In years of growing pharmaceutical expenditures, many European countries have adopted Health Technology Assessment (HTA) frameworks to align drug prices with clinical value. Germany's 2011 AMNOG reform introduced mandatory price negotiations for new medicines, based on their added therapeutic benefit. This paper estimates the causal impact of AMNOG on anticancer drug prices using a triple-difference approach and a panel of 77 drugs launched between 2007 and 2017 across 24 OECD countries. The reform led to a 15.8% reduction in post-negotiation prices in Germany, and there is no evidence that manufacturers raised launch prices strategically in anticipation of future negotiated reductions. These findings confirm the effectiveness of HTA-based pricing mechanisms and contribute to ongoing policy discussions on sustainable pharmaceutical pricing in Europe.
Many countries use external reference pricing (ERP), linking domestic drug prices to foreign benchmarks. We show theoretically that strategic firm responses to ERP can create cross-country spillovers with unintended consequences. Exploiting the introduction of ERP in Germany in 2011 in a difference-in-differences design, we find that this policy caused a 6.6% price increase in reference countries relative to non-reference markets. Results are robust across specifications, including an approach that accounts for confidential discounts.
"Most Favored Nation" drug pricing restricts patient access in reference countries, even when patients face no out-of-pocket costs. We show that manufacturers narrow covered patient populations to raise measured therapeutic benefit and the benchmark price, operating through coverage determination rather than cost-sharing. Calibrating to U.S.-OECD price differentials, MFN pricing yields 7.1% higher global therapeutic benefit but 17.8% lower manufacturer revenue. If the reference country renegotiates its pricing rule, both therapeutic benefit and revenue increase — but the reference country's health plan bears most of the cost.
Multi-indication drugs pose pricing challenges, affecting therapeutic benefits and access. We model how a manufacturer strategically chooses clinically eligible patient populations for each indication during R&D, recognizing that broader populations increase demand but reduce expected therapeutic benefits and maximum prices. We identify mechanisms that induce the manufacturer to maximize total therapeutic benefit: indication-specific prices equal to expected benefits, population-weighted uniform prices, and two-part tariffs. These mechanisms emerge endogenously from Nash bargaining, preventing full surplus extraction by the manufacturer. When indications are introduced sequentially with unconstrained price adjustments, benefit maximization persists; however, price caps distort patient selection, explaining empirically observed indication launch strategies.