What impact would International Reference Pricing have in the US?

The Trump Administration recently “floated” four executive orders designed to lower US drug pricing. While the methodology is unclear, it seems likely that international reference pricing (IRP) may be used. 

MME looked at the implications of using IRP from two prior proposals; one based on a ‘most favored nation’ approach and another capping drug prices at 120% of the average price in Australia, Canada, France, Germany, Japan, and the United Kingdom.

To assess the potential global impact, we conducted an analysis of 10 leading Medicare Part B drugs. The criteria used to select the drugs for analysis were:

  • Medicare Part B drugs with >$100M total of 2017 spending 
  • Single source drugs approved after January 2010 (no generics or biosimilars as of December 2019)
  • Vaccines, immunoglobulins, blood products were excluded
  • Drug price data available in the US and 6 reference markets (ex-factory prices analyzed in all countries; reimbursed price used in Japan; ASP included for the US) as of August 10, 2020

Overall price declines based on these methods are summarized in the table below:

MethodologyMFN120% Cap
 Avg.RangeAvg.Range
At launch58%33% to 80%30%10% to 67%
Currently65%40% to 88%42%19% to 78%

Management of the global price corridor, along with visible and negotiated prices will be critical for manufacturers if these approaches continue to be pursued. It will also be key to monitor proposed methodologies and which price level is referenced, given these can vary substantially amongst countries based on their individual margins. If enacted, the impact would be substantial both within and outside the US with major implications for global pricing strategies and launch decisions.

We are extending an invitation to a virtual meeting to talk through this analysis and how it translates to actionable preparation strategies for your product. Contact us today to schedule a meeting to discuss how we can help.

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