The pharmaceutical industry stands at a peculiar place in the United
States. It is one of the largest industries in the United States, “enjoy[ing] profit
margins nearly four times that of the average Fortune 500 company.” It is also
a global leader, responsible for an enormous amount of research and
development. Despite its size and power, the U.S. pharmaceutical industry is
largely reviled, Perhaps what differentiates the U.S. pharmaceutical industry
from the pharmaceutical industries of other nations is its “free market” price
setting. Other nations, particularly those in the European Union, use
government price controls to keep pharmaceutical prices low. One of the most
popular systems of price control is reference pricing. Reference pricing is a
method of controlling spending on drug reimbursement by using the price of
similar or existing drugs to set “a reimbursement tariff (called reference price)
for groups of drugs which are considered to be ‘interchangeable.’” This
Comment explores the validity of reference pricing as a method of reducing
government healthcare spending, particularly in the United States, through
comparison to foreign price controls.