Pharma Industry
Industry: Email Alert RSS FeedDeveloping a reference-based pricing strategy for your formulary - excerpt from 'PBM Formulary Strategies' by Tim Watson - Excerpt
Drug Cost Management Report, March, 2003 by Tim Watson
Figure 10. Timeline for Adoption of
Reference Pricing
Country Reference Pricing Introduced
Germany 1989
The Netherlands 1991
Sweden 1993
Denmark 1993
New Zealand 1993
British Columbia 1995
Australia 1996
Italy 1996
Spain 2000
Source: Danzon PM. Reference Pricing: Theory and Evidence. May 22,
2001, page 1.
Figure 11. Example of Price Ranges
Within the PPI Category
Philosec $143.96
Prevacid $134.14
Aciphex $124.75
Nexium $123.29
Protonix $94.93
Generic Philosec $86.38
Note: Table made from bar graph.
Figure 12. Baseline Data for PPI Category
Market Share Total Rxs Avg Price/Rx Total Cost
Aciphex 5% 1,500 $124.75 $187,125
Protonix 1% 300 $94.93 $28,479
Prevacid 36% 10,800 $134.14 $1,448,712
Nexium 5% 1,500 $123.29 $184,935
Philosec 53% 15,900 $143.96 $2,288,964
100% 30,000 $4,138,215
Figure 13. Scenario 1-Half of Prilosec Rx
Convert To Generic Omeprazole
Market Share Total Rxs Avg Price / Rx Total Cost
Aciphex 5% 1,500 $124.75 $187,125
Protonix 1% 300 $94.93 $28,479
Prevacid 36% 10,800 $134.14 $1,448,712
Nexium 5% 1,500 $123.29 $184,935
Prilosec 27% 7,950 $143.96 $1,144,482
Omeprazole 27% 7,950 $86.38 $686,721
Total 100% $3,680,454
Figure 14. Scenario 2-Overall PPI
Utilization Shifts to Prilosec
Market Avg Price /
Share Total Rxs Rx Total Cost
Aciphex 5% 1,500 $124.75 $187,125
Protonix 10% 3,000 $94.93 $284,790
Prevacid 5% 1,500 $134.14 $201,210
Nexium 0% - - -
Prilosec 40% 12,000 $143.96 $1,727,520
Omeprazole 40% 12,000 $86.38 $1,036,560
Total 100% 30,000 $3,437,205.00
Figure 15. Scenario 3-Impact of
Reference Price Set at Least Expensive
Branded Product
Market Avg Price /
Share Total Rxs Rx Total Cost
Aciphex 5% 1,500 $94.93 $142,395
Protonix 1% 300 $94.93 $28,479
Prevacid 36% 10,800 $94.93 $1,025,244
Nexium 5% 1,500 $94.93 $142,395
Prilosec 27% 7,950 $94.93 $754,693
Omeprazole 27% 7,950 $94.93 $754,693
Total 100% 30,000 $2,847,900
Figure 16. Scenario 4-Impact of
Reference Price Set at Least Expensive
Product (Generic)
Market Avg Price /
Share Total Rxs Rx Total Cost
Aciphex 5% 1,500 $86.38 $129,570
Protonix 1% 300 $86.38 $25,914
Prevacid 36% 10,800 $86.38 $932,904
Nexium 5% 1,500 $86.38 $129,570
Prilosec 27% 7,950 $86.38 $686,721
Omeprazole 27% 7,950 $86.38 $686,721
Total 100% 30,000 $2,591,400
Figure 17. Impact of Reference Pricing
Strategies on Costs in PPI Class
Baseline $4,138
Scenario 1 $3,680
Scenario 2 $3,437
Scenario 3 $2,847
Scenario 4 $2,591
Note: Table made from bar graph.
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