The document provides an overview of external price referencing (EPR) in the European pharmaceutical industry, detailing its purpose, key elements, and the impact of EPR on drug pricing strategies. It discusses various pricing measures, the role of different countries in EPR, and the challenges and risks associated with referencing prices across borders. Furthermore, it highlights the responsibility of institutions involved in pharmaceutical pricing and reimbursement and the complexities of implementing EPR effectively in both EU and non-EU countries.

1. External Price
Referencing in Europe
Pharma industry EPR overview, including Non-EU countries
Photo by Matt Briney on Unsplash
Dragan Cirkovic, Nov 2017

2. External Price Referencing
Using the price of a medicine from one or several countries as a
benchmark or reference price in own country;
Purpose
Setting or negotiating the price of a medicine in a given country.
Important elements of EPR:
Basket of reference countries
Price used for referencing/ Price published
Responsible Institution(s)
Calculation algorithm
Nov-17

3. DIRECT PRICING MEASURES:
Local authorities set drug prices following a defined pricing policies:
External Reference Pricing, Value Based Pricing
INDIRECT PRICING MEASURES:
Acts and activities that indirectly influence on manufacturers to reconsider price for approval:
Internal reference pricing, Parallel imports, mandatory discounts and rebates, different
forms of agreements between payers and manufacturers, Drugs interchangeability/ generic
substitution

4. Launch and post launch decisions
Globally:
• Launch sequence adaptation
Regionally/Locally:
• Market Access execution
• Value based pricing
• Procurement strategy
• Cost sharing agreements:
• Price-Volume Agreements
• Financial/Natural Rebates
• Price/Volume Cups
• Performance or outcome based schemes
Pre-launch decisions
• Floor price globally
• Floor price regionally
• Launch sequence strategy
Variables:
• Reimbursement / Market Access
• Demand analyses
• Distribution
• Product positioning
• Competitive intelligence/landscape
• Market Segmentation
• Patent expiration
• Parallel trade analyses
• Reference pricing impact
Basic decisions before and after Launch

5. EPR ELEMENTS
 Basket of reference countries
 Price used for referencing/ Price published
 Calculation algorithm
 Responsible Institution(s)
Nov-17

6. Basket of Reference Countries
In the beginning, two main criteria's:
 Economic comparability
 Geographic Comparability
With years, baskets became larger and larger:
Nine countries > 20 members in the basket and
some (Poland/Hungary) have 31 countries to
compare price with…
Countries with highest Reference frequency (most often in the basket):
France (20)
Germany (19)
Slovakia, Italy, Spain (18 times in the basket)

7. AT, Austria; BE, Belgium; BG, Bulgaria; CH, Switzerland; CY, Cyprus; CZ, Czech Republic; DE, Germany; DK, Denmark; EE, Estonia; EL, Greece; ES, Spain; FI, Finland; FR, France; HR, Croatia; HU, Hungary; IE, Ireland;
IS, Iceland; IT, Italy; LT, Lithuania; LU, Luxembourg; LV, Latvia; MT, Malta; NL, the Netherlands; NO, Norway; PL, Poland; PT, Portugal; RO, Romania; SE, Sweden; SI, Slovenia; SK, Slovakia; UK, United Kingdom; AL, Albania;
BH, Bosnia; MC, Macedonia; MG, Montenegro; RU, Russia; SR, Serbia; TR, Turkey; UKR, Ukraine.
NON
EU
N. of countries
in the basket AT BE BU CH CY CZ DE DK EE EL ES FI FR HR HU IE IS IT LT LU LV MT NL NO PL PT RO SE SI SK UK AL BH MC MG RU SR TR UKR Add. countries
AT 24
BE 26 Country of origin
BU 12
CH 6
CY 4
CZ 19
DE 15
DK 9
EE 4 Country of origin
EL 22
ES 16 Eurozone but not
FI 29 Liechtenstein
FR 4
HR 3
HU 31 Liechtenstein
IE 9
IS 4
IT 27
LT 8
LU 1 Country of origin
LV 7
MT 11 Public sector
NL 4
NO 9
PL 31 Liechtenstein
PT 3
RO 12
SE n/a
SI 3
SK 27
UK n/a
AL 3
BH 3 Austria, Italy
MC 12
MG 3
RU 21
+ Country of origin,
Belarus, Kazakhstan
SR 3 Country of origin
TR 7
+ Country of origin and
Country of relaese
UKR 5
AT BE BU CH CY CZ DE DK EE EL ES FI FR HR HU IE IS IT LT LU LV MT NL NO PL PT RO SE SI SK UK AL BH MC MG RU SR TR UKR
Ref. frequency 16 16 11 3 10 15 19 16 12 17 18 15 22 9 14 14 3 18 14 9 12 8 17 6 13 15 11 13 17 18 18 1 1 3 2 1

8. Price referencing, although started in EU Member states, is nowadays
accepted by most of the Non-EU countries.
EPR situation in Non-EU countries is still “fragile” and changes can be
expected, as national institutions are still in pursue of method that will
grant lowest prices and/or method that will grant special price for large
markets (e.g. Ru/Tr)
In EU countries, change comes more in a form of creative cost-sharing
agreements than changes in pricing policies.
Basket of Reference Countries

