Skip to main content

Reference Pricing Lowers Spend, Eventually Decreases Cost-Sharing

February 14, 2020

A study published in JAMA Network Open found that the implementation of reference pricing was associated with the lowest-cost prescriptions in each therapeutic class, reductions in overall employer health spend, and an eventual decrease in employee cost-sharing.

Reference pricing is a relatively new practice in the United States, more commonly implemented in Europe. Under the common approach, pharmacy benefit managers (PBMs) assign individual drugs to one of the many tiers within their contracted formularies, usually based on the drug’s price. Generic drugs typically are assigned to the first tier, branded drugs that offer substantial rebates are assigned to the second tier, and branded drugs that offer little to no rebates are assigned to the third tier. Pharmacists are authorized by PBMs to automatically substitute cheaper therapy options—generic for branded medication, for example.

Previous studies on reference pricing reported similar results with the exception of an increase in consumer cost-sharing because some physicians continued to prescribe and some patients continued to use more expensive products. The current study was designed to investigate the persistence of that association over time, adding 3 years to the postimplementation follow-up period.

James C. Robinson, PhD, University of California School of Public Health, Berkeley and colleagues used data from 1.2 million drug claims obtained from the Reta Trust, a health care purchasing alliance of Catholic organizations, and a random sample of 2.1 million claims from the California Public Employees’ Retirement System (CalPERS).

In the first 2.5 years after reference pricing implementation, low-cost prescriptions in each therapeutic class increased by 5.1 percentage points, patient cost-sharing initially increased by 10.3%, and overall spend decreased by 19.1%.

After the new study’s subsequent 2-year postimplementation period, low-cost prescriptions increased by an additional 6.2 percentage points, patient cost-sharing decreased by 21.3%, and prices paid increased by 7.2%.

The researchers added that during the study period, the share of prescriptions for lower-priced drugs increased by 6.3 percentage points (8.9% relative increase), the mean prescription drug price decreased by $9.5 (12.1% relative decrease), and the mean patient cost-sharing decreased by $1.8 (4.3% relative decrease).

The initial rise in cost-sharing can be attributed to a lag in physician and patient response, according to the researchers. While the results suggest that reference pricing has significant benefits for both employers and patients, much of its success is reliant on their acclimation to the process.

—Edan Stanley


Robinson J, Whaley C, Brown T, et al. Physician and patient adjustment to reference pricing for drugs [published online February 5, 2020]. JAMA Netw Open. 2020;3(2):e1920544. doi:10.1001/jamanetworkopen.2019.20544.



Back to Top