Ex-factory price (of medicines)

The ex-factory price is the price at which the marketing authorisation holder sells a pack to the wholesaler, before any trade margin and before VAT. It is the first price in the chain and the one most cross-country comparisons want, because every later price adds national margins and taxes that say more about the distribution system than about the product. Ten European countries publish it directly. In the others it has to be derived, estimated, or it is not available at all.

What the ex-factory price is, and what it is not

It is the manufacturer's selling price to the next stage of distribution, excluding VAT. It is not the price the wholesaler charges the pharmacy, not the pharmacy retail price, and in almost all cases not the price actually paid after confidential rebates.

Three distinctions decide whether two figures are comparable:

• Chain position. Ex-factory sits before the wholesale margin. A pharmacy purchase price includes it.
• Tax. Ex-factory is a net figure. Consumer prices in France, Spain, Portugal, Estonia and Cyprus include VAT.
• List against paid. Published ex-factory prices are list prices. Negotiated discounts are confidential in several markets.

National equivalents

The term changes with the language, and the national term is what you will find in the file.

Where it has to be derived

Where a country publishes a later stage, the ex-factory level is reconstructed by removing margins and tax in reverse order. That reconstruction is regulation, not arithmetic, and it is only as good as the statutory rule behind it.

The honest label matters. Where a statutory formula exists, the result is a derived price. Where a margin has to be assumed, it is an estimate, and it should be marked as one in any dataset that leaves your organisation.

Why the ex-factory level is the one that travels

External reference pricing compares countries at a defined level, and most national formulae reference the manufacturer level. Norway averages the three lowest prices from a basket of nine countries that includes Germany and Austria. Latvia caps the manufacturer price of prescription medicines at the lowest price in Lithuania or Estonia. The Netherlands calculate maximum prices from Belgium, France, Norway and the United Kingdom.

That is why an error at ex-factory level does not stay in one country. It propagates into every formula that reads that market.

Common mistakes

1. Comparing an ex-factory price with a pharmacy purchase price. The difference is the wholesale margin, not a price difference.
2. Forgetting that the German wholesale margin is capped. It is capped at 37.80 euro, and the cap applies from a manufacturer price of 1,200 euro upwards, so a percentage based back calculation fails on expensive packs.
3. Reading a margin band on the wrong basis. In Portugal and Spain the bands sit on the manufacturer price level. Read the wrong way round, the deviation in Portugal reaches 3.23 euro per pack.
4. Treating an upper bound as a price. Croatia publishes margin ceilings, so the back calculation gives the highest possible manufacturer price, not the actual one.
5. Mixing list and net. No European country publishes what is actually paid after rebates.

Conclusion

Ex-factory is the cleanest level for a cross-country comparison and the least frequently published one. Ten countries give it to you directly, four of them only under a licence contract, and the rest require a statutory back calculation or an assumed margin. Establish which of the three situations applies before you compare anything, and label derived and estimated values as such.

Related reading: European Drug Pricing Database: how cross-border prices work and Pharma pricing Germany: how the system works.