OBJECTIVES: We aimed to present the characteristics and challenges of the external reference pricing (ERP) from the perspective of Slovenia. METHODS: The literature search was made for the information on ERP in countries included in the Slovenian country basket and countries that refer Slovenia. The data on characteristics of the ERP such as country basket composition, calculation of the reference price, scope of medicines, type of comparable price and use of the ERP as main or supportive criterion were taken into account. RESULTS: Slovenia defines medicine prices based on the prices in Austria, Germany and France, while 17 countries refer Slovenia. Slovenia’s greatest potential impact concerns the medicine prices in Croatia, Bosnia, Serbia and Portugal that refer only three countries. Their calculation method is an average price of reference countries, indicating that the role of Slovenia is not as large as it could be if the calculation method was the lowest price or the average of lowest three prices in reference countries. However, Slovenia does not have a greater role in countries calculating reference price as the lowest price or the average of the three lowest prices, while most of those countries refer 20 or more countries and Slovenia is not necessary the country with the lowest medicine price. The ERP represents a special challenge for countries as Slovenia that do not represent a large medicines market and try to reduce medicine costs to a greater extent than others with potential risk of medicines withdrawal. Slovenia does not have a direct impact on medicine prices in countries using ERP as supportive criterion. Further, Slovenia and Austria refer each other, representing an overlapping connection. CONCLUSIONS: The small pharmaceutical market and potentially large impact on the prices of medicines in other countries places Slovenia in a special position.