A Comparative Analysis of International Drug Price Negotiation Frameworks: An Interview Study of Key Stakeholders

Abstract

Policy Points.

• Health care systems around the world rely on a range of methods to ensure the affordability of prescription drugs, including negotiating prices soon after drug approval and relying on formal clinical assessments that compare newly approved therapies with existing alternatives.

• The negotiation framework established under the Inflation Reduction Act is far more limited than other frameworks explored in this study. Adding elements from these frameworks could lead to more effective price negotiation in the United States.

Context

In 2022, Congress passed the Inflation Reduction Act, which allowed Medicare, for the first time, to begin negotiating the prices for certain high‐cost brand‐name prescription drugs. Many other industrialized countries negotiate drug prices, and we sought to compare and contrast key features of the negotiation process across several health systems. We focused, in particular, on the criteria for selecting drugs for price negotiation, procedures for negotiation, factors that influence negotiated prices, and how prices are implemented.

Methods

We included four G7 countries in our analysis (Canada, France, Germany, and the United Kingdom [England]), two Benelux countries (Belgium and the Netherlands), and one Scandinavian country (Norway) with long‐established frameworks for drug price negotiation. We also analyzed the Veterans Affairs Health System in the United States. For each system, we gathered relevant legislation, government publications, and guidelines to understand negotiation frameworks, and we reached out to key drug price negotiators in each system to conduct semistructured interviews. All interviews were recorded, transcribed, and coded, and data were analyzed based on an internal assessment tool that we developed.

Findings

All eight systems negotiate the prices of brand‐name prescription drugs soon after approval and rely on formal clinical assessments that compare newly approved drugs with existing therapies. Systems in our study differed on characteristics such as whether the body performing clinical assessments is separate from the negotiating authority, how added health benefit is assessed, whether explicit willingness‐to‐pay thresholds are employed, and how specific approaches for priority disease areas are taken.

Conclusions

High‐income countries around the world adopt different approaches to conducting price negotiations on brand‐name drugs but coalesce around a set of practices that will largely be absent from the current Medicare negotiation framework. US policymakers might consider adding some of these characteristics in the future to improve negotiation outcomes.

Prices for brand‐name prescription drugs in the united states are approximately two to four times higher than prices in other comparable countries. ¹ A key reason for the price differential is that high‐income countries apart from the United States negotiate drug prices with manufacturers shortly after launch, whereas the United States allows pharmaceutical manufacturers to set prices at whatever level they choose when entering the market. The Inflation Reduction Act (IRA) of 2022 authorizes the Centers for Medicare and Medicaid Services (CMS) for the first time to negotiate prices for a small number of high‐revenue brand‐name prescription drugs on behalf of Medicare. ² In 2023, CMS released comprehensive guidance on negotiation plans, which covered the selection of drugs, negotiation procedures, and timelines for implementation. For example, qualifying drugs must be single‐source brand‐name drugs or biological products lacking marketed generic or biosimilar competition and will be eligible for negotiation beginning 7 years after Food and Drug Administration approval for small‐molecule drugs (11 years for biologics), with the negotiated price taking effect 2 years later. ³ , ⁴

We sought to understand how the price negotiation framework established under the IRA compares with procedures in other countries, including which drugs are selected, how negotiations are conducted, what factors influence negotiations, and how prices are implemented. We focused on seven comparator high‐income countries with established negotiation frameworks: Belgium, Canada, France, Germany, the Netherlands, Norway, and the United Kingdom (England). We also examined negotiations conducted by the US Department of Veterans Affairs (VA). For each system, we conducted semistructured interviews with expert stakeholders possessing in‐depth knowledge of negotiation procedures and outcomes. Our goal was to identify key similarities and differences in approaches to drug price negotiation across these systems to inform future US drug pricing reforms.

Methods

We selected seven comparator countries based on their economies, prescription drug spending, market size, geographic locations, health care delivery systems, and historic experiences with price negotiation. We included four G7 countries (Canada, France, Germany, and the United Kingdom [England]), two Benelux countries (Belgium and the Netherlands), and one Scandinavian country (Norway). We also analyzed the VA in the United States because, although the system is small compared with others in the cohort (and not necessarily representative of US payers), the VA was the largest US federal health care program that negotiated brand‐name drug prices before the passage of the IRA.

For each system, we gathered relevant legislation, government publications, and negotiation guidelines from the websites of the health ministries and/or departments of health in the countries of interest (and, in the case of the VA, from its official website). We then reached out to key drug price negotiators in each country and the VA to conduct semistructured interviews. We identified people who helped lead negotiations in each system through the authors’ professional networks. This qualitative method facilitated a deeper understanding of contextual factors influencing negotiation strategies. Finally, we performed a targeted literature review of peer‐reviewed articles and the gray literature to glean further insights into the topics identified by interviewees.

