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Differences in national pricing policies and regulations are partly responsible for observed price differentials in both in- and off-patent markets for several reasons. First, there are
fundamental differences between free-pricing and price-controlled systems which allow
different stakeholders, with different interests to control initial price setting.
Free-pricing systems, which allow pharmaceuticals to be priced without restriction at launch, are likewise regulated through other means such as profit control (UK) (Mrazek and Mossialos, 2004), or reimbursement regulation through internal reference pricing and/or use of HTA.
Fixed pricing, also referred to as direct price controls, amounts to the setting of fixed
maximum prices, which may apply broadly to all medicines whether or not they are
reimbursed, or to specific groups of products (for example, reimbursed, inpatient/outpatient, on-patent/off-patent). While the aim is to set prices at a reasonable or affordable level, definitions thereof differ across as well as within countries. They way in which prices are set i.e. through negotiations (Austria, France, Italy, Portugal, Spain) or unilaterally by the national authority, affects prices to wholesalers, patients and ultimately to health insurers/governments. Direct price controls may slow price increases or induce lower prices altogether. However, the influence on overall pharmaceutical expenditure may be overshadowed by increases in expenditures due to volume and innovative drugs (Mrazek and Mossialos, 2004).
Second, within price-regulated systems, the specific features of individual policies as well as the mix of regulatory measures vary significantly across Member States. Pricing policies and regulatory approaches reflect national priorities in both health and industrial policy, such as containing overall pharmaceutical expenditures or promoting R&D, employment and trade.
Third, pricing regulation may be implemented at various stages along the distribution chain, from manufacturer to wholesaler to pharmacist and individual consumer or hospital. Moreover, in several Member States, the type and strength of regulation differs between in-patent and off-patent markets.
The following is a discussion of how the main types of pricing methodologies can affect prices of pharmaceuticals in EU Member States.