Pharmacy retail price
Explanation of abbreviations and terms
• HAMP - Human medicinal product with marketing
authorisation
• MD - Medical device
• PMP - Prepared medicinal product
• GDP - gross domestic product
• OECD - Organisation for Economic Co-operation
and Development
• VAT - value added tax
Explanation of abbreviations and terms
• EU - European Union
• CZE - Czech Republic
• SÚKL - Státní ústav pro kontrolu léčiv - State Institut for Drug Control SIDC
• CZK - Czech crown
• IHIS - Institute of Health Information and Statistics of the Czech Republic
• CZSO - Czech Statistical Office
• MZ - Ministerstvo zdravotnictví ČR - Ministry of Health CZE
• Mark-up - common “surcharge“ for the distributor and pharmacy,
is determined on a percentage rate calculated from the price actually
applied by producer in CZK without VAT
• Ex-factory price - the price at which the manufacturer shall provide the
medicinal product on the market
How to keep accessibility and
availability of healthcare?
By solving this issues:
• Number of health-care facilities
• Quality of health service
• Funding of health care and prices of health services
or medicinal products
Regulation - is it the right way?
Deregulation or regulation in the health-care is often
discussed topic.
For example in the pharmacy sector:
Deregulation in this sector is usually aimed to:
• increase the accessibility of medicinal products and
pharmaceutical services
• increase the quality of services through competition
• drive down prices of these products or services through
competition
• However, these could be false expectations or not fully
met expectations.
Health expenditures and importance of price
regulation in health care
In general - Why are the prices in health care
regulated?
- providing availability of health care
- regulation and saving of health expenditure - mainly
from public sources
- to have the possibility of „predicting“ future
expenditures
• http://www.keepeek.com/Digital-Asset-Management/oecd/social-issues-
migration-health/health-at-a-glance-2013/health-expenditure-per-
capita_health_glance-2013-64-en#page4
• http://www.oecd-ilibrary.org/sites/health_glance-2011-en/07/05/g7-05-
01.html?itemId=/content/chapter/health_glance-2011-64-
en&_csp_=1cc4108e291fece3f264ef765504b47c
• http://www.oecd-ilibrary.org/sites/health_glance-2013-en/07/04/g7-04-
01.html?contentType=&itemId=%2fcontent%2fchapter%2fhealth_glance-2013-67-
en&mimeType=text%2fhtml&containerItemId=%2fcontent%2fserial%2f19991312&accessItemIds=%2fcontent%2fbook%2fhealth
_glance-2013-en&_csp_=82798c694fdeaaf10461068180fbef5d
The basic principles of price
regulation of Pharmaceuticals
• For the Course Pharmacy Practice is the most
important the part of Expenditures on
pharmaceuticals.
• Foremost, will be described the general principle
and samples from different states and then we will
focus on situation in Czech Republic.
The basic principles of price
regulation of Pharmaceuticals
Price control is a competence of each country (there is no
unify method within EU as well) and reflects:
• the different national healthcare policy priorities
• prescribing behavior
• patterns of utilization of pharmaceuticals
• purchasing power or willingness to pay
• Price control may by applied to all pharmaceutical
whether or not they are reimbursed, or to specific groups
of pharmaceuticals (e.g. only reimbursed, only for
inpatient care or outpatient, ..)
without compromising patient access!!
The basic principles of price
regulation of Pharmaceuticals
Where can be prices of these products influenced?
At the level of:
• the manufacturer price (ex-factory price)
• the wholesaler price
• the pharmacy retail price
• VAT
Prices of pharmaceuticals
• Furthemore - prices of pharmaceuticals differ in the
international scale due to factors:
o different pack sizes and distribution channels
o import duties/taxes
o exchange rate fluctuations
• So it looks like that there is a tremendous difference in
prices at each stage of chain from ex-factory price to
pharmacy retail price between countries.
• This price spread between lowest and highest is
significantly more apparent:
o in generic medicines than in branded
o in less expensive medicines than more expensive medicines
•
Levels of goverment influence and
regulation
Ex-factory price:
• Possibilities e.g.:
1) national authority determines
the maximum ex-factory price e.g. via
reference pricing (details will be explained in "Social
pharmacy")
2) without regulation
Levels of goverment influence and
regulation
Wholesale level
Possibilities e.g.:
1) The wholesale mark up is not regulated by the
government, but based on free agreements between
manufacturers / wholesalers and pharmacy
2) The wholesale mark up is regulated
by regressive/degressive or flat mark-up
• Discount?
