OBJECTIVES: Many countries use External Reference Pricing (ERP) – also known as International Reference Pricing (IRP) – to set the price of medicines. The formula used to set the price in the referrer country in relation to price of the same medicine in a basket of reference countries is one of the most important elements of the ERP system. This study aims to assess the variation in formula use globally.

METHODS: The IRP systems of 70 countries were examined using the GlobalData IRP 360 country profiles and IRP Matrix. Countries were split into groups based on their ERP formula archetype.

RESULTS: Referencing the lowest price among the basket of reference countries is still a popular formula – currently used by 22.9% of countries. An additional 12.8% of countries reference the Nth lowest or the average of N lowest prices. Some 31.4% reference the average, 1.4% – the median, and 2.9% – the highest. An astounding 12.8% of countries have dual formulas, meaning that a different formula would apply to different drug types or in case the price is calculated from neighbouring vs developed countries in the reference basket. Another 7.2% use formulas including “or”: for example, the average/median from the basket of reference countries or the price in a specific country, whichever of the two is the lower/average. For two other countries the formula is unspecified. Just one country sets its reference price under ERP at a percentile of the available prices. Notably, one country applies a different, more punitive, formula for drugs with a waiver from pharmaco-economic evaluation.

CONCLUSIONS: Formulas used the calculate the price under ERP are increasingly complex, with a significant proportion of countries applying a different formula for different therapeutic areas or for domestically produced originator medicines. Departure from referencing the lowest price improves alignment with ERP best practice guidelines.