International reference prices (IRP), also called external reference prices, are widely used across developed nations. IRP uses the prices paid in other countries to either inform negotiations with the pharmaceutical industry or as a cap on market prices. The authors review the application of IRP to cap the prices of negotiated outcomes in the context of US proposals for changing the way prescription drug prices are established for the Medicare program. They examine the economic, political, and administrative issues associated with the use of IRP, and they summarize the evidence on the impacts of IRP.

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