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.