We study the effects of a change in the way patient reimbursements are calcu-
lated on the prices of pharmaceuticals using quasi-experimental data for Denmark
which switched from external (where reimbursements are based on prices of similar
products in foreign countries) to internal reference pricing (where they are based on
the cheapest domestic substitute). We analyze three therapeutic classes with differ-
ent treatment durations and show that the reform led to substantial price decreases
for our lifelong treatment and to less substantial price reductions for our medium
duration treatment while we do not find significant effects on our acute treatment.
Moreover, the reform did only affect generics and did not impact original products
or parallel imports.
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