Analysis of External Price Referencing On Drugs - Essay Example

This may include an External Price Referencing element in it. In some countries like Germany, they allow free pricing of patented drugs but use the policy of External Price Referencing in reimbursements. It is not the same in the Netherlands which sets a cap on the price of medicines considered to be of therapeutic value. It must be noted that not all types of drugs are subjected to this policy of External Price Referencing. There are different guidelines in different countries that are used when using the policy.

The drug m market follows the rules of demand and supply just like other products. The only difference comes in regulatory protection and approval and also in the role played by the demand side. (Mossialos, et al, 2004). This varies with different countries for they have different rules and regulations that guide the policy being undertaken on pharmaceutical products. Also, the value of a particular pharmaceutical product is determined by factors such as the amount the consumers are willing to pay for the product.

This varies in different countries based on availability, accessibility, the importance of the drug, and other factors like government policies and controls. The manufacturer and those importing set their own pricing which affects the price of the drug. This varies in different countries which have different tariffs on imported goods. Others factors are differences in costs of procurement and even price discrimination by the suppliers of patented drugs in those countries with a factory producing generic drugs.

(Olcay and Laing, 2005). The incomes of individual consumers and national, degree of competition in the public and private sector, the system of health capacity, and the public policy in different countries. Those countries that are developing public health costs account for the second-largest government expenditure after staffing cost. (World Bank 1993). Also, there are other costs that are hidden which can greatly make the price of medicine vary in different countries. These include costs that are associated with tariffs, import tax, transport, staff costs, stock losses which can even double the manufacturer’s price of the product, in this case, the drug. (Perez-casas Herranz & Ford, 2004).  Governments have two reasons for levying tariffs on drugs. For one is a way of generating income and the protection of the local pharmaceutical industry.