We developed a uniform set of prespecified questions for each interview based on personal experience with drug price negotiation and a review of academic studies on the topic (see the Supporting Information for a complete version of the assessment tool). We allowed the interviewer (I.D.S.) to explore additional questions based on respondents’ answers. The interview guide was pretested in a pilot interview with a public official who had personal experience with drug price negotiation across several markets. Our aim in pretesting was to optimize the timing and pace of questions and further refine our data collection methods. The guide covered (i) criteria for selecting drugs for price negotiation; (ii) procedures for negotiation (including how the negotiation process is structured, the consequences of not reaching an agreement, and the expected timelines for negotiation); (iii) factors that influence negotiated prices (including how these factors are defined and from what sources the information is derived); and (iv) implementation of these prices (including how the negotiated price is applied across different channels in the supply chain and the extent to which prices for certain payers may deviate from the negotiated prices). We also asked experts about any policies that were available to amend negotiated prices over time and about factors outside the negotiation process that might influence prices, such as market size, disease prevalence for a given therapy, and norms and values related to the health care system and country.

To set up interviews, we reached out to experts over email. The interview guide was sent to respondents who agreed to participate before the interviews. Interviews were conducted from January 10, 2024, to January 19, 2024, and all were recorded and transcribed. The interviewer (I.D.S.) made notes during each interview. To analyze the interviews, we used an internal assessment tool based on the four main topic areas in the interview guide. The tool captured and organized responses across the topic areas into discrete variables for analysis reflecting key elements of negotiation (see Supporting Information). Responses were reviewed and manually coded to identify overarching themes and trends. We also looked for any additional themes to emerge outside of the assessment instrument. Direct quotes were not presented in the analysis. We reached out to interviewees to validate the accuracy of our descriptions and analysis but did not send full transcripts for comment. The project was considered exempt research by the Stanford University Institutional Review Board.

Results

We contacted nine people, and all agreed to complete interviews, which lasted an average of 60 minutes (range: 45–70 minutes). No repeat interviews were carried out. Interviewees were employees of governments or coalitions representing public insurance plans with responsibilities for leading or conducting price negotiations. The documents identified were publicly available government publications and legislation outlining the responsibilities of different agencies charged with price negotiations and the methods they employed to conduct these negotiations. We also identified peer‐reviewed articles, white papers, policy reports, and material put out by consultant companies supporting pharmaceutical firms on price negotiation in the different countries (see Supporting Information).

Selecting Drugs for Negotiation

Five of the eight systems (Belgium, Canada, Norway, the United Kingdom, and the VA) negotiate all newly approved brand‐name prescription drugs and indications without applying specific inclusion or exclusion criteria. By contrast, in Germany, drugs with annual statutory health insurance expenditure below €1 million are excluded, ⁵ whereas the Netherlands excludes hospital drugs with estimated total annual costs of less than €20 million and those with costs per treatment per patient of €50,000 or less per year if expected costs to the system are €10 million or less per year. ⁶ In France, the national negotiations include all outpatient drugs but only a selection of inpatient drugs—in particular, only hospital drugs with projected costs exceeding 30% of the average cost for the relevant diagnosis related group. Hospital drugs below this threshold are negotiated by hospital purchasing bodies or unions. ⁷ , ⁸ , ⁹

Price Negotiation Process

Price negotiations are carried out under different authorities. In four countries (Belgium, France the Netherlands, and the United Kingdom), the Ministries of Health and/or Social Affairs oversee negotiation. ⁷ , ¹⁰ , ¹¹ , ¹² In Canada, Norway, and Germany, price negotiations are completed by designated governmental bodies or coalitions representing public plans. ¹³ , ¹⁴ , ¹⁵ , ¹⁶ The negotiation unit in the VA operates as an internal department within the VA health system. ¹⁷ , ¹⁸

All countries and the VA initiate price negotiations around the time of market authorization, with Germany permitting up to one year of manufacturer‐set prices free from negotiation. Each country and the VA have official, publicly available guidelines outlining the responsibilities of different agencies and stakeholders in the reimbursement process.

The first step in negotiation for each system in our cohort is a clinical assessment of the drug compared with existing therapies. Six countries (Canada, France, Germany, the Netherlands, Norway, and the United Kingdom) rely on independent health technology assessment (HTA) agencies separate from the bodies tasked with conducting negotiations. ¹⁹ , ²⁰ , ²¹ , ²² , ²³ , ²⁴ , ²⁵ , ²⁶ , ²⁷ Clinical assessments in Belgium and the VA, by contrast, are completed by the same organizations that conduct price negotiations, although by different groups of people within the organizations and at different times (Table 1). ²⁷ , ²⁸

Table 1.

