A Transparent and Consistent Approach to Assess US Outpatient Drug Costs for Use in Cost-Effectiveness Analyses

Joseph Levy, Marjorie Rosenberg, David Vanness

Research output: Contribution to journalArticlepeer-review

18 Scopus citations


Background: Assessment of drug costs for cost-effectiveness analyses (CEAs) in the United States is not straightforward because the prices paid for drugs are not publicly available and differ between payers. CEAs have relied on list prices that do not reflect the rebates and discounts known to be associated with these purchases. Objectives: To review available cost measures and propose a novel strategy that is transparent, consistent, and applicable to all CEAs taking a US health care sector perspective or a societal payer's perspective. Methods: We propose using the National Average Drug Acquisition Cost (NADAC), the Veterans Affairs Federal Supply Schedule (VAFSS), and their midpoint as the upper bound, lower bound, and base case, respectively, to estimate net drug prices for various payers. We compare this approach with wholesale acquisition cost (WAC), the most common measure observed in our literature review. The minimum WAC is used to provide the most conservative comparison. Results: Our sample consists of 1436 brand drugs and 1599 generic drugs. On average, the upper bound (NADAC) is 1% and 9.8% lower than the WAC for brand and generic drugs respectively, whereas the lower bound (VAFSS) is 48.3% and 54.2% lower than the WAC. The NADAC is less than the WAC in 89.6% of drug groups. The distributions of these relationships do not show a clear mode and have wide variation. Conclusions: Our study suggests that the WAC may be an overestimate for the base case because the minimum WAC is higher than the NADAC for most drugs. Our approach balances uncertainty and lack of data for the cost of pharmaceuticals with the need for a transparent and consistent approach for valid CEAs.

Original languageEnglish (US)
Pages (from-to)677-684
Number of pages8
JournalValue in Health
Issue number6
StatePublished - Jun 2018
Externally publishedYes


  • United States
  • cost-effectiveness analysis
  • drug cost
  • health economic methods

ASJC Scopus subject areas

  • Health Policy
  • Public Health, Environmental and Occupational Health


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