The impact of reference pricing system on brand name’s prices : the case of Tunisia

Many policies are planned to face the increasing rate in health costs. In such circumstances and in order to reduce the pharmaceutical expenses, Tunisia adopted a reform of Health Insurance System. We study the effect of the introduction of reference pricing on pharmaceuticals’ price. In this study we use data for four molecules from IMS Health database. The data span from the third quarter 2002 to fourth quarter 2008. First, we study competition effect on brand-names’ price and generic one. We find that the brand name price’s drop is more important than the average price of generic. Then, we examine the effect of the introduction of reference pricing (RP) on prices. It shows that the brand name’s price decline after the introduction of RP and generic competition has an important role in this process. We find that the RP system has a strong effect in terms of reducing prices of pharmaceuticals; the effect is stronger for brand-name than generic versions. This confirms that the RP encourages generic competition and induces generic switching.