Kaiser Report Examines Pharmaceutical Supply Chain
The pharmaceutical supply chain involves multiple organizations playing sometimes
overlapping roles in product distribution and contracting, but drugmakers clearly
have the most influence in establishing prices, according to a new report that
explains the multistep path a drug takes from manufacturer to patient.
The complexity of the system can result in considerable price variability for
the same product, says the report prepared by Health Strategies Consultancy
for the Kaiser Family Foundation. "Increased understanding of these issues
on the part of policymakers should assist in making rational policy decisions
for the Medicare and Medicaid programs," the report says.
Drugmakers play the most important role in establishing prices, the foundation
says. A relatively few, large multinational firms comprise the bulk of the brand
industry, according to the report. Ten firms accounted for 60 percent of total
U.S. sales in 2004. Manufacturers determine initial prices through a process
of assessing expected demand, future competition and projected marketing costs.
The firms are then able to establish the wholesale acquisition cost (WAC), which
is the baseline price at which.
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