Understanding the components of pharmaceutical expenditure—overview of pharmaceutical policies influencing expenditure across European countries

Abstract

Aim: To explain the components of pharmaceutical expenditure and illustrate the strengths and limitations of this indicator. In particular, we explore policies applied in European countries that affect the price and volume of medicines. Methodology: This paper is based on a presentation held at the European Drug Utilization Research Group (EuroDURG)/International Society for Pharmacoepidemiology (ISPE) meeting in Antwerp, Belgium on 1 December 2011. The aim is to raise awareness of the limitations of pharmaceutical expenditure and explain how to interpret pharmaceutical expenditure data. Updated pharmaceutical policies in European countries are based on surveys by the WHO Collaborating Centre for Pharmaceutical Pricing and Reimbursement Policies (Vienna, Austria). Results: Pharmaceutical expenditure consists of price and volume components. Prices may be indicated at different levels: key price types are ex-factory price (manufacturer level), pharmacy purchasing price (wholesale), and the pharmacy retail price (pharmacy). Taxes, such as value-added tax, are likely to be added. In the hospital sector, different price types, e.g. official hospital price and actual hospital price, apply. Volume may be expressed in sales units, e.g. standard units; prescriptions, or defined daily doses. Pharmaceutical policies, e.g. reference price system, prescription monitoring, discounts and rebates, influence prices or volume and thus pharmaceutical expenditure. Conclusion: When analysing pharmaceutical expenditure data, our advice is to check which components are included and which markets the data refer to. One particular limitation of total pharmaceutical expenditure data is that they often only cover the out-patient sector.