Foreign reference pricing (FRP) for medical devices is periodically advocated by the Private Health Insurance industry as a way of decreasing spending on items included on the Commonwealth Department of Health’s Prostheses List.

FRP is the benchmarking of prices paid in foreign jurisdictions in order to reduce the budget impact of f medical devices in another jurisdiction.  Sometimes this would appear to be a reasonable approach to take.  We have seen this recently in the appearance of Apple, Microsoft and Adobe in front of a House of Representatives Committee to explain why electronically downloaded products cost significantly more in Australia despite no Australian landed costs being involved.

However it is a different story for medical devices and it is disingenuous of private health insurers not to take into account the complexities of supplying medical devices into different health systems, economies and political systems.  This not only relates to the obvious differences in human resources cost, the differences in freight, and the size of a country’s population but also should include the health economic drivers within each country’s health system.  These can include the degree of activity based funding, the mix of public and private funding, and the clinical decision making process.

For those who are interested in medical devices reimbursement, a sensible way to determine appropriate pricing for medical devices is not to look for the lowest price in another country, but to determine a price that offers value for money to the local health system.  Value can be demonstrated in many ways.  This can include the evaluation of clinical evidence, budget impact analysis and cost/value marketing tools.