Klement Podnar, Bojan Molj, and Urša Golob
Executive Summary
The authors review how part of the Slovenian pharmaceutical market was influenced by pharmaceutical reference pricing. In the past decade or so, several European Union countries (Germany, the Netherlands, Sweden, Denmark, Poland, Spain, Italy, and Slovenia), as well as countries in some other parts of the world (New Zealand, Australia, and British Columbia in Canada), have implemented different forms of a reference-pricing system. Pharmaceutical reference pricing differs from that used in marketing theory and refers to a regulation methodology that sets the highest price limit for each particular drug according to all prices in that drug's category. Two forms of reference-pricing systems are the most common: generic and therapeutic. The generic system, which has also been implemented in Slovenia, pertains only to drugs with the same chemical substances (i.e. close substitutes), whereas the therapeutic system pertains to drugs with similar therapeutic effect (i.e. imperfect substitutes).
The aim of this article is to explore the consequences of the implementation of (generic) reference pricing on particular drugs and on particular groups' market shares and prices. To do this, the article begins by discussing the general characteristics of reference-pricing systems. It analyzes selected groups of medicines in which reference pricing has been implemented. After identifying some of the consequences of reference pricing, it describes the results of reference pricing on the Slovenian pharmaceutical market. On the basis of descriptive analysis, the authors argue that the reference-pricing system has caused a dramatic decrease of the market shares of originators on the one hand and an increase in the share of generic drugs on the other hand. The results of the analysis are consistent with the predictions and arguments of several authors.
Reference pricing changed the market structure in the studied groups, which were included in the system of reference pricing. In addition, it lowered prices, mainly because of the presence of generic products, and therefore caused lower-value sales indexes in most studied groups, which indicates savings within the interchangeable drug lists but not among other drugs on positive lists that are not included in the reference pricing.
Although short-term results of the reference-pricing implementation in Slovenia have shown favorable results, some authors argue that the reference-pricing system does not produce the desired effects on national health policies in the long run. Experience from other countries has shown that the only way of securing further savings from reference prices is by defining new product clusters and putting more pressure on generic manufacturers to lower their prices. In addition, Slovenian policy makers are already considering the reference pricing for therapeutic substitutes, which is the system used, for example, in Germany and the Netherlands. However different studies have indicated that therapeutic reference pricing has no stimulative effect on competition between drugs because of imperfect substitution. Thus, policy makers should think carefully about extending the system.
As for particular pharmaceutical manufacturers, the results show that originator manufacturers tend to lose market shares because of reference pricing. With no changes in pricing policies, they are highly likely to continue to lose market share because the number of groups of drugs included in the reference pricing system in Slovenia is rising. Therefore, originator manufacturers may want to consider different pricing policies to retain their market share.
Biography
Klement Podnar received his master's degree and his PhD from the Faculty of Social Sciences at the University of Ljubljana. He is a member of the Marketing Communication and Public Relations Department in the Faculty of Social Sciences at the University of Ljubljana. Currently, he lectures on the topic of Marketing and Visual Communications. He is a member of the editorial board of the International Centre for Corporate Marketing Studies ( Edinburgh, UK). His research interests lie in marketing, corporate communications, and organizational identification. He has published several article in this area. Recent publications include have appeared in Corporate Communications: An International Journal, Journal of Marketing Communications, and European Journal of Marketing.
Bojan Molj is a postgraduate student in the Faculty of Social Sciences at th, University of Ljubljana. He works as a brand manager for the German retailer Hofer. Before this, he worked in marketing department of Lek, a Slovene pharmaceutical firm.
Urša Golob received her PhD from the Faculty of Social Sciences at the University of Ljubljana. She has five years' experience working as a marketing and marketing communications consultant. Currently, she is engaged as a teaching assistant in area if Marketing Management and Consumer Behavior in the Marketing Communication and Public Relations Department with the Faculty of Social Sciences at the University of Ljubljana. Her previous academic positions include teaching in the Marketing Department with the Faculty of Economics at the University of Ljubljana. Her research interests focus on marketing, corporate social responsibility, and corporate communications. Her recent publications have appeared in European Journal of Marketing and Public Relations Review.
Journal of Public Policy & Marketing, Vol. 26, No. 2, Fall 2007
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