Abstract

Objectives

The objective of this report is to provide guidance and recommendations on how drug costs should be measured for cost-effectiveness analyses conducted from the perspective of a managed care organization (MCO).

Methods

The International Society for Pharmacoeconomics and Outcomes Research (ISPOR) Task Force on Good Research Practices—Use of Drug Costs for Cost Effectiveness Analysis (DCTF) was appointed by the ISPOR Board of Directors. Members were experienced developers or users of CEA models. The DCTF met to develop core assumptions and an outline before preparing a draft report. They solicited comments on drafts from external reviewers and from the ISPOR membership at ISPOR meetings and via the ISPOR Web site.

Results

The cost of a drug to an MCO equals the amount it pays to the dispenser for the drug's ingredient cost and dispensing fee minus the patient copay and any rebates paid by the drug's manufacturer. The amount that an MCO reimburses for each of these components can differ substantially across a number of factors that include type of drug (single vs. multisource), dispensing site (retail vs. mail order), and site of administration (self-administered vs. physician's office). Accurately estimating the value of cost components is difficult because they are determined by proprietary and confidential contracts.

Conclusion

Estimates of drug cost from the MCO perspective should include amounts paid for medication ingredients and dispensing fees, and net out copays, rebates, and other drug price reductions. Because of the evolving nature of drug pricing, ISPOR should publish a Web site where current DCTF costing recommendations are updated as new information becomes available.