Entities Involved in the Drug Price Negotiation Process

Nation	Population Covered	HTA Body	Negotiation Agency	Body Responsible for Reimbursement Decision/Recommendation
Belgium	All (11.7 million)	NIHDI	Under the supervision of NIHDI, a group of stakeholders named CRM (health insurers, health care providers, academia, and representatives and the ministers) negotiators	Ministry of Social Affairs
Canada	All for inpatient drugs; low‐income, armed forces for outpatient drugs (16 million or 40% of population)	CADTH or INESSS	pCPA	Individual insurance plans (jurisdictions)
France	All (68.2 million)	HAS	CEPS	Ministry of Health for inpatient drugs; sickness funds union (UMCAM) for outpatient drugs
Germany	All (83.8 million)	IQWiG	GKV‐Spitzenverband (Association of Statutory Health Insurance Fund)	The umbrella organization of private health insurance agrees with the negotiated price
The Netherlands	All (17.7 million)	ZIN	The Ministry of Health, Welfare, and Sports	The Ministry of Health, Welfare and Sport
Norway	All (5.5 million)	Norwegian Medical Product Agency	Hospital Procurement Trust	Health Regions for hospital drugs; Norwegian Medical Product Agency for nonhospital drugs (primary care drugs)
United Kingdom (England)	All (67 million)	NICE	NHS England	NICE
VA (United States)	Veterans and their families (9 million or 3% of population)	VA Pharmacy Benefit Manager	VA Pharmacy Benefit Manager	National Formulary Committee

CADTH, Canadian Agency for Drugs and Technologies in Health; CEPS, Economic Committee of Pharmaceuticals; CRM, Commission on Reimbursement of Medicines; HAS, National Health Authority; HTA, Health Technology Assessment; INESSS, The Institut national d ’excellence en santé et en services sociaux; IQWiG, Institute for Quality and Efficiency in Health Care; NHS, National Health Service; NICE, National Institute for Health and Care Excellence; NIHDI, National Institute for Health and Disability Insurance; pCPA, Pan‐Canadian Pharmaceutical Alliance; VA, Veterans Affairs.; ZIN, Zorginstituut Nederland.

In all settings except the VA, HTA reports are completed based on clinical and pharmacoeconomic data submitted by manufacturers. Assessments summarize the medical, economic, social, and ethical issues related to use of the drug. These HTA reports, which are made publicly available (absent price information, which is typically kept confidential) then become a key element in price negotiations, providing guidance for manufacturers and negotiators. The added benefit assessed in the HTA is used to inform determinations of fair prices for drugs. A majority of the countries (Belgium, Canada, the Netherlands, Norway, and the United Kingdom) rely on quality‐adjusted life years (QALYs) in cost‐effectiveness analyses to assess the added benefits of new therapies and thresholds for cost‐effectiveness. ²⁹ , ³⁰ , ³¹ , ³² , ³³ France and Germany rely on their own instruments to assess added benefit, which indicate whether a price premium is allowed without indicating precisely what level is acceptable. ³³ , ³⁴ , ³⁵ , ³⁶ , ³⁷ , ³⁸ , ³⁹

For the seven countries in the cohort (but not the VA), if a therapy has no added benefit, manufacturers cannot price the therapy higher than existing comparators. For drugs with added clinical benefit over current standards of care, by contrast, manufacturers are able to charge price premiums based on added clinical benefits. The size of the price premium is subject to negotiation and may also depend on other factors that a country has decided to incorporate (e.g., the burden or severity of disease).

The VA does not rely on cost‐effectiveness analysis performed by an HTA body. Instead, VA negotiators rely on its internal pharmacy benefit manager to assess the safety, efficacy, and cost of the drug without applying an explicit scale to operationalize added therapeutic benefit. The assessment is reviewed by a National Formulary Committee, which decides whether to add the drug to the national formulary, although the details of the assessment are not made publicly available. The ceiling price is set based on guaranteed statutory discounts (the Federal Supply Schedule) and is not related to the added benefit of the drug. ¹⁸ , ²⁸

Negotiation Timelines

Five of the eight systems (Canada, the Netherlands, Norway, the United Kingdom, and the VA) operate with targeted timelines that give negotiators flexibility regarding when milestones must be met. Three countries (Belgium, France, and Germany), by contrast, set fixed deadlines for completing negotiation milestones (e.g., requests for information from manufacturers) that require strict adherence. Belgium initiates the appraisal phase and price negotiations approximately 120 days after the manufacturer's reimbursement request has been received and the HTA report has been finalized (although not yet made public). The agency must complete its clinical assessment and negotiations so that a reimbursement decision can be made within 180 days (excluding clock‐stops requested by manufacturers); otherwise, the brand‐name manufacturer's reimbursement request is automatically enforced. ¹⁰ , ⁴⁰ Germany's negotiation process begins when its HTA body publishes a decision on the benefit assessment; negotiation must then be completed within six months of publication. ⁴¹ , ⁴² , ⁴³ In France, manufacturers wishing to enter price negotiations must notify the negotiating authority within two weeks of the HTA report's release. The negotiating authority then has four weeks to send the manufacturer a first proposal on price. ⁸

Consequences of Failing to Reach Agreement

The consequences for manufacturers of failing to reach agreement are substantial given that, with the exception of Canada and the VA, negotiated prices apply to health plans representing the majority of market share in each country in question. In the VA, all brand‐name and biologics drugs must be included in the Federal Supply Schedule after approval, but the incentives to reach agreements are strong given that prescribers are typically steered to select certain drugs within a therapeutic class based on formulary design.

