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    Original Investigation
    Health Policy
    February 5, 2020

    Physician and Patient Adjustment to Reference Pricing for Drugs

    Author Affiliations
    • 1University of California School of Public Health, Berkeley
    • 2RAND Corporation, Santa Monica, California
    • 3Department of Medicine, University of California School of Medicine, San Francisco
    • 4San Francisco Veterans Affairs Medical Center, San Francisco, California
    JAMA Netw Open. 2020;3(2):e1920544. doi:10.1001/jamanetworkopen.2019.20544
    Key Points español 中文 (chinese)

    Question  Is reference pricing in employment-based health insurance associated with prescribing lower-priced drugs, and is this prescribing practice associated with reductions in cost sharing by patients?

    Findings  In this economic evaluation of 3.3 million drug insurance claims, after implementation of reference pricing, physicians increased the prescription of the low-cost drugs within each therapeutic class, and this increase was associated with a reduction of prices paid by employers and cost sharing paid by employees.

    Meaning  Reference pricing may shift the mix of drugs dispensed from those offering the highest rebates to the pharmacy benefit manager to those offering the lowest prices to the employer and employee.


    Importance  Reference pricing has been shown to reduce drug spending in Europe and has been adopted by some employers and labor unions in the United States. Its association with patient cost sharing depends on whether and how quickly physicians adjust their prescribing patterns to favor the least costly alternatives within each therapeutic class.

    Objective  To examine whether the implementation of reference pricing is associated with physicians and patients shifting to lower-cost drugs, thereby reducing consumer cost sharing and the prices paid by employers.

    Design, Setting, and Participants  This economic evaluation included employees of Catholic organizations who purchased health insurance through the Reta Trust and a random sample of employees of public sector organizations who purchased insurance through the California Public Employees’ Retirement System (CalPERS) as a comparison group between July 1, 2010, and December 31, 2017. Data analysis was performed from January 1, 2019, to September 1, 2019.

    Exposures  The Reta Trust implemented reference pricing in July 2013; CalPERS did not adopt reference pricing during the study period.

    Main Outcomes and Measures  Probability that the drug prescribed was the least costly alternative within its therapeutic class, price paid per prescription, and patient cost sharing per prescription. Multivariable, difference-in-differences regression analysis of drug insurance claims was performed for patients before and after implementation of reference pricing, adjusted for patient characteristics, each drug’s therapeutic class, and the month and year of the prescription.

    Results  During the study period, a total of 1.2 million prescriptions were submitted by 34 319 individuals covered by Reta Trust and 2.1 million prescriptions were submitted by 738 159 individuals covered by CalPERS. In the first 2.5 years after implementation of reference pricing, the percentage of prescriptions made for the low-priced drug within each therapeutic class increased by 5.1 percentage points (95% CI, 1.8 to 8.4 percentage points), patient cost sharing increased by 10.3% (95% CI, −1.6% to −23.6%; this difference was not statistically significant), and prices paid decreased by 19.1% (95% CI, −30.2% to −6.2%) for Reta Trust patients compared with CalPERS patients. During the subsequent 2-year postimplementation period, the percentage of prescriptions made for the low-priced drug increased an additional 6.2 percentage points (95% CI, 2.3 to 10.1 percentage points), patient cost sharing decreased by 21.3% (95% CI, −31.2% to −9.9%), and prices paid increased by 7.2% (95% CI, −12.6% to 31.4%; this difference was not statistically significant). Relative to the change experienced by the CalPERS population, 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).

    Conclusions and Relevance  In this study, reference pricing was associated with a combination of lower prices paid by employers and lower cost sharing by employees but with a time lag in prescribing habits by physicians.