Price indexing

Contrac tors bids offer the most rehable information on cost. Order-of-magnitude costs, however, may be required for preliminary studies. One way of estimating them is to obtain cost information from similar facihties and scale it to the proposed installation. Costs of steel storage tanks and vessels have been found to vaiy approximately as the 0.6 to 0.7 power of their weight [see Happel, Chemical Process Economics, Wiley, 1958, p. 267 also Williams, Chem. Eng., 54(12), 124 (1947)]. AU estimates cased on the costs of existing eqiiipment must be corrected for changes in the price index from the date when the equipment was built. Considerable uncertainty is involved in adjusting data more than a few years old. 

TABLE 25-69 Solid Waste Price Index, WTE Incinerator Intake TPD-Tip Fee, September 1994... 

FIG. 25-66 Waste -to-energy price index. National index, September 1994, 57.49/ton. Data from Solid Waste Digest, -ool. 4, no. 9, Sept. 1994. Fuhlished hy Chatiwell Information Publishers, Alexandria, VA. )... 

Price Indexing Some gas prices, by contractual agreement, reflect changes in the spot, futures or other markets, such as heating oil. Price indexing is often used to reflect that the parties to the contract believe the price to be paid is related in some way to the particular index used. 

Costs converted to US doiiars (1996 vaiue) using the Heaith Purchasing Power Parity price index (OECD, 1999). 

If it can be assumed that world market forces will level out the prices of equipment, the UK price can be estimated from the US price by bringing the cost up to date using a suitable US price index, converting to pounds sterling at the current rate of exchange, and adding an allowance for freight and duty. 

Since the Wholesale Price Index for Industrial Chemicals changed only 1% between 1959 and 1971, no correction will be applied to obtain the 1974 prices. 

The analysis of the contribution made by increased pharmaceutical spending to the growth in the per capita intensity of health resources suffers from major measurement problems that deprive available indicators of any value. Traditional pharmaceutical price indexes (such as the Laspeyres index, used to calculate the pharmaceutical component of the consumer price index) provide little relevant information in a market in which the introduction of therapeutic innovations is of prime importance the indexes show an apparent freeze, and sometimes even a steep drop (as in the Spanish case). However, the steady rise in the average price per prescription paints a very different picture. 

An accurate measure of the apparent causes of the evolution of pharmaceutical expenditure could be obtained by taking chain-linked Laspeyres price indexes for each therapeutic group with a suitable level of disaggregation. In this situation, ideally we would have monetary measures of willing-... 

This price cap is established in the form of a price index for a set (or a series of subsets) of the services offered by the regulated company, excluding those offered on competitive markets (for example, generics). 

The price index is adjusted periodically according to an adjustment factor that is pre-established and exogenous to the company during the lifetime of the regulatory contract, but can be established on the basis of the fulfilment of certain policies by the company in the previous period (for example, R D policies, limits on spending on advertising and promotion and so on). 

One study on the evolution of Spanish public pharmaceutical expenditure21 concludes that spending on pharmaceuticals rose 264 per cent in real terms from 1980 to 1996. This figure can be broken down into a 39 per cent decrease in the relative price of medicines, a 10 per cent increase in the quantity and a variation of 442 per cent explained by a residual that reflects the effect of the introduction of new products and a shift in consumption. As we can see from these figures, we have no practical price index and no quantitative approximation to the breakdown of the increase in expenditure into price and quality. 

Objective The objective of this study is to construct pharmaceutical price indexes in order to be able to make crossnational comparisons and analyse the causes of the differences between countries. 

Method The authors use information on all non-hospital sales of pharmaceutical products in 1992 in a sample of countries consisting of the USA, Canada, Germany, France, Italy, Japan and the UK. The database was provided by Intercontinental Medical Systems (IMS). The empirical analysis is based on the calculation of the Paasche and Laspeyres price indexes and the ratio between them. The descriptive analysis is completed with the econometric analysis (quasi-hedonic model) of the determining factors of the variation in the relative prices of each active ingredient in each country taking the USA as the point of comparison. 

Conclusions When weighted samples are used that are representative of consumption in each country, the differences in the pharmaceutical price indexes are much smaller than those observed until now. Strict price regulation is related to lower prices for older and more universally distributed compounds. However, generic competition is responsible for notable price reductions in non-regulated markets. 

Bemdt, E.R. et al. (1998), Price indexes for medical care goods and services an overview of measurement issues , National Bureau ofEconomic Research working paper no 6817, Cambridge, MA. 

Lobato s work19 makes at least four contributions. First, it seeks to quantify the demand for pharmaceuticals and argues that those variables that are employed in an attempt to approximate physical consumption, such as the number of prescriptions or packages, are not useful because they sum heterogeneous units. Monetary valuation presents the problem (considered below) of what price indexes are to be applied as deflators when studying the evolution of demand and expenditure over time. 

Rovira s proposals22 regarding drug price indexes are still relevant today. Lobato19 considers that the consumer price index (CPI) is not a suitable deflator for series of pharmaceutical expenditure (it leads to absurd conclusions real consumption would not have risen between 1969 and 1989). A deflator built on authorized price reviews leads to the opposite result, likewise illogical (the Social Security demand cannot have risen 12.5 times between 1969 and 1989). Consequently, the author constructs an ad hoc deflator which... 

Labor costs experience inflation just as do capital costs as Figure B.5 demonstrates. Raw materials and fuel costs are subject to considerable erratic fluctuations as demonstrated by oil and metals prices, which have rapidly risen and fallen several times over the last five decades. For example, Figure B.6 shows the changes in refinery fuel price index since 1955. Prediction of refinery fuel prices in the future is clearly much more difficult than predicting capital costs. 

Consumers contributions to the cost of their medicines are limited by safety net thresholds, which are adjusted annually in relation to the consumer price index (CPI). Under the PBS the maximum cost for a listed item on 1 January 2005 is AUD 4.60 for concessional patients and AUD 28.60 for general patients, except where... 

The United Kingdom is seen from these figures to be a country with a comparatively low per-capita consumption of medicines, to have a high medicines price index and a strong pharmaceutical research base, therefore the various measures to contain medicines expenditure would appear to have had their greatest impact on the demand side. 

Conversely, in countries where the population is relatively small and where individual consumption of medicines is low and pharmaceutical industry investment is also low, the government is able to enforce low prices for medicines. These countries are typified by the Netherlands, Norway, Finland and Denmark. Sweden, where there is significant pharmaceutical research, is atypical of the rest of Scandinavia and the medicines price index and medicine consumption are approximately the European average. 

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