When agreements cannot be reached, six of the eight systems (Belgium, Canada, the Netherlands, Norway, the United Kingdom, and the VA) do not provide a mechanism for dispute resolution. By contrast, in France, if an agreement is not reached after 10 negotiation sessions, the manufacturer is given a deadline of 15 days to propose a new price. The negotiating authority may decline the price and make a counteroffer. If an agreement is still not reached, then the negotiation is suspended. After four months, each party can reopen negotiations by sending a new proposal. ⁸ In the case of Germany, if no agreement is reached within six months, an arbitration board intervenes to determine the price. If the negotiation enters arbitration, the arbitration must be completed within three months. At this stage, manufacturers must adhere to the price set by the board, which corresponds to the maximum price of the product. ⁵ , ⁴³ No system in our cohort levies a monetary penalty for manufacturers that fail to reach an agreement.

Factors that Shape Negotiations

Added Therapeutic Value

In all eight systems, the primary consideration in price negotiations is the additional therapeutic benefit of the drug and the certainty of the evidence supporting the added benefit relative to the drug's price (Table 2). Across each setting, determinations of added therapeutic benefit include quality of life, morbidity, mortality, safety, and medical need. However, operationalization of the added benefit varies.

Table 2.

Factors That Shape Drug Price Negotiations

	Added Therapeutic Value	Burden or Severity of Disease	Economic Evaluation and WTP Thresholds	Budget Impact	Priority Disease Areas	Product‐Specific Information
Belgium	Yes (based on efficacy, efficiency, safety, applicability, and user‐friendliness, including QALYs)	Yes, defined in reimbursement categories	Cost‐effectiveness (ICER) expressed in euros per QALY, but no explicit threshold or guidelines	Yes, but no explicit threshold or guidelines	Yes, manufacturers are not required to submit health economic modelling for drugs for rare diseases	No
Canada	Yes (measured in QALYs)	Yes, but no explicit tool	Cost‐effectiveness (ICER) expressed in CAD$ per QALY; no predetermined threshold; CAD$50,000 often cited as benchmark	Yes, but no explicit threshold or guidelines	No	No
France	Yes (according to the ASMR rating, ranging from ASMR I to V)	Yes, defined in reimbursement categories	Comparative effectiveness analysis; no predefined threshold	Yes, contracts outlining projected sale	Yes, for rare diseases, a fixed budget for the entire drug is considered instead of the costs per patient	External reference pricing—basket of four other countries
Germany	Yes (quantified according to a six‐level scale depending on the certainty of the clinical effectiveness)	Yes, but no explicit tool	Comparative effectiveness analysis; no predefined threshold	Yes, but no explicit threshold or guidelines	Yes, manufacturers of reserve antibiotics are exempted from value assessment and are permitted to set prices; manufacturers of drugs for rare diseases (with expenditure under €30 million) are exempted from value assessment (though are not permitted to set prices)	Manufacturers asked to provide information on prices in 15 other countries
The Netherlands	Yes (measured in QALYs)	Yes, quantified as relative shortfall (measured in QALYs)	Cost‐effectiveness (ICER) expressed in expressed in euros per QALY; thresholds of €20,000‐80,000 depending on severity	Yes, but no explicit threshold or guidelines	No	No
Norway	Yes (measured in QALYs)	Yes, quantified as absolute shortfall (measured in QALYs)	Cost‐effectiveness (ICER) expressed in NOK per QALY; explicit thresholds depending on severity, but not publicly available	Yes, but no explicit threshold or guidelines	Yes, separate guidelines for assessment and higher WTP for rare diseases	No
United Kingdom (England)	Yes (measured in QALYs)	Yes, quantified as absolute and relative shortfall (measured in QALYs)	Cost‐effectiveness (ICER) expressed in pounds per QALY; explicit and publicly available WTP of £20,000‐30,000 depending on severity and uncertainty around cost‐effectiveness	Yes, explicit budget impact test with a threshold of £20 million in any of the first three years	Yes, separate guidelines for assessment and higher WTP for rare diseases; payment scheme for antibiotics	No
VA (United States)	Yes, no explicit scale	No	No	Yes, but no explicit threshold or guidelines	No	No

ASMR, Amélioration du Service Médical Rendu; HTA, Health Technology Assessment; ICER, incremental cost‐effectiveness ratio; QALY, quality‐adjusted life year; VA, Veterans Affairs; WTP, willingness to pay.

Five systems (Belgium, Canada, the Netherlands, Norway, and the United Kingdom) rely on economic evaluations using QALYs to assess added therapeutic benefit, whereas three (France, Germany, and the VA) do not. ³⁰ , ⁴⁴ , ⁴⁵ , ⁴⁶ , ⁴⁷ , ⁴⁸ In Belgium, QALYs are not used as a stand‐alone instrument in the economic evaluation but are included as one assessment criterion along with treatment‐relevant characteristics of the drug, such as efficacy, safety, and user‐friendliness, compared with existing therapies. France assesses the added therapeutic benefits according to improvement over the standard of care (Amélioration du Service Médical Rendu, or ASMR) on a scale from I to V, on which ASMR I refers to major improvement (new therapeutic benefit or reduction of mortality) and ASMR V to no clinical improvement. Drugs with ASMR I, II, and III are subject to price negotiation and are typically reimbursed at a higher price than the comparator. ⁷ In Germany, the added benefit is quantified according to a six‐level clinical effectiveness scale, ranging from major added benefit (e.g., considerable increase in life expectancy, long‐term relief from severe symptoms, avoidance of severe side‐effects, gain in quality of life) to benefit less than the comparator. ³⁸ The VA does not conduct formal economic evaluations but instead assesses the safety and efficacy of the drug in the absence of explicit metrics to quantify added therapeutic benefit.

