The WHO pharmaceutical price build-up

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SOURCE: https://www.imshealth.com/files/web/IMSH%20Institute/Healthcare%20Briefs/Understanding_Pharmaceutical_Value_Chain.pdf

PricebuildupWHO

In defining and measuring the elements of the value chain, an initiative between the World Health Organization (WHO) and Health Action International (HAI) has established a useful methodology to classify the level of medicine price build-up at each step.

According to the WHO/HAI there are six key components which contribute to the price build-up of medicines (see Exhibit 1). These are as follows:

1. Manufacturer selling price: the net acquisition cost of the medicine from the manufacturer, reflecting all discounts, rebates or other reductions in price.

2. Cost, insurance, freight charges (CIF), import tariffs and charges: the cost of importing a finished pharmaceutical product (FPP) or active pharmaceutical ingredient (API) into a country.

3. Importer margin: applied by the importer who is tasked with procuring and receiving delivery of imported goods. Elements of the medicine value chain 2

4. Distributor margin: applied by wholesalers and sub-wholesalers to perform the logistical role of storing and subsequently transporting medicine to point of sale.

5. Retailer margin: applied by retailers in the final step of the distribution chain, the point at which medicines are dispensed to patients.

6. Taxes: the final component of the price build-up which can include both national and regional taxes.

 

 

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