• All Topics
  • Health Technology Assessment (HTA)
  • Antimicrobial Resistance (AMR)
OHE OHE
Newsletter SignupSubscribe

News & Insights
  • News
  • Events
  • Insights
  • Bulletin
  • News
  • Events
  • Insights
  • Bulletin

News & Insights

  • News
  • Events
  • Insights
  • Bulletin
Newsletter SignupSubscribe
  • News
  • Events
  • Insights
  • Bulletin

Close
OHE OHE
  • Research & Publications
  • News & Insights
  • Education
  • Innovation Policy Prize
  • Events
  • About Us
  • OHE Experts
  • Contact Us
Newsletter SignupSubscribe

Research & Publications

All Publications

Filter by:
  • Antimicrobial Resistance (AMR)
  • Biosimilars
  • Cell and Gene Therapies
  • Chronic Diseases
  • Combination Therapies
  • COVID-19 Research
  • Digital Health
  • Drug Development/R&D
  • Emerging Markets
  • EQ-5D and PROMs
  • Health Care Systems
  • Health Data and Statistics
  • Health Technology Assessment
  • Precision Medicine
  • Real-World Evidence
  • Use of Medicines
  • Value-Based Pricing
  • Vaccine Research
  • Economics of Innovation
  • Measuring and Valuing Outcomes
  • Policy, Organisation and Incentives in Health Systems
  • Value, Affordability and Decision Making

News & Insights

  • News
  • Events
  • Insights
  • Bulletin

Education

  • Education Hub
  • OHE Graduate School
  • EVIA Programme
  • IRA Programme

Innovation Policy Prize

  • The Prize Fund
  • 2022 Prize Fund

Latest Research & Publications

  • Health Technology Assessment…
  • Israel

NICE enough? Do NICE’s Decision Outcomes Impact International HTA Decision-making?

andrew-butler-aUu8tZFNgfM-unsplash
Read more
  • Health Technology Assessment…
  • Value, Affordability, and…
  • Gene therapies

Are Recommendations for HTA of Gene Therapies Being Achieved?

cover 3
Read more
  • Chronic Diseases
  • Value, Affordability, and…
  • Dermatology

The Burden of Hidradenitis Suppurativa on Patients, the NHS and Society

jakob-braun-HfOOKAPsE28-unsplash
Read more
  • Digital Health
  • Economics of Innovation
  • Mental Health

Dementia in the UK: Estimating the Potential Future Impact and Return on Research Investment

image option 1
Read more
  • Precision Medicine
  • Economics of Innovation

The Case for Expanding Uptake of Next-Generation Sequencing for Lung Cancer in Europe

NGS report_AdobeStock_406823942_portrait
Read more
  • Antimicrobial Resistance (AMR)
  • Economics of Innovation

A Novel Incentive Model for Uptake of Diagnostics to Combat Antimicrobial Resistance

Roche AMR diangostics_national-cancer-institute-2fyeLhUeYpg-unsplash_portrait
Read more
  • Health Technology Assessment…
  • Value, Affordability, and…
  • Pricing and Reimbursement

Real-World Evidence: Current Best Practice for Reimbursement Decision-Making

RWE_clay-banks-b5S4FrJb7yQ-unsplash_portrait
Read more
  • Value-Based Pricing
  • Economics of Innovation
  • Pricing and Reimbursement

Delivering the Triple Win: A Value-Based Approach to Pricing

Triple_Win_AdobeStock_249059909_portrait_v2
Read more
Close
OHE
  • All Publications

    Filter by:
    • Antimicrobial Resistance (AMR)
    • Biosimilars
    • Cell and Gene Therapies
    • Chronic Diseases
    • Combination Therapies
    • COVID-19 Research
    • Digital Health
    • Drug Development/R&D
    • Emerging Markets
    • EQ-5D and PROMs
    • Health Care Systems
    • Health Data and Statistics
    • Health Technology Assessment
    • Precision Medicine
    • Real-World Evidence
    • Use of Medicines
    • Value-Based Pricing
    • Vaccine Research
    • Economics of Innovation
    • Measuring and Valuing Outcomes
    • Policy, Organisation and Incentives in Health Systems
    • Value, Affordability and Decision Making
    • News
    • Events
    • Insights
    • Bulletin
    • Education Hub
    • OHE Graduate School
    • EVIA Programme
    • IRA Programme
    • The Prize Fund
    • 2022 Prize Fund
  • Events
  • About Us
  • OHE Experts
  • Contact Us
Newsletter SignupSubscribe
Back
  • News
11 min read 2nd March 2011

Differential Pricing – A Win-Win Solution?