The assessment of the clinical benefit determined by the HTAs is not negotiable, but health systems and manufacturers may have different views on what is clinically meaningful and what level of uncertainty in the clinical evidence is acceptable relative to the price of the drug. All systems explicitly consider the certainty of clinical evidence, and officials uniformly cited higher degrees of uncertainty for added clinical benefit as a key factor associated with lower price premiums. For example, in Norway, where discretion is applied when all other factors are considered essentially equal, uncertainty in the clinical or cost parameters of the HTA will result in a lower prioritization. ⁴⁹ This, in turn, leads to lower prices in the negotiations. One analysis of reimbursement decisions for hospital drugs in Norway from 2021 to 2022 found that drugs with high confidence in relative efficacy estimates were accepted with a 4.4‐fold higher price compared with drugs with more limited certainty regarding relative efficacy. ⁵⁰

None of the examined countries have explicit frameworks for how uncertainty should affect the price of the drug, but nearly all systems (Belgium, Canada, France, Germany, the Netherlands, Norway, and the United Kingdom) have developed a negotiating process for managed entry agreements to address uncertainty, benefits, affordability, and risk. ⁵ , ¹⁰ , ⁵¹ , ⁵² , ⁵³ , ⁵⁴ , ⁵⁵ These agreements, also known as risk‐sharing arrangements or access schemes, are contractual arrangements between payers and manufacturers and exist to manage the entry of new and potentially high‐cost drugs while balancing the need for patient access with cost‐effectiveness and budgetary constraints.

Burden or Severity of Disease

Three countries (the Netherlands, Norway, and the United Kingdom) explicitly account for the burden or severity of disease when negotiating prices by weighting the cost‐effectiveness threshold for diseases with substantial morbidity and mortality. In the Netherlands, the burden of disease is operationalized using a “proportional shortfall” method, which accounts for the proportion of healthy life years that a patient loses relative to their remaining life expectancy measured in QALYs. ⁵⁶ , ⁵⁷ Conversely, in Norway, severity is operationalized using an “absolute shortfall” method, which is equivalent to future loss of healthy life years measured in QALYs. ⁴⁵ The UK considers both proportional and absolute shortfalls and applies QALY weights depending on the severity of the disease. ⁴⁶

Four of the five systems that do not explicitly account for severity of disease as a stand‐alone factor in negotiation account for it in other ways. For example, in France, severity of disease is one of four criteria that drives the reimbursement rate granted by the national health insurance system. ⁷ Belgium also uses reimbursement categories that reflect the need for the drug and hence, indirectly, the severity of the condition for which the drug is prescribed. ⁵⁸ In Germany, the law requires consideration of disease severity in the benefit assessment, but it is not integrated into the negotiation according to a specific formula. ⁴¹ , ⁵⁷ , ⁵⁹ Canada also considers disease severity as one factor in the drug review process but does not operationalize this according to a prespecified formula. ⁶⁰ The VA does not include severity as a factor in the negotiations.

Economic Evaluation and Willingness‐to‐Pay Thresholds

As noted above, among the seven systems that rely on HTAs (all except the VA), five employ cost‐effectiveness analysis based on cost per QALY to specify a threshold (Belgium, Canada, the Netherlands, Norway, and the United Kingdom). The United Kingdom and the Netherlands operate with publicly available thresholds. The HTA body in the United Kingdom makes recommendations based on cost‐per‐QALY thresholds of £20,000 and £30,000 depending on the degree of certainty around the incremental cost‐effectiveness ratio and other considerations (e.g., whether there are compelling reasons to suggest that the health benefits of the technology were inaccurately assessed, potentially resulting in an underestimation of the health utility gained). For highly specialized technologies that treat rare conditions, a threshold of up to £300,000 may be accepted ⁴⁶ depending on the QALY gain. The Netherlands operates thresholds of €20,000, €50,000, and €80,000 per QALY depending on the severity of disease that a given therapy treats. ⁶¹

In Belgium, the willingness‐to‐pay threshold varies on a case‐by‐case basis, given the uncertainties related to clinical and/or budgetary impact in the HTA report. An informal willingness‐to‐pay benchmark of €40,000 per QALY has been used in reimbursement procedures, but not in a systematic manner. ⁵⁸ In Canada, there are no predetermined willingness‐to‐pay thresholds, but a threshold of CAD$50,000 per QALY is often cited as a benchmark. ⁴⁴ Norway bases its negotiations and reimbursement decisions on confidential but differentiated and explicit willingness‐to‐pay thresholds depending on the severity of disease. Norway also operates with a higher threshold for rare and specialized conditions. ⁴⁹ , ⁶²

Budget Impact

All systems consider affordability or budget impact as part of the drug negotiation process. For six systems (Belgium, Canada Germany, Netherlands, Norway, and the VA), there are no explicit thresholds set for when a drug will be subject to further negotiations.

