U.S. Health Plans Considering Drug Pricing System Used in Europe, Canada

The Wall Street Journal on March 26 examines a commonly used practice in Europe and Canada to lower drug costs known as reference pricing or "therapeutic MAC," or maximum allowable cost. Therapeutic MAC systems group drugs by the medical conditions they treat, and then health plans decide the maximum amounts they will pay for medicines in each group. The Journal reports that in British Columbia, which uses the system for its government-sponsored health plan for the elderly, the reference price is set based on the price of the least costly generic drug in each class. Reference prices also could be based on the average cost of medicines in each class, the Journal reports. Health plan members who opt to use less-expensive drugs can pay little or no out-of-pocket costs, while those who choose more expensive, brand-name drugs must pay the difference between the reference price and the actual price. Many U.S. health plans use different strategies to lower drug costs, the Journal reports. For instance, some plans employ a three-tiered copayment system under which generic drugs generally cost plan members the least; most major employers and health plans use pharmacy benefit managers to administer their prescription drug benefits; and many health plans offer lower copays to encourage members to use less-expensive drugs. Reference pricing is a "bit more aggressive" than those tactics, the Journal reports. Health plans such as Aetna, Humana and Wellpoint Health Networks are investigating the pricing method and could implement it by 2004 or 2005, the Journal reports. Paul Ginsburg, a health economist with the Center for Studying Health System Change, said that reference pricing "is all part of a general movement to make consumers more accountable and by using financial incentives, get them to make more economical choices." However, critics say that reference pricing can be "complex to administer and require a lot of explaining to employees," the Journal reports (Bennett, Wall Street Journal, 3/26).