Five criteria stand out as fundamental requirements for a drug pricing benchmark to be successful:
- Immune to manipulation
The Predictive Acquisition Cost® (PAC) meets all these criteria.
Transparency – Does the drug pricing benchmark bear a genuine relationship to the actual acquisition cost of the drug?
PAC satisfies various aspects of transparency required to gain market acceptance:
- Genuine relation to actual acquisition cost. PAC has been designed explicitly to reflect this.
- How it works. At a macro level, we can describe the factors that drive the PAC output; for a specific drug, we can offer insight into the factors most responsible for driving the output via reason-codes or sensitivity analysis.
Accessibility – Is the drug pricing benchmark readily accessible and can it be readily adopted by the pharmacy industry?
The PAC solution is designed to be distributed to all interested parties within the pharmaceutical supply chain. The PAC is available to anyone who wishes to subscribe via Elsevier Gold Standard.
PAC’s adoption should be no more complex than existing pricing benchmarks, used for both drug pricing analytics and as a daily contractual reimbursement benchmark. The PAC enables the pharmacy industry to move away from existing generic effective rate (GER) contracts and develop pricing strategies built off acquisition price.
Comprehensiveness – Is the drug pricing benchmark available for all branded and generic drug groups?
The PAC design lends itself to supporting brands and generics, including single-source generics. Developing benchmarks for generics is more complex than for brands, in large part due to a more dynamic underlying market that impacts price.
In addition, our multi-factor approach also lends itself to being tolerant of a given piece of information not being available. For example, we can generate a PAC for a new drug for which a survey-based AC may not yet have been collected.
Timeliness – Is the drug pricing benchmark updated with a frequency appropriate to the quickly changing actual acquisition costs, especially for generic products?
For a given drug, the PAC adjusts as soon as any of the input factors adjust. Some of the factors may be updated more periodically and have some inherent staleness, while other factors will almost immediately reflect changing market conditions. The PAC synthesizes all relevant information available to it at any point in time.
Immune to manipulation – Is the drug pricing benchmark safe from manipulation?
Many of the inputs to our multi-factor model are inherently not prone to manipulation. Even market statistics (e.g. MAC benchmarks, survey-based AC) are difficult for one or two players to throw off if we work off the “median” rather than “average.”
We regularly re-train the model to ensure it accurately captures changes in relationships between input factors and output, leverages additional data feeds as they become available and incorporates learnings from past experience.
In addition, the PAC model maintains a robust monitoring system to detect any unusual movements in the factors or attempts at manipulation.