Table 2.

Concepts in pricing and reimbursement of generic pharmaceuticals.

Free pricing	Prices are set by the manufacturer with no direct price control regulation applied. Indirect price control regulation may be in place, e.g. on reimbursement.
Cost-plus pricing	Prices are set by considering manufacturing costs and adding allowances for sales, promotional or marketing expenses, manufacturer profit margins, and charges and profit margins accrued in the supply chain to the production cost of a pharmaceutical product.
Price capping	Prices are set at a fixed percentage below the originator price at patent expiry.
Price capping with managed entry	Prices are set at a fixed percentage below the originator price, with additional specific percentage reductions depending on the sequence of market entry of each product.
External Reference Pricing	Prices are set by using the prices of the given medicine in one or several other countries to derive a benchmark or reference price.
Combination or selection of lowest price from various methods	Prices are set at the lowest price obtained from a single pricing method when reviewing resulting prices from a variety of pricing methods per product.
Tendering	A procedure using competitive bidding for the purchasing of medications. Suppliers bid for a particular contract with a specific quantity and price (and other criteria if this is permitted).
Internal Reference Pricing	A maximum level of reimbursement for a group of drugs is established as a benchmark or reference price. The drugs compared within a group can be identified at therapeutic level (therapeutic reference pricing) or at molecular level (molecular reference pricing).
Formulary management	A list of pharmaceutical drugs approved for reimbursement. A formulary can be positive (listing products that are reimbursed) or negative (listing products which are not reimbursed).

Source: The authors.