Levels of goverment
influence and regulation
Example: Pharmacy retail price level based on Mark-
up:
• Pharmacy retail price = Rough price for the final consumer
• - ex-factory price + mark up + VAT
Possibilities - the mark up:
o statutory – usually if there is reimbursement
o one's (own free) choice - usually if these products are not
reimbursed
Types of Mark up
Constant mark up (flat) - e.g. 28 % for all goodsdegressive mark up - e.g. Higher ex-factory price means lower
allowed mark-up
Levels of goverment
influence and regulation
• Types of Mark up:
o Can be set like maximum /=it is not necessry to apply full mark-up/
o Fixed
• So based on the principle of the regulation - in the end of
supply chain - price of the medicinal product can be consistent in
all pharmacies (fixed prices) in one country or vary pharmacy to
pharmacy in another country.
Pharmacy retail price regulation
Specific group of pharmaceuticals in the field of price
setting are medicinal products prepared in the pharmacy in
here the situation differs greatly among the world:
• The fee for preparing usually depends on the dosage
form of prepared product.
• In some countries, this fee is paid for each preparing,
regardless of quantity.
• Elsewhere is changed when multiple quantities are
prepared or even is account the exact time spent by
preparing.
• And vice versa In some countries is it without official
benefit for pharmacy…
Value added tax
in European countries
Value added tax (VAT) is a form of consumption tax added to a product's
sales price
The purpose of VAT is to generate tax revenues to the government
VAT in EU
- each Member State's national VAT legislation must comply with the
provisions of EU VAT law as set out in Directive 2006/112/EC
- sets out the basic framework for EU VAT, but does allow Member States
some degree of flexibility:
have a minimum standard (basic) rate of VAT of 15%
could be applied one or two reduced rates, but cannot be below 5%
Value added tax and medicinal products
- vary significantly across EU
Note: some old EU Member States have a exempt and shall apply 0% VAT
rate on certain supplies – like UK exempting some groups of medicinal
products from VAT
Pharmacy retail price in
CZE
Health expenditures in Czech
Republic
To describe health expenditures in the years 1990 -
2012, see graph bellow- every year health
expenditures grows (sharp growth in the years after "Velvet
revolution„)
•
Pharmacy retail price regulation in
the Czech republic
Simplified, In the Czech Republic, there is statutory pricing for all
reimbursable pharmaceuticals with marketing authorisation and prices
of non‐reimbursable pharmaceuticals are not regulated - it means:
Pharmacy retail price regulation in
the Czech republic
The maximum pharmacy retail price based
on common maximum wholesale and pharmacy
mark up and VAT.
The administrative authority of price regulation in
Czech Republic is SIDC (State Institute for Drug
Control) and Ministry of Health CZE.
Pharmacy retail price regulation in
the Czech republic
The legislation of price regulation
• - Act ….on Prices,
• - Price regulation by the Ministry of health MZ ČR
(1/2013 FAR)
• - Price regulation by Ministry of health ČR
(3/2012/FAR) – medicinal devices
• - OOP 01 – 16 (Regulation by SIDC) - measures of a
general nature concerning the amount and terms
of payment of prepared medicinal products and
other regulation by SIDC (OOP)
Pharmacy retail price regulation in
the Czech republic
VAT in Czech pharmacies
2nd Reduced VAT – 10 %:
- Medicinal products for human use, Prepared medicinal
products, some medicinal products for veterinary use.
1st reduced VAT – 15%:
Some groups of medicinal devices, some additional
products
Standard VAT – 21%:
- Medicinal products - for veterinary use (some), some
groups of medicinal devices, some additional products
Zone – ex-facotry price
Price regulation of Human authorised
medicinal product in CZE
• This Mark up
o is common wholesale and pharmacy
o there are no official agreements on
how the mark-ups are split,
but wholesale distributors - mostly 2 % - 5%
o mark-up = maximum (not fixed!) - this
can distinguish prices in pharmacy
Example: the calculation of pharmacy retail price of HAMP:
Ex-factory price = 200 CZK - It means calculation according
to Zone 2
Maximum mark-up = 33% of Ex-factory price + 6 CZK
additional part
VAT = 10%
Pharmacy retail price without VAT: 200 CZK + 33% (of 200
CZK) + 6 CZK = 272 CZK
Pharmacy retail price with VAT: 272 CZK + 10% (of 272
CZK) = 299,20 CZK
How to calculate the price?
