The effect of reference price regulation on pharmaceutical prices in Finland

Abstract

This thesis considers the impact of the Finnish reference pricing system (RPS) on pharmaceutical wholesale prices. The policy, introduced in 2009, sets a maximum amount for the public reimbursement of pharmaceuticals assigned to the system. The reform was designed to improve the generic substitution practice that began in 2003. Using rich panel data for the years of 2006–2012, I apply the difference-in-differences method, exploiting the fact that some products never entered reference pricing (RP). I find statistically significant evidence that prices fell by 5.9% in 2009 and 8.7% in 2010, after which the effect disappeared. However, concern with parallel price trends between the treatment and control groups prevents causal interpretation of the results.