Reference Based Pricing
A pricing scheme for prescription drugs that is designed to lower the overall expenditures on pharmaceuticals. The programs lump drugs that target specific issues into groups, and set rates for the group as a whole - usually based on the cost of the cheapest drug. For example, there are a variety of drugs designed to lower blood pressure. Under reference based pricing, the insurance provider would only pay for the cost of the cheapest blood pressure medicine. While these programs do not limit the specific drugs patients may purchase, they only cover a portion of the cost of more expensive drugs in any given category.