Ex-factory, wholesale, pharmacy, reimbursement: which price is which

The ladder

Ex-factory (manufacturer) price. What the manufacturer or its distributor invoices the wholesaler. This is the price that most national pricing systems actually regulate, negotiate or cap, and the one that external reference pricing compares. Also called the producer price, the manufacturer selling price, or in French PFHT (prix fabricant hors taxes).

Wholesale margin and wholesale price. The wholesaler’s remuneration, regulated in most European countries as a percentage, a fixed fee, a degressive scale, or a combination, and sometimes capped. Added to the ex-factory price it gives the wholesale selling price, which is the pharmacy’s purchase price.

Pharmacy purchase price. What the pharmacy pays (German AEP, Nordic AIP). Several Northern European lists publish this rung as the headline price, which makes them look cheaper than lists that publish retail.

Pharmacy margin, dispensing fee and VAT. The pharmacy’s remuneration, again regulated and often degressive or flat per pack, plus VAT at the national rate for medicines, which ranges from zero to the standard rate.

Public (retail) price. What a patient would pay with no reimbursement (German AVP, Nordic AUP, French PPTTC, Spanish PVP). The headline price in most Southern and Western European lists.

Reimbursement price and reference price. What the payer actually covers. In reference-price systems the payer sets a reimbursement limit for a group of interchangeable products; the patient pays any difference above it. In the UK, the Drug Tariff price for a generic is a reimbursement price derived from a survey of what pharmacies pay, not a regulated list price at all.

The two mistakes

Comparing different rungs. A manufacturer price in one country against a retail price in another overstates the gap by the margins and VAT in the second country, which can be 30 to 60 per cent. Before any comparison, bring both prices to the same rung, usually ex-factory, by removing margins and VAT using that country’s rules.

Treating a list price as a transaction price. Published prices are ceilings or references. Hospitals tender, wholesalers discount, payers negotiate confidential rebates and managed-entry agreements, and in Germany the published price of a product under AMNOG is not the negotiated reimbursement amount for the first year. The gap between list and net is the subject of its own explainer.

Which price for which purpose

• Parallel trade: the price you can actually buy at in the exporting country (wholesale or below, after discounts) against the price you can sell at in the destination (wholesale, below the reimbursement price). List prices bound the range; they do not give the answer.
• Launch pricing: the ex-factory price of the originator and of any reference-price group in the destination market.
• External reference pricing: ex-factory, almost always; which is why manufacturers care about the ex-factory list in small reference countries.
• Procurement: the reimbursement or tender price, and the margin structure that sits above it.

Reading a list

Every published list should answer four questions before its numbers are used: which rung, which currency, VAT included or not, and as at what date. A surprising number of commercial comparisons fail the first question.

MPA’s prices dataset records the published price type for every price it holds, so that like is compared with like.