OBJECTIVES: In Egypt, the Ministry of Health and Population (MOHP) sets pharmaceutical prices from ex-factory to retail. In July 2012, the pricing policy changed from a cost plus to an external reference pricing method which was effective in October 2012. Our goal was to quantify the policy change impact on retail prices in pharmacies. METHODS: We used MOHP lists and IMS data to pre-identify products with price changes. Purchase and sales data were obtained from a chain pharmacy in Alexandria for all transactions pre- and post- the policy change (April - Jun 2012 and 2013) to identify additional products and to validate the MOHP and IMS data. Changes in price per unit and per daily defined dose (DDD) were calculated. RESULTS: A total of 205 products were subject to price changes, 70% were generics and 36% were essential drugs. The main therapeutic classes represented by the products were anti-infectives 15%, cardiovascular 14%, hair products 12%, vaginal-antiseptic 10%, psychotropics 8%, blood products 7% and analgesics 6%. Half of the products were produced by domestic private companies, 27% by multinational firms, 21% by state-owned companies and 2% were imported. Overall, the average price per physical unit increased by 53% (54% per DDD) for the affected products. The average prices per physical unit and price changes after the policy varied significantly by manufacturer type: 1.8 EGP (0.26 $USD) for drugs produced by state-owned companies increased by 238%, 2.3 EGP for domestic-private company products increased by 10%, 13 EGP for multinationals products decreased by 6%, and 41 EGP for imported products increased by 13%. CONCLUSIONS: Switching to a referent price policy for pharmaceuticals resulted in considerable percentage increase, on average, for products where a price change occurred. However, the nominal effect was attenuated because the biggest proportional changes occurred on the lowest cost drugs.