Adapting Tools from Other Nations to Slow U.S. Prescription Drug Spending

Policy Analysis Examines Reference Pricing and Comparative-Effectiveness, Cost-Effectiveness Research to Slow Prescription Drug Spending

Media Advisory
Aug. 30, 2012

Alwyn Cassil (202) 264-3484 or

WASHINGTON, DC—Tools commonly used in other developed nations to help slow prescription drug spending growth offer potential lessons for the U.S. health system, according to a new Policy Analysis from the nonprofit, nonpartisan National Institute for Health Care Reform (NIHCR).

Written by Jack Hoadley, Ph.D., a research professor at Georgetown University’s Health Policy Institute, in consultation with the Center for Studying Health System Change (HSC), the policy analysis examines how reference pricing and comparative-effectiveness, cost-effectiveness research might be adapted for a U.S. context.

Outpatient prescription drugs account for about 10 percent—$259 billion in 2010—of total U.S. health spending. Other developed nations typically pay much lower prices for brand-name drugs than the United States. However, health systems in other industrialized nations operate much differently than the U.S. system, according to the analysis.

“With appropriate modifications to fit the U.S. context, both approaches could increase the use of generic drugs and less-expensive brand-name drugs, helping to constrain spending growth. In particular, reference pricing—an approach where a payer sets payment for a group of similar drugs using a benchmark based on a lower-priced option—could increase consumer incentives to select less-expensive alternatives. Similarly, an approach that bases formulary placement and cost-sharing tiers on scientific assessments of the clinical value of competing drugs offers the potential both to increase acceptance of cost management by patients and physicians and to improve health outcomes,” the analysis states.

The Policy Analysis—Adapting Tools from Other Nations to Slow U.S. Prescription Drug Spending—is available online at

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The Center for Studying Health System Change is a nonpartisan policy research organization committed to providing objective and timely research on the nation’s changing health system to help inform policy makers and contribute to better health care policy. HSC, based in Washington, D.C., is affiliated with Mathematica Policy Research.