Pharmacoeconomic Concepts Overview

  • Net Profit = gross margin – expenses (salaries, rent, utilities, etc)
  • AWP differential = EAC – AAC          this the profit that the pharmacy makes on the ingredient
    • AWP differential aka Earned discount
    • This doesn’t include a dispensing fee
  • Dispensing Fee = cost of dispensing (overhead aka salaries, rent, etc.) + profit
  • Gross margin = sales – cost of goods sold
  • Medical loss ratio (MLR)-
    • How much of the premium is used to provide services
    • If the doctor receives $100 for a procedure and it only costs him $85, MLR = .85
    • Higher the MLR the better for the purchaser
  • comparing generic drugs on price is an example of a cost minimization study
  • Cost effectiveness study-  data is gained from a clinical trial or controlled study, report units in dollars ($) /physiologic unit
  • Cost utility- data from clinical trial, take surveys of patients with regards to certain preferences (QALY)

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