- choose the zone according to ex-factory price
- add the mark-up according to the level
- add VAT – human authorised medicinal products – 10%
Price regulation of Medical devices in
CZE
Example: calculation of pharmacy retail price of MD
Ex-factory of elastic bandage is 15 CZK.
VAT for this product is set: 21%.
Calculate the maximum of pharmacy retail price:
Pharmacy retail price = 15 x 1,25 x 1,21 = 22,68 CZK
With price regulation:
Maximum mark-up 25 % of the ex-factory price
it is common wholesale and pharmacy mark-up (divided between
wholesaler and pharmacy)
there are no official agreements on how the mark-ups are split
VAT: 1st reduced or standard
Prices of medicinal products prepared in the
pharmacy in CZE
Σ (purchase prices of all used substances, materials
without VAT + Σ Taxa laborum) + VAT (10%)
-
Prices of medicinal products prepared in the
pharmacy in CZE
Taxa laborum – fee for preparing – depends on activity
provided (dissolving, mixing,…), number of components in
the medicinal product, whole prepared amount –
• cover costs for preparing
• given: price regulation by Ministry of health MZ
1/2013/FAR
• possibility of cumulation - but only:
o one of groups No 1.1 - 1.12.,
o one from groups 2.1.1 - 2.1.2.,
o one from groups 2.2.1. - 2.2.3,
o one from groups 2.3.1. - 2.3.5.
• taxa laborum is chosen according to the real methods
(activities) used by preparing
Calculation of pharmacy retail price of PMP
Rp.
Mentholi 4,0
Methylis salicylatis 9,0
Vaselini albi ad 100,0
M.f.ung.
D.S.ointment
Price of substances without VAT:
Mentholum ... 1CZK/g;
Methylis salicylatum ... 2CZK/g;
Vaselinum album ... 0,50CZK/g
Containers without VAT: jar 125ml ...5CZK; label ...1CZK
Calculation of pharmacy retail price of PMP
It is a preparation of ointment and the determined number
of components is 2 components - acitve substances.
From group we choose appropriate groups of taxa
laborum and we calculate along formula:
Σ (purchase prices of all used substances, materials
without VAT + Σ Taxa laborum) + VAT (10%)
Price of substances and containers = (4,0 x 1 + 9,0 x 2 + 87,0 x 0,5 + 5 + 1)
Taxa laborum = group 1.7. (91,67 CZK) + group 2.1.1. (3,10
CZK) +
group 2.2.2. (13,95 CZK)
Pharmacy retail price = ((4,0x1 + 9,0x2 + 87,0x0,5 + 5 + 1)
+ (91,67+3,10+13,95)) x 1,10 = 198,20 CZK
Reimbursement of medicinal products
• SIDC
• List of reimbursed medicinal products
• Announced 1st day/every month
Reimbursement of medicinal products
prepared in the pharmacy
Oop 01 – 16 („Regulation“ by SIDC) - reimbursement of medicinal products prepared in the
pharmacy
- there are written groups of medicinal products which prepared in the pharmacy and which are
NOT reimbursed in accordance to their use or content:
a) combination of substances with analgetic and/or antipyretic effect, except of combination
with codeine for non-analgesic use (gastroenterology);
b) antiphlogistics – for local application
c) decongescents of nose mucose, combinations - decongescens + other substances
d) medicinal products with herbal origin (tea…)
e) vitamins, combination of vitamins, combination - vitamins + minerals or other substances for p.o.
use
f) methionin for p.o. use except of hereditary diseases
g) expectorants and antitusics
h) treatment of erectile dysfunction
i) products containing:
- chinidin
- hydrargyri amidochloridum.
- - latanoprost
j) products containing combination of:
- coffein and ephedrin
k) antihemorrhoidalia for local application and rectal use
Medicinal products without price regulation
• Mark up:
• usually - 20 % - 30 % in the CZE
• reflects marketing strategy of the pharmacy