Reference Pricing Case Study

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The pharmaceutical market in the United States is not a price regulated market, meaning the price of the drugs can be placed at any price without question. Due to the lack of regulation the pharmaceutical industry is the largest profit gaining industry in the United States market. Although this is great for the industry, it is not enjoyable for the consumers. Many Americans cannot acquire the medications they need to better their health because of the high costs.
The World Health Organization (WHO) noticed there was an issue and came together as a committee and proposed regulations that would help lower the costs of pharmaceutical drugs. These regulations to propose where to cut costs throughout the pricing process. WHO recommended the follow
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The benefit, they acknowledge, from the tax exemption would be lower costing drugs for the poor. Doing so would allow the poor to have access to the similar healthcare than those who have more money. However, the tax exemptions could have a negative effect, such as causing a loss in funds from the government and creating a negative effect on the health care system as a whole. One way the government makes its money is through the tax dollars that come from the purchases people make. Without obtaining the tax dollars from medication the US could lose a substantial amount of …show more content…
According to Marie Salter, in “Reference Pricing: An Effective Model for the U.S. Pharmaceutical Industry?” Reference pricing is enforced by either a specific committee or a preexisting committee, through a reform law. In reference pricing drugs are split into groups, based on their active ingredients, and then compared to other similar groups from an international market and then priced to have a similar value. If this is done correctly, it could stop people from buying drugs from other countries, and could have the money flow back into the United States market. Reference pricing in some countries is used a little informally as a benchmark for the pricing of the drug. Insurance could also play a part in the introduction of this method because they could pay up to the reference price, if the companies priced the drug higher, then the patient could pay the rest. Under the Federal Food, Drug and Cosmetic Act (FFDCA) the government works directly with manufacturing companies to collect money for development and ensures that the drug is safe for use, but because the United States market is not regulated they do not set a price point for the drug during this process. The US market already has a system that is similar to price referencing with Medicare and Medicaid, but that does not help every consumer, just those with that support. The solution in this case would be to open similar regulations that Medicare and

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