The Impact of Reference Pricing of Nonsteroidal Anti-Inflammatory Agents on the Use and Costs of Analgesic Drugs


  • Paul V. Grootendorst,

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    • Address correspondence to Paul V. Grootendorst, Ph.D., Faculty of Pharmacy, University of Toronto, 19 Russell St., Toronto, ON, Canada M5S 2S2. Dr. Grootendorst, John K. Marshall, M.D., M.Sc., FRCPC, Anne M. Holbrook, M.D., PharmD, M.Sc., FRCPC, Lisa R. Dolovich, M.Sc., PharmD, Bernie J. O'Brien, Ph.D., (deceased, formerly of) and Adrian R. Levy, Ph.D., are with the Centre for Evaluation of Medicines, St. Joseph's Hospital, Hamilton ON, Canada. Drs. Grootendorst and Dolovich, are with the Faculty of Pharmacy, University of Toronto, Toronto, ON, Canada. Dr. Grootendorst is also with the Department of Economics, McMaster University, Hamilton ON, Canada. Drs. Marshall and Holbrook, are with the Department of Medicine, McMaster University, Hamilton ON, Canada. Drs. Holbrook and O'Brien, Ph.D., (deceased, formerly of), are with the Department of Clinical Epidemiology and Biostatistics, McMaster University, Hamilton ON, Canada. Dr. Dolovich, is with the Department of Family Medicine, McMaster University, Hamilton ON, Canada. Dr. Levy, is also with the Department of Health Care and Epidemiology, University of British Columbia, BC, Canada.

  • John K. Marshall,

  • Anne M. Holbrook,

  • Lisa R. Dolovich,

  • Bernie J. O'Brien,

  • Adrian R. Levy


Objective. To estimate the effect of reference pricing (RP) of nonsteroidal anti-inflammatory drugs (NSAIDs) on drug subsidy program and beneficiary expenditures on analgesic drugs.

Data Sources/Study Setting. Monthly claims data from Pharmacare, the public drug subsidy program for seniors in British Columbia, Canada, over the period of February 1993 to June 2001.

Study Design. RP limits drug plan reimbursement of interchangeable medicines to a reference price, which is typically equal to the price of the lowest cost interchangeable drug; any cost above that is borne by the patient. Pharmacare introduced two different forms of RP to the NSAIDs, Type 1 in April 1994 and Type 2 in November 1995. Under Type 1 RP, generic and brand versions of the same NSAID are considered interchangeable, whereas under Type 2 RP different NSAIDs are considered interchangeable. We extrapolated average reimbursement per day of NSAID therapy over the months before RP to estimate what expenditures would have been without the policies. These counterfactual predictions were compared with actual values to estimate the impact of the policies; the estimated impacts on reimbursement rates were multiplied by the postpolicy volume of NSAIDS dispensed, which appeared unaffected by the policies, to estimate expenditure changes.

Principal Findings. After Type 2 RP, program expenditures declined by $22.7 million (CAN), or $4 million (CAN), annually cutting expenditure by about half. Most savings accrued from the substitution of low-cost NSAIDs for more costly alternatives. About 20 percent of savings represented expenditures by seniors who elected to pay for partially reimbursed drugs. Type 1 RP produced one-quarter the savings of type 2 RP.

Conclusions. Type 2 RP of NSAIDs achieved its goal of reducing drug expenditures and was more effective than Type 1 RP. The effects of RP on patient health and associated health care costs remain to be investigated.