Using External Reference Pricing In Medicare Part D To Reduce Drug Price Differentials With Other Countries

So Yeon Kang, Michael J. DiStefano, Mariana P Socal, Gerard F Anderson

Research output: Contribution to journalArticle


Many countries use external reference pricing to help determine drug prices. However, external reference pricing has received little attention in the US-perhaps because the US is often the first adopter of drugs. External reference pricing could be used to set prices for drugs that were already established in the market. We compared the price differentials between the US and the UK, Japan, and Ontario (Canada) for single-source brand-name drugs that had been on the market for at least three years. We found that the prices averaged 3.2-4.1 times higher in the US after rebates were considered. The price differential for individual drugs varied from 1.3 to 70.1. The longer a drug remained on the market, the greater the differential. The estimated savings to Medicare Part D of adopting the average price of drugs in the reference countries was $72.9 billion in 2018. Medicare could use external reference pricing in Part D to improve affordability for patients.

Original languageEnglish (US)
Pages (from-to)804-811
Number of pages8
JournalHealth affairs (Project Hope)
Issue number5
Publication statusPublished - May 1 2019



  • Branded drug pricing
  • Comparative drug pricing policy
  • Drug pricing policy reform
  • External Reference Pricing
  • International Pricing Index
  • Medicare Part D
  • Pharmaceutical policy
  • Prescription drug pricing

ASJC Scopus subject areas

  • Health Policy

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