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This paper reviews the literature on reference pricing (RP) in pharmaceutical markets. The RP strategy for cost containment of expenditure on drugs is analyzed as part of the procurement mechanism. We review the existing literature and the state-of-the-art regarding RP by focusing on its economic effects. In particular, we consider: (1) the institutional context and problem-related factors which appear to underline the need to implement an RP strategy; i.e., its nature, characteristics and the sort of health care problems commonly addressed; (2) how RP operates in practice; that is, how third party-payers (the insurers/buyers) have established the RP systems existing on the international scene (i.e., information methods, monitoring procedures and legislative provisions); (3) the range of effects resulting from particular RP strategies (including effects on choice of appropriate pharmaceuticals, insurer savings, total drug expenditures, prices of referenced and non-referenced products and dynamic efficiency; (4) the market failures which an RP policy is supposed to address and the main advantages and drawbacks which emerge from an analysis of its effects. Results suggest that RP systems achieve better their postulated goals (1) if cost inflation in pharmaceuticals is due to high prices rather than to the excess of prescription rates, (2) when the larger is the existing difference in prices among equivalent drugs, and (3) more important is the actual market for generics.

In this paper we describe the existence of financial illusion in public accounting and we comment on its effects for the future sustainability of local public services. We relate these features to the lack of incentives amongst public managers for improving the financial reporting and thus management of public assets. Financial illusion pays off for politicians and managers since it allows for larger public expenditure increases and managerial slack, these being arguments in their utility functions. This preference is strengthen by the short time perspective of politically appointed public managers. Both factors run against public accountability. This hypothesis is tested for Spain by using an unique sample. We take data from around forty Catalan local authorities with population above 20,000 for the financial years 1993-98. We build this data basis from the Catalan Auditing Office Reports in a way that it can be linked to some other local social and economic variables in order to test our assumptions. The results confirm that there is a statistical relationship between the financial illusion index (FI as constructed in the paper) and higher current expenditure. This reflects on important overruns and increases of the delay in paying suppliers, as well as on a higher difficulties to face capital finance. Mechanisms for FI creation have to do among other factors, with delays in paying suppliers (and thereafter higher future financial costs per unit of service), no adequate provision for bad debts and lack of appropriate capital funding either for reposition or for new equipments. For this, it is crucial to monitor the way in which capital transfers are accounted in local public sheet balances. As a result, for most of the Municipalities we analyse, the funds for guaranteeing continuity and sustainability of public services provision are today at risk. Given managerial incentives at present in public institutions, we conclude that public regulation recently enforced for assuring better information systems in local public management may not be enough to change the current state of affairs.

The organisation of inpatient care provision has undergone significant reform in many southern European countries. Overall across Europe, public management is moving towards the introduction of more flexibility and autonomy . In this setting, the promotion of the further decentralisation of health care provision stands out as a key salient policy option in all countries that have hitherto had a traditionally centralised structure. Yet, the success of the underlying incentives that decentralised structures create relies on the institutional design at the organisational level, especially in respect of achieving efficiency and promoting policy innovation without harming the essential principle of equal access for equal need that grounds National Health Systems (NHS). This paper explores some of the specific organisational developments of decentralisation structures drawing from the Spanish experience, and particularly those in the Catalonia. This experience provides some evidence of the extent to which organisation decentralisation structures that expand levels of autonomy and flexibility lead to organisational innovation while promoting activity and efficiency. In addition to this pure managerial decentralisation process, Spain is of particular interest as a result of the specific regional NHS decentralisation that started in the early 1980 s and was completed in 2002 when all seventeen autonomous communities that make up the country had responsibility for health care services. Already there is some evidence to suggest that this process of decentralisation has been accompanied by a degree of policy innovation and informal regional cooperation. Indeed, the Spanish experience is relevant because both institutional changes took place, namely managerial decentralisation leading to higher flexibility and autonomy- alongside an increasing political decentralisation at the regional level. The coincidence of both processes could potentially explain why some organisation and policy innovation resulting from policy experimentation at the regional level might be an additional feature to take into account when examining the benefits of decentralisation.