The other two systems that consider budget impact (France and the United Kingdom), by contrast, apply specific publicly available guidelines outlining the approach for how budget impact will be considered, although these systems do not describe the extent to which prices are expected to decrease relative to the size of the budget impact. France negotiates contracts outlining projected sales, with prices decreasing as purchasing volume increases. If sales surpass the specified maximum volume, further price reductions are mandated. ³³ The United Kingdom relies on budget impact as an additional step in their HTA assessments; any product assessed to be cost‐effective but expected to result in £20 million or more in spending in any of the first three years after approval is subject to further negotiations. ⁵³

Priority Disease Areas: Drugs for Rare Diseases and Antibiotics

Five out of eight systems (Belgium, France, Germany, Norway, and the United Kingdom) employ separate approaches in the evaluation and negotiation of drugs used in priority disease areas, such as infectious or rare diseases, whereas three (Canada, the Netherlands, and the VA) apply the same approaches regardless of the disease.

Among the five countries that apply different approaches to priority disease areas, Belgium does not require manufacturers to submit health economic models to the assessment agency for drugs that treat rare diseases. Therefore, in these cases, the negotiations will not take country‐specific cost‐effectiveness ratios into account. France has distinct rules for rebates on drugs that treat rare diseases. Instead of considering costs per patient, France applies a fixed budget for the drug, regardless of the number of patients treated. ⁵¹ In Germany, drugs for rare diseases and particular antibiotics are exempted from a regular assessment of therapeutic benefit. If a drug is classified as a “reserve antibiotic” in the German system, it is assumed to have added benefit, and manufacturers are permitted to set prices. ⁹ Drugs for rare diseases are judged against an expenditure threshold, requiring that annual spending on the drug for the entire population treated in Germany must be below €30 million. ⁴¹ Norway does not require the same level of documentation of added benefit for drugs targeting small patient groups with severe diseases and applies a higher willingness‐to‐pay threshold. ⁶² The United Kingdom has developed separate guidelines for drugs that are defined as “highly specialized.” ⁶³ Drugs for rare diseases can qualify for this scheme and are subject to higher willingness‐to‐pay thresholds. The United Kingdom has also run a pilot program for two antimicrobials in which the National Health Service pays manufacturers fixed annual fees over 10 years (a subscription model) regardless of the actual drug quantities dispensed. ⁶⁴

Product‐Specific Information

No systems in our study include considerations of unit production costs in negotiations. In addition, although experts from each country and the VA agreed that incentives for innovation and research and development are crucial, none currently considers these as factors in the price negotiation process for individual drugs. Instead, countries have policies in place to promote research and development outside of price negotiation schemes. One example of such policies are government tax credits and subsidies for companies that develop new drugs for the French market. ⁵¹ Another example is a new joint government–industry program in the United Kingdom that includes £400 million of government funding to boost infrastructure for clinical trials and manufacturing in the country. ⁶⁵

Two countries in our cohort (France and Germany) include external reference pricing in their negotiations. France uses the basket of Germany, Italy, Spain, and the United Kingdom when assessing drugs with value scores of ASMR I, II, or III. Germany asks the manufacturers to provide information on prices paid in 15 other countries. If the company cannot disclose the actual price paid in other countries, the parties must first agree on a method to estimate the net prices in these countries. ⁶⁶ , ⁶⁷

Implementation of the Negotiated Prices

For six countries (Belgium, France, Germany, the Netherlands, Norway, and the United Kingdom) and the VA, the price ultimately negotiated functions as a maximum reimbursement price and is immediately implemented. By contrast, in Canada, the implementation of prices is at the discretion of the participating jurisdiction, and the timing of implementation can vary.

Six of the eight systems (Germany, France, the Netherlands, Norway, the United Kingdom, and VA) have further mechanisms for price reduction beyond the centralized negotiation procedures explored in this paper. For example, health insurers in Germany have the option to negotiate additional rebates directly with the manufacturer below the maximum allowable price, resulting in potential variations in drug prices across insurers. ³⁹ Similarly, hospitals in France have the authority to negotiate additional rebates with manufacturers, with the flexibility to retain a portion of the difference between the maximum negotiated price and the price agreed on directly with the manufacturer. ³⁵ , ³⁶ In the Netherlands, health insurers and hospitals can also negotiate further rebates directly with manufacturers, allowing for potential price discrepancies across insurers. ⁶⁸ , ⁶⁹ Norway has implemented pharmaceutical tendering for patented drugs as an additional cost‐reducing strategy, with the lower prices applicable across all hospitals. In the United Kingdom, additional mechanisms for discounts and rebates can be provided locally at the hospital level through different mechanisms for price reduction, such as therapeutic tender where competition exists. ⁷⁰ In the VA, manufacturers may also offer a lower price than the statutory price that applies to all VA providers. By contrast, in Belgium and Canada, there are no additional negotiations with manufacturers about branded drugs after centralized price negotiations are completed.

