Prices and distribution margins of in-patent drugs in pharmacy: A comparison in seven European countries

Abstract

Objectives To compare prices of in-patent active ingredients (AIs) in Europe at three levels (ex-factory prices, net distribution margins and third party payers’ prices). Methods We compared the prices in seven EU countries (Belgium, France, Germany, Italy, the Netherlands, Spain and the UK) of the 20 in-patent AIs most sold on the Italian retail market in 2004, based on “sell in” sales data. We calculated the average ex-factory price per unit of each compound in each of the seven countries, weighted by the volumes of all reimbursable package sizes and strengths. We estimated net distribution margins according to the 2004 domestic regulations by deducting any type of mandatory discount. Finally, we added VAT to calculate “third party payer's prices”. All prices were expressed in index numbers (Italy = 100). Results Italy had the lowest average ex-factory prices, the Netherlands and particularly the UK had by far the lowest distribution margins, while Germany had by far the highest third party payers’ prices. The Netherlands and particularly UK showed a steep decrease from ex-factory to third party payers’ prices, while Belgium, Italy and Spain gave the opposite pattern. Conclusions Our study suggests that public authorities can deal with drug prices both by strictly controlling ex-factory prices and by establishing appropriate distribution margins. The latter might be facilitated by liberalizing the distribution sector.