Understanding the pharmaceutical value chain

Article type: Research Article

Authors: Aitken, Murray

Affiliations: IMS Institute for Healthcare Informatics, 100 IMS Drive, Parsippany, NJ 07054, USA. Tel.: +1 973 316 4034; Fax: +1 973 541 3589; E-mail: maitken@theimsinstitute.org

Abstract: Understanding the pharmaceutical value chain requires the identification of each component from manufacturer to end consumer of medicines - and to understand their interaction. In most cases, the manufacturer's selling price represents only a fraction of the retail price of a drug. More than half of the end user price results from insurance, freight charges (CIF), import tariffs and charges, importer margin, distributor margin, retailer margin and taxes. The article describes the elements of the medicine value chain, outlines factors and costs that contribute to the difference between the net price a pharmaceutical manufacturer receives for a drug and the final amount paid for the drug by the end user. It quantifies the price build-up for specific therapy areas and countries and illustrates the diversity of approaches and costs associated with the value chain through case studies.

Keywords: Pharmaceutical value chain, pharmaceutical distribution and retail margins, pharmaceutical cost analysis

DOI: 10.3233/PPL-160432

Journal: Pharmaceuticals Policy and Law, vol. 18, no. 1-4, pp. 55-66, 2016