All systems renegotiate their contracts when a new indication for an already negotiated and reimbursed drug is introduced to the market. The new indication may have a higher added benefit than the initial indication and thus may yield a higher price premium. New indications may also result in higher volumes of sales, which could require price reductions.

All systems, except Canada, apply uniform pricing, meaning that newly negotiated prices are not indication‐specific but instead apply to all indications. Each system, however, varies in their determinations of new prices. For example, Belgium, France, and Germany calculate a blended average price based on the added benefit and population size for each indication, which could result in price increases or decreases. Norway, the Netherlands, and the United Kingdom also assess the added benefit for each new indication, but they generally do not allow price increases for new indications. Canada and the VA apply a case‐by‐case approach. All systems also implement product‐specific agreements, such as price–volume contracts or indication‐based contracts, to ensure that drugs remain cost‐effective across all indications. ⁷¹

Discussion

This study identifies several key similarities and differences regarding how eight different health systems carry out drug price negotiation. Nearly all systems rely on formal clinical assessments of drugs compared with existing therapies and negotiate the prices of prescription drugs immediately after approval. Systems differed on whether the group performing clinical assessments is separate from the negotiating authority, how added health benefit is assessed, whether explicit willingness‐to‐pay thresholds are employed, and how specific approaches for priority disease areas or severity of disease are taken. This study helps identify consensus best practices employed for price negotiation across several different health systems.

Our research builds on several important prior comparative studies, ⁹ , ³¹ , ³³ , ⁴² , ⁴³ , ⁵⁸ , ⁵⁹ , ⁷² , ⁷³ , ⁷⁴ , ⁷⁵ , ⁷⁶ , ⁷⁷ but this is the first, to our knowledge, that relies on in‐depth interviews with actual negotiators to identify details of the negotiation process for use in comparisons across a range of countries with long histories of drug price negotiation. These interviews enabled novel insights into how officials weigh different values when approaching price negotiations (e.g., the central role of uncertain clinical evidence in driving price reductions). This study also analyzes the operation of drug price negotiation in other countries based on key characteristics that CMS has identified and addressed in recent guidance, such as drug selection, negotiation procedures, and criteria used in the negotiation process. Because country‐specific negotiation frameworks evolve over time, this analysis offers valuable, up‐to‐date data for legislators and regulators around the world seeking to improve existing frameworks for drug price negotiation or, as in the United States, establish new ones.

Beginning in January 2025, the European Union (EU) will adopt a standardized framework for clinical assessment of newly approved drugs. ⁷⁸ The framework for joint clinical assessment will be implemented across member states in stages, beginning first with oncology drugs and advanced therapies, such as gene therapies. The process will run in parallel with the regulatory review process; when manufacturers submit market authorization applications to the European Medicines Agency, they will provide information at the same time to a European Commission secretariat to inform the HTA process. An assessor and coassessor from each country will collaborate to assess the relative efficacy of drugs submitted for market authorization and will report findings that member states can then use to make reimbursement decisions, although each member state will still be responsible for determining the added value of a given drug to its health system. ⁷⁹ Member states are obliged to include the joint clinical assessment in their national HTA review (along with additional clinical analyses they may choose to undertake) and will each complete their own cost‐effectiveness analyses, price negotiations, and reimbursement decisions.

This centralized joint clinical assessment process may help standardize evaluations of new therapies. Our study found that countries take different approaches to HTA evaluations and subsequent reimbursement decisions; France and Germany, for example, do not use QALYs to assess added benefit, unlike other European countries in our cohort. Greater standardization in drug assessment may be especially important given the challenges countries face in addressing uncertainty in clinical evidence and the increasing number of drugs approved based on nonrandomized trials, single‐arm studies, surrogate measures as study end points, and short follow‐up times. ⁸⁰ , ⁸¹ Joint EU efforts could yield new approaches for HTA bodies and negotiating authorities to address questions related to uncertain evidence generated in these types of studies.

This joint HTA framework may also spur new collaborative initiatives (e.g., in assessments of therapies to treat rare or infectious diseases) and even shared approaches to reimbursement (e.g., specifying explicit, uniform thresholds for coverage or how to incorporate budget impact). There may be limits to collaboration given that some questions hinge on fundamental normative values about which EU member countries may disagree. At a minimum, however, joint assessments beginning in 2025 should promote further discussion about optimal approaches to price negotiation.

The organizations analyzed in our cohort have a long record of evaluating and negotiating the prices of prescription drugs, whereas CMS is currently implementing a negotiation framework for the first time. Our analysis highlights how the framework established by the IRA is an outlier compared with other countries. First, the scope of Medicare negotiation is far more limited than in the countries we studied. The IRA only allows negotiation beginning 7 years after approval for small‐molecule drugs (and 11 years for biologics) compared with immediate negotiation following approval in most countries in our cohort. The IRA also excludes far more drugs than any of these systems, including plasma‐derived products and drugs designated for only one rare disease. ² Second, the structure of IRA negotiation differs from most systems we analyzed in that comparator systems have separated the negotiation process from the clinical assessment. Third, although both CMS and the comparator systems in our study use objective factors in their negotiation framework, CMS guidelines offer limited insight into how these factors will be implemented. ⁸² The Affordable Care Act of 2010 and the IRA prohibit the use of traditional QALY‐based cost‐effectiveness analysis out of concern that these analyses assign less value to life extensions of patients with disabilities compared with patients without disabilities or healthier patients. ² , ⁸³ Although these rules fundamentally misunderstand how QALYs are used, they leave CMS in the position of determining the starting point for a fair price by collecting data from manufacturers, researchers, clinicians, and the public on a number of variables (e.g., comparative effectiveness, research and development costs, production costs) without guidance on how to aggregate these inputs. ⁸⁴

