Prices of a basket of 150 medicines can vary by up to  25% across European Union (EU) member states or, in the case of generics, the difference can be as much as 16-fold, says a new report.

These wide variations in drug prices and costs can be due to many factors, including the size of the market, regulatory policy, the use of price controls and reference pricing, encouragement of the use of generics, cultural practices and taxation levels, says the report, which was commissioned by the European Parliament's Committee on the Environment, Public Health and Food Safety (ENVI) and carried out by researchers at the Medical Technology Research Group of the London School of Economics and Political Science.

The wealth of the nation also seems to be a factor, according to the authors. "In general, price of in-patent pharmaceuticals seems to be proportionately higher in member states with higher level of per capita income. In addition, higher-income member states spear to spend more on pharmaceuticals,” they write.

The highest per capita spending across Europe - out of a list 20 member states and at 2008 levels - is found in Greece, with an average annual spend of nearly 700 euros. The next highest spenders are Ireland, France, Germany and Austria, while the lowest is Poland, at around 125 euros per person per year. The UK stands in sixteenth place, at around 250 euros, and is the only nation to have been spending less per capita in 2008 than in 2000.

24 out of the 27 EU member states use external price referencing as a tool for determining prices, says the report, and it acknowledges that this approach can lead to lower prices, particularly when a member state makes decisions based on the lowest comparison prices rather than the average.  However, the authors also warn that there are concerns that this approach "ignores other aspects, such as health priorities for each country, and moreover that it can create uncertainty for innovative sectors of the industry."

Reference pricing can also create problems of access, they add; a low price for a new product in one national market can lead manufacturers to refrain from launching the product in other markets, given that the low price might jeopardise their pricing prospects elsewhere due to the wide application of external reference pricing.

The report suggests that one way of tackling these pricing and access issues is through greater sharing of information and policy experience between member states on the mechanisms which they use to procure medicines, leading to the identification of good practices.

"Approaches to health technology assessment [HTA] could be a key topic of further discussion, given that a growing number of member states use this approach, but their results in terms of reimbursement decisions often vary," the authors go on to suggest, adding: "clinical cost-effectiveness is one of the factors considered in HTA analysis. Here, EU institutions could foster stakeholder discussions to help define the value of innovation for patients, health systems and the EU pharmaceutical industry and its role in the European economy."

Moreover, they add that parallel trade “is an important issue to be addressed, and probably an area that merits further study, given that it raises difficult questions about the interactions between the EU single market and national health policies."