Summarised in this post is a just-released OHE Occasional Paper that examines the potentially positive impact of differential pricing in Europe and the overall negative effects of international reference pricing (IRP) measures. Increasing financial difficulties in some European Union  Members…

Share:
  •  Twitter
  •  LinkedIn
  •  Facebook
  • has-icon Email
euflags6-29-10

Summarised in this post is a just-released OHE Occasional Paper that examines the potentially positive impact of differential pricing in Europe and the overall negative effects of international reference pricing (IRP) measures.

Flags of the EU

Increasing financial difficulties in some European Union  Members States has led to greater use of international reference pricing (IRP), whereby prices in one country are established based on the price in one or more other countries.  Countries with both lower incomes (e.g., Greece) and higher incomes  (e.g., Germany) introduced new IRP measures in 2010. The EU Commission is facilitating the exchange of information on prices in EU Member States in support of IRP.

Does International Reference Pricing Work?

Although IRP may indeed reduce prices and costs to the health system in the short term, its full impact is far from positive. As the authors point out, ‘the policy provides an incentive to companies to delay launch [of a new product] in low price countries until higher prices have been established elsewhere’ thus delaying access by patients to new medicines. In extreme cases, companies may decide to not market a medicine at all in a particular country when a low price there would pull down prices in other countries through IRP.

Moreover, companies may strive to negotiate higher prices in lower-price countries than they would if the impact of IRP on prices elsewhere was not a concern. As a result, because of IRP, lower price countries may actually pay more relative to income than do higher price countries.

Finally, lower prices mean less income for pharmaceutical companies, translating ultimately into less investment in innovation. The authors note that IRP ‘will have a negative impact on incentives for R&D and ultimately will reduce the availability of innovative products for all EU citizens and the competitiveness of Europe in bioscience’.

Is Differential Pricing a Solution?

IRP drives price toward a single, uniform price. That provides incentives for companies to set this price high and sell the product only in the richer segments of the European market. Differential pricing assumes that consumers should not all pay the same prices, but pay according to ability to pay. This allows companies to sell at lower prices in lower income markets. The result is to allow patients the earliest possible access to new medicines while providing the revenues essential to increasing investment in R&D, which also helps strengthen the bioscience base in Europe.

According to the authors, transferring low prices from low income countries to high income countries through arbitrage (e.g., parallel trade) or copying other countries’ prices (through IRP) undermines differential pricing.  A dialogue about how best to implement differential pricing across the EU is essential, they argue, building on the 2010 report by the Belgian Presidency of the EU that endorsed differential pricing as a way to ensure equity in access to medicines across the EU.

Download Garau, M., Towse, A. and Danzon, P.  (2011) Pharmaceutical pricing in Europe: Is differential pricing a win-win solution? Occasional Paper 11/01.  London: Office of Health Economics.

  • Economics of Innovation
  • Innovation

Related News

NGS report_AdobeStock_406823942_landscape
  • News
  • July 2023

NGS testing for lung cancer across Europe still limited, despite clear case for adoption

Read more
IRA-course-graphic-for-website-news-FINAL-1
  • News
  • May 2023

New free educational program launched – Explaining the U.S. Inflation Reduction Act

Read more
Prize event
  • News
  • January 2023

Professor Aidan Hollis wins first £40,000 OHE Policy Innovation Prize

Read more
  • News
  • October 2020

Opportunities to Increase Efficiency in Healthcare

Read more
footer_ohe_logo

Leading intellectual authority on global health economics

Sign Up for OHE Insights, Events & News Bulletin

Newsletter SignupStart Sign Up

Research & Publications

News & Insights

Innovation Policy Prize

Education

Events

About Us

OHE Experts

Contact Us

Sign Up for OHE Insights, Events & News Bulletin

Newsletter SignupStart Sign Up

The Office of Health Economics (OHE) is a company limited by guarantee registered in England and Wales (registered number 09848965) and its registered office is at 2nd Floor Goldings House, Hay’s Galleria, 2 Hay’s Lane, London, SE1 2HB.

Terms & Conditions

Privacy Policy

Cookies Policy

© 2023 Website Design

An error has occurred, please try again later.An error has occurred, please try again later.

We are using cookies to give you the best experience on our website.

You can find out more about which cookies we are using or switch them off in .

 Twitter
 Facebook
 LinkedIn
 Copy
 Email
Powered by  GDPR Cookie Compliance
Privacy Overview

This website uses cookies so that we can provide you with the best user experience possible. Cookie information is stored in your browser and performs functions such as recognising you when you return to our website and helping our team to understand which sections of the website you find most interesting and useful.

Strictly Necessary Cookies

Strictly Necessary Cookie should be enabled at all times so that we can save your preferences for cookie settings.

If you disable this cookie, we will not be able to save your preferences. This means that every time you visit this website you will need to enable or disable cookies again.

3rd Party Cookies

This website uses Google Analytics to collect anonymous information such as the number of visitors to the site, and the most popular pages.

Keeping this cookie enabled helps us to improve our website.

Please enable Strictly Necessary Cookies first so that we can save your preferences!