Moving forward, Congress could strengthen the IRA negotiation framework by borrowing key elements from other countries. Shifting negotiation earlier and including more drugs could help achieve low prices for longer duration. ⁸⁵ Like other countries, the United States could set up a centralized HTA body or rely on independent groups to conduct these assessments. An alternative approach, as employed by Belgium, would be to ensure that different groups at CMS perform clinical assessments and negotiations at different points in time. Keeping the HTA process and negotiations separate can help facilitate independent and objective determinations while promoting public trust. ⁸⁶ , ⁸⁷ , ⁸⁸

Congress and CMS could also develop clearer frameworks for how added therapeutic value will be assessed. The strategies in France and Germany demonstrate that structured approaches need not rely on QALY‐based cost‐effectiveness methods, which have proven politically untenable in the United States even if their criticisms often lack sound empirical or normative rationales. ⁸⁹ More explicit, transparent guidance is also needed for how different factors beyond cost‐effectiveness will be considered in the United States. ⁷⁵ , ⁷⁶ CMS, for instance, does not specify how factors that must be considered in negotiations such as public investment will weigh against others such as research and development and manufacturing costs. Our findings underscore the wide range of options available to the federal government when evaluating the value of prescription drugs. However, without reform, the United States may be an outlier among comparator countries for its lack of transparency and reproducibility in evaluating and negotiating drugs.

CMS has identified health equity as an important factor in price negotiation and will place added value on drugs that treat vulnerable patient populations, such as those with disabilities, the elderly, the terminally ill, and children. In implementing this approach, CMS could borrow from Norway, the Netherlands, and the United Kingdom, which offer higher prices for treatments or interventions that address severe conditions or for which the burden of disease is high. A challenge is that, in the US system, these higher prices may result in higher out‐of‐pocket costs, further disadvantaging already marginalized patient populations. CMS may therefore choose to negotiate lower prices for such products to better stimulate widespread uptake and use. Future research should focus on developing objective standards for assessing the intersection of health equity, drug pricing, and access to aid in drug price negotiations in the United States and around the world. ⁸² , ⁹⁰ , ⁹¹

An area in which the United States cannot look to negotiation frameworks in other countries is in accounting for research and development costs. No system in our study considered these costs when negotiating the prices of prescription drugs. Quantifying research and development are challenging given the debate over what inputs count (e.g., preclinical research costs, clinical research costs, manufacturing costs, capital costs, and acquisition costs for purchased assets) and how these inputs should be measured. ⁹² , ⁹³ , ⁹⁴ Drug companies, moreover, often protect such information as trade secrets. Although policy instruments to promote innovation are crucial, strategies outside the negotiation framework, as seen in France and the United Kingdom, are available to facilitate research and development without integrating these costs into the value assessment of individual drugs. ⁵¹ , ⁶⁵

Among the limitations of this study, we did not include comprehensive data on access to medications or drug spending in each system, restricting our ability to assess the overall performance of different negotiation frameworks. The study also focused on the processes and procedures that shape drug price negotiation; numerous exogenous factors, including how societies value health and how much countries can afford to pay, may affect final agreed‐on prices. Additionally, although interviewees underscored the primary importance of added therapeutic benefit and the certainty of evidence in drug price negotiations, we did not ask them to formally rank different factors. Future research should quantify how officials (and the frameworks in which they operate) trade off different values when negotiating prices. Our analysis also did not examine other types of price controls across health care systems, which could also affect access. Finally, confidential strategies employed during price negotiation could not be fully disclosed, even in anonymized conversations.

Conclusion

Health care systems around the world use a range of approaches to negotiate prices for prescription drugs. There is alignment that market entry is the focal point for the lifetime pricing of new branded pharmaceuticals. The negotiation framework established in the United States under the IRA is far more limited in scope than these other frameworks. As policymakers seek to improve on the IRA in the coming years, adopting strategies employed in other systems could lead to more effective drug price negotiation in the US.

Funding/Support

Funding for this study comes from the Commonwealth Fund and Arnold Ventures. Dr. Feldman also reports a grant from the National Heart, Lung, and Blood Institute (K08HL163246).

Conflict of Interest Disclosures

Iselin Dahlen Syversen is on unpaid leave from the position of head of the Pharmaceutical Price Negotiation Department at the Norwegian Hospital Procurement Trust. Dr. Kesselheim reports serving as a consultant for Alosa Health. Dr. Feldman reports serving as a consultant for Alosa Health and an expert witness in litigation against inhaler manufacturers.

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