Estimating a Drug’s Price After Loss of Exclusivity as a Function of Its Cost of Goods Sold

Background The majority of cost-effectiveness analyses of pharmaceuticals do not incorporate future price changes that are expected once generic competition enters the market. A common rationale for not doing so is the uncertainty around what postloss of exclusivity price to model. The objective of this study is to assess if a drug’s price postloss of exclusivity can be estimated on the basis of its cost of goods sold (COGS). Methods First, stakeholders were engaged to understand pricing practices for generic drugs. Then peer-reviewed literature, gray literature, and manufacturer financial statements were reviewed to estimate the typical manufacturer profit margin over COGS. Using pricing data from the Mark Cuban CostPlus Drug Company (MCCPDC), estimates of COGS were calculated by drug form. Finally, a COGS-based approach to estimating a drug’s price postloss of exclusivity was tested. Results COGS were estimated for 2168 unique National Drug Codes (NDCs) reported in the MCCPDC price list by removing the typical manufacturer profit margin (50%) from the manufacturer prices (net of any markup or fees from the MCCPDC). A tablet/capsule, the most common form in the price list, had a median COGS of $0.10 per tablet/capsule. Estimating a drug’s price postloss of exclusivity as the median COGS for that drug form times two (to reflect a 50% profit margin), produces estimates of postloss of exclusivity prices that account for drug-specific attributes. Conclusions This study provides an evidence-based approach to estimate a drug’s price postloss of exclusivity as a function of its COGS for incorporation into cost-effectiveness analyses.