What do we really know about reference pricing of pharmaceuticals?

Health policy-makers worldwide have adopted different Reference Pricing (RP) systems for pharmaceuticals. Systems may differ concerning their effects on pharmaceutical prices, firms’ strategies, market structure, public and private expenditure, health outcomes and Research and Development (R&D) investments. We present evidence from a recent systematic review of the effects of RP across different systems. Evidence suggests RP successfully decreases drug prices and expenditures in the short-run. Prices drop more where generics have more market power. There is no evidence of negative health effects associated with patients switching between drugs. More research is needed on the long-term effects of RP and its impact on R&D.