Cross-national drug price comparisons with economic weights in external reference pricing in Germany

Background: Since 2012, the pharmaceutical reimbursement legislation in Germany has been applying external reference pricing that uses country-specific economic weights for foreign prices. However, the law does not specify technical details. Therefore, we develop a proposal how national income weights can be taken into consideration.

Areas covered: We develop weighting schemes that draw on gross domestic product per capita and adjust for purchasing power parities, and exchange rates. In a second step, we populate the weighting schemes with economic data as well as with the price data for a pharmaceutical product (abiraterone acetate). Weighting the price of abiraterone acetate by gross domestic product per capita indicates potential price differentials of up to 43 percentage points across European prices in the German basket.

Expert commentary: The weighting of foreign pharmaceutical prices by economic indicators, i.e. gross domestic product per capita, can capture economic differences across countries. It would also allow for differential Ramsey pricing which might foster innovation.