9. Price used for referencing/ Price published
From each reference country, price collection from Official
Price register/ catalogue/ list
Official price list: Manufacturers, Wholesaler or Retail price,
depending on the country
Products to compare either by Brand or INN, with same or
similar formulation
Price calculation based on all available referent prices: 1.
average of some or all ref. prices, 2. lowest among some or
all ref. prices, 3. other method
Price collected either my
Manufacturer / MA holder or
by authorities
Influenced by price
conversion, rebates
calculation and currency
conversions

10. Calculation algorithm
Basic price calculation:
1. average of some or
all ref. prices,
2. lowest among some
or all ref. prices
Other variables* in the price equation:
- Package size, dose strength, form of administration
and dispensation modalities
- Original or Generic drug
- If Generic, number of Generic substitutions
- Orphan/innovative drug
- Reimbursement status
- Domestic producer with same INN
- Currency conversion
- Other
*All listed variables are defined as special cases in local pricing
policies

11. Responsible institutions
Which institutions are responsible for determining “benefit” and “value” of
pharmaceuticals?
• Most usually these are Ministry (of Health, Economy, Social Affairs) and/or HIF.
• Several countries developed Institutes/working groups (independent or part of
MoH) dealing only with pricing/reimbursement
Project that is gathering most of responsible institutions – PPRI (Pharmaceutical
Pricing and Reimbursement Information) started as a an initiative in 2004.
PPRI today collects more than 70 institutions - competent authorities for
pharmaceutical pricing and reimbursement from 41 countries
Source:
WHO-Health Systems in Transition

12. country
Drug
Agency
Ministry SHI NHS Other country
Drug
Agency
Ministry SHI NHS Other
Albania X Lithuania X X
Austria X X X Luxemburg X X
Belgium X Macedonia X
Bulgaria X Malta X
Canada X Moldova X
Croatia X Netherlands X
Cyprus X Norway X X X
Czech Republic X X Poland X
Denmark X X Portugal X
Estonia X Romania X
Finland X X Serbia X X
France X X Slovakia X X
Germany X X Slovenia X X X
Greece X X X South Africa X
Hungary X X South Korea X X
Iceland X X Spain X X
Ireland X X X Sweden X
Israel X Switzerland X
Italy X Turkey X
Latvia X Ukraine X
United Kingdom X
NHS=National Health Service,
SHI=Social Health Insurance,
National competent authorities for pharmaceutical pricing and reimbursement represented in the PPRI network.
Ministry (Health, Economy, Social Affairs, depends from country)
Others: State-owned research institutions, HTA agencies, procurement agencies.
source: S.Vogler et al

13. Responsible institutions in some countries
Nov-17
Source:
WHO-Health Systems in Transition

14. What could possibly go wrong with
referencing?

15. Differential
pricing
Parallel trade
Launch
sequence
strategy
Differential pricing: strategy of selling the same medicines to different
countries, according to their ability to pay, at different prices’ even
though costs are the same (Tiered pricing or Ramsey pricing)
Parallel trade consists of buying pharmaceutical products in one EU
Member State and selling them in another at a higher price, thus
making a profit from the price difference between the export
country and the import country.
Launch sequence strategy: Launch models aimed at managing the
sequence of introduction of new drugs in different countries to
minimize the negative impact

16. Launch sequence strategy example
Starts with Stage1 and price registration in “unregulated” markets like Germany and UK:
• Higher initial price set by manufacturer can be used as reference for second stage
• Good price for some of the biggest markets globally, no risk of parallel trade or price referencing from low price markets
Stage2 is price registrations in other markets where German
and UK price can be used either as reference or for higher
price negotiations.
Third Stage is price registration in so called “low price”
markets. Here we have two possibilities that can be used
separately or in combination:
• Use already registered higher prices as reference
• Register price for package different than package registered in
markets from first two stages
Main issue: postponed access to latest therapy for patients
on low price markets

17. Other possible issues
• Reduce price transparency (closed door agreements)
• Circular referencing of two or more countries lead to price decrease due to
external factors
• Inaccurate mandatory margins calculation out of reference prices
• Currency fluctuations/conversions
• “Compulsory licensing” - a legal form of patent infringement is
reconsidered in low price markets (either due to high price or missing
therapy)

18. CAN WE PROVIDE THERAPY ACCESS
TO ALL PATIENTS AND COMPLY WITH
LOCAL PRICING POLICIES AT THE
SAME TIME?
Nov-17

19. Risk sharing agreements
• Direct agreements between Manufacturers and Authorities
• Benefits:
• Providing latest therapy to all patients
• Keeping the official (visible) price on higher level
• Disadvantage
• Lack of price transparency makes Price Referencing irrational
Examples:
• Price Volume agreements with paybacks by companies (France)
• General discount system – manufacturers return % of annual sales to MoH (Spain)
• Clawback tax, MoH calculates quarterly % of sales to be returned as tax to MoH – reimbursement drugs
(Romania)
• Profit Margin regulated – not to exceed predefined level (otherwise manufacturers pay back the difference or
reduce the price for the following year (UK)

20. Additional resources
• The WHO Collaborating Centre for Pharmaceutical Pricing and
Reimbursement Policies
• WHO Country Policies
• Rand corporation Pharma pricing
• Pharmaceutical Market Access in Emerging markets
• WHO-Health Systems in Transition
• ISPOR global Health Care Systems Road map

21. Contact me:
dragan.cirkovic@gmail.com
www.linkedin.com/in/dragancirkovic