,30121.5119,412,30821.4117,733,88521.4113,443,93121.3
      Reduce the price by 10% and 20% of Rx changedWeighted average9,097,795,1841,855,030,4064,508,87920.4−18,678,66720.2−125,115,05719.0−169,955,72918.5
      Mean9,113,147,1661,851,460,53037,360,25320.720,969,10720.52,180,49120.3−52,039,89319.7
      Mean without outliers9,144,702,5051,858,220,76635,777,18320.717,448,79620.5−3,753,83120.3−40,549,74519.9
      Median9,194,499,6351,868,012,76637,574,31320.715,883,24020.511,223,54720.4−4,327,90120.3
      33rd percentile9,151,945,5121,849,194,54787,266,35921.277,537,33921.173,711,50621.058,982,24320.8
      Reduce the price by 15% and 30% of Rx changedWeighted average9,013,727,0741,838,428,5481,822,42820.4−21,365,11820.2−241,439,06617.7−254,024,81117.6
      Mean9,041,036,2441,840,173,68820,576,98920.64,185,84320.4−103,500,85119.2−124,150,81519.0
      Mean without outliers9,088,149,8421,849,963,10819,703,23520.61,374,84820.4−82,935,53919.4−97,102,40819.3
      Median9,162,392,6051,864,571,91022,334,22520.6642,18020.4−21,765,99420.1−36,435,90420.0
      33rd percentile9,102,270,9801,845,202,87657,158,84220.947,429,82220.822,372,17220.59,307,71120.4
      Therapeutic level
      Reduce the price by 5% and 10% of Rx changedWeighted average8,884,288,0081,779,319,461162,133,78721.9−37,571,39419.6−55,803,45419.4−84,803,69719.1
      Mean8,870,290,4401,764,592,358220,327,90122.4−36,658,72119.5−54,930,67419.3−69,289,22419.1
      Mean without outliers8,866,931,6471,762,149,519228,943,80922.5−494,28419.9−20,171,24819.6−37,041,10919.5
      Median8,890,792,5081,770,504,239211,850,15822.328,414,49820.216,434,93120.15,941,13420.0
      33rd percentile8,852,205,3031,722,469,608408,726,83024.1348,327,90123.4342,243,73623.3336,468,01323.3
      Reduce the price by 10% and 20% of Rx changedWeighted average8,807,801,5081,774,177,927110,850,88821.4−88,854,29319.1−120,590,61118.8−161,291,17018.3
      Mean8,782,144,4901,760,300,567153,220,14121.8−103,767,45318.9−126,891,75418.6−157,435,17418.3
      Mean without outliers8,775,576,7451,757,519,895160,283,14321.9−69,154,95019.2−95,816,10318.9−128,396,01118.6
      Median8,821,084,8941,768,096,335153,945,99921.8−29,490,63519.7−43,966,91819.5−63,766,48019.3
      33rd percentile8,747,772,3181,720,593,066313,492,58123.3253,092,67822.6244,586,71922.5232,036,00122.3
      Reduce the price by 15% and 30% of Rx changedWeighted average8,737,042,0821,767,275,37273,927,51221.1−125,778,64318.8−198,551,20418.0−232,050,59617.6
      Mean8,702,040,3791,754,230,488102,871,32121.3−154,115,30018.4−216,599,36817.7−237,539,28517.4
      Mean without outliers8,692,378,4971,751,088,759108,610,07121.4−120,828,02218.8−193,791,29217.9−211,594,25917.7
      Median8,758,230,1141,764,506,411108,688,88321.4−74,747,75019.3−112,374,60518.9−126,622,23318.7
      33rd percentile8,654,208,7081,717,637,920234,414,98422.6174,016,05421.9149,659,93721.6138,471,41821.4
      low asterisk Baseline co-pay rate = 20.4%.
      Co-payrate(%)=Originalcopayment($)+Additionalcopayment($)Totalmedicalexpenditures($).

      Appendix E

      Appendix EEstimated Additional Copayment and Copayment Rate by Scenarios under the Hybrid Grouping Model
      Co-pay reduction programNo co-pay reduction programFor drugs at least 20% lower than the reference priceFor drugs at least 10% lower than the reference priceFor all drugs lower than the reference price
      Change in price and RxLevel of ReimbursementTotal medical expenditures ($)Original Co-payment
      Baseline co-pay rate = 22.9%.
      ($)
      Additional Co-payment ($)Co-pay rate
      Co-payrate(%)=Originalco−payment($)+Additionalco−payment($)Totalmedicalexpenditures($)
      (%)
      Additional co-payment ($)Co-pay rate
      Co-payrate(%)=Originalco−payment($)+Additionalco−payment($)Totalmedicalexpenditures($)
      (%)
      Additional co-payment ($)Co-pay rate
      Co-payrate(%)=Originalco−payment($)+Additionalco−payment($)Totalmedicalexpenditures($)
      (%)
      Additional co-payment ($)Co-pay rate
      Co-payrate(%)=Originalco−payment($)+Additionalco−payment($)Totalmedicalexpenditures($)
      (%)
      Reduce the price by 5% and 10% of Rx ChangedWeighted average2,602,859,645585,411,51442,004,37824.1%-45,105,32720.8%-49,464,36420.6%-90,148,38219.0%
      Mean2,621,735,831580,767,00281,197,76225.2%27,361,71223.2%20,085,62422.9%4,910,72722.3%
      Mean w/o outliers2,635,608,854583,937,48681,201,65425.2%26,938,45823.2%20,790,07522.9%7,276,08922.4%
      Median2,574,735,101570,769,54877,930,43125.2%-19,752,85821.4%-21,570,42121.3%-27,583,55621.1%
      33rd percentile2,551,238,142552,467,090134,496,71626.9%59,129,16624.0%57,921,67423.9%53,984,91923.8%
      Reduce the price by 10% and 20% of Rx ChangedWeighted average2,575,318,901582,713,46726,266,11523.6%-60,843,59020.3%-113,876,91618.2%-147,847,23916.9%
      Mean2,570,863,537576,105,80950,715,64124.4%-3,120,40922.3%-19,676,96421.6%-51,257,60220.4%
      Mean w/o outliers2,578,733,155577,457,72452,671,36924.4%-1,590,85422.3%-16,792,99421.7%-43,819,02220.7%
      Median2,540,256,872568,302,82554,242,76324.5%-43,440,52520.7%-46,654,34220.5%-59,083,43520.0%
      33rd percentile2,505,157,869550,376,49397,561,66425.9%22,195,08622.9%19,165,16722.7%10,467,52622.4%
      Reduce the price by 15% and 30% of Rx changedWeighted average2,513,742,642570,890,77116,407,68723.4%-70,702,01919.9%-184,904,88915.4%-204,112,86814.6%
      Mean2,518,701,046568,488,55231,874,48323.8%-21,961,56721.7%-88,659,69419.1%-104,751,15518.4%
      Mean w/o outliers2,529,983,946570,679,24233,574,31323.9%-20,687,91021.7%-80,202,38419.4%-91,989,29718.9%
      Median2,536,298,711571,548,71236,085,62424.0%-61,597,66520.1%-80,710,28919.4%-87,585,50219.1%
      33rd percentile2,466,365,361547,952,47669,372,90225.0%-5,993,67622.0%-19,075,65121.4%-28,943,80921.0%
      * Baseline co-pay rate = 22.9%.
      Co-payrate(%)=Originalcopayment($)+Additionalcopayment($)Totalmedicalexpenditures($)

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