Estimating Drug Costs: How do Manufacturer Net Prices Compare with Other Common US Price References?

T. Joseph Mattingly, Joseph F. Levy, Julia F. Slejko, Nneka C. Onwudiwe and Eleanor M. Perfetto
Additional contact information
Joseph F. Levy: University of Maryland School of Pharmacy
Julia F. Slejko: University of Maryland School of Pharmacy
Nneka C. Onwudiwe: US Food and Drug Administration
Eleanor M. Perfetto: University of Maryland School of Pharmacy

PharmacoEconomics, 2018, vol. 36, issue 9, No 6, 1093-1099

Abstract: Abstract Background Drug costs are frequently estimated in economic analyses using wholesale acquisition cost (WAC), but what is the best approach to develop these estimates? Pharmaceutical manufacturers recently released transparency reports disclosing net price increases after accounting for rebates and other discounts. Objective Our objective was to determine whether manufacturer net prices (MNPs) could approximate the discounted prices observed by the U.S. Department of Veterans Affairs (VA). Methods We compared the annual, average price discounts voluntarily reported by three pharmaceutical manufacturers with the VA price for specific products from each company. The top 10 drugs by total sales reported from company tax filings for 2016 were included. The discount observed by the VA was determined from each drug’s list price, reported as WAC, in 2016. Descriptive statistics were calculated for the VA discount observed and a weighted price index was calculated using the lowest price to the VA (Weighted VA Index), which was compared with the manufacturer index. Results The discounted price as a percentage of the WAC ranged from 9 to 74%. All three indexes estimated by the average discount to the VA were at or below the manufacturer indexes (42 vs. 50% for Eli Lilly, 56 vs. 65% for Johnson & Johnson, and 59 vs. 59% for Merck). Conclusions Manufacturer-reported average net prices may provide a close approximation of the average discounted price granted to the VA, suggesting they may be a useful proxy for the true pharmacy benefits manager (PBM) or payer cost. However, individual discounts for products have wide variation, making a standard discount adjustment across multiple products less acceptable.

Date: 2018
References: View complete reference list from CitEc
Citations: View citations in EconPapers (6)

Downloads: (external link)
http://link.springer.com/10.1007/s40273-018-0667-9 Abstract (text/html)
Access to the full text of the articles in this series is restricted.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:spr:pharme:v:36:y:2018:i:9:d:10.1007_s40273-018-0667-9

Ordering information: This journal article can be ordered from
http://www.springer.com/economics/journal/40273

DOI: 10.1007/s40273-018-0667-9

Access Statistics for this article

PharmacoEconomics is currently edited by Timothy Wrightson and Christopher I. Carswell

More articles in PharmacoEconomics from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().