# Impact of equivalent units of production on state-controlled unit cost calculation for fair pricing of pharmaceuticals: a scoping review

## TL;DR

This paper reviews how using continuous process costing could help make pharmaceutical pricing fairer by improving cost transparency and aligning with UN sustainability goals.

## Contribution

The study identifies a gap in linking pharmaceutical pricing to continuous process costing and proposes mandatory cost disclosures to improve fairness.

## Key findings

- Only 8 out of 46 reviewed articles addressed pharmaceutical unit production costs directly.
- No studies were found linking pharmaceutical pricing to continuous process costing or Equivalent Units of Production.
- Three key gaps were identified: lack of standard costing methods, absence of state-regulated systems, and no enforceable markup ceilings.

## Abstract

Ninety-one percent of 1500 patient groups surveyed across 78 countries perceive pharmaceutical firms’ pricing policies as unfair. Despite this, there is little evidence of pharmaceutical companies adopting continuous process costing, a management accounting method that could help transparently track costs and determine fair pricing. This study investigates the link between unit costs, equivalent production units, and fair pharmaceutical pricing. To enhance transparency, fairness, and affordability, we propose mandating the disclosure of unit cost formulas, costing methods, and markup ceilings in annual reports, in alignment with UN SDG goals.

This review followed the Joanna Briggs Institute’s (JBI) methodology for scoping reviews to frame the research question, identify relevant studies in databases, select studies, extract the data, report the results and guide consultation sessions with stakeholders with lived experience on potential implications. The search period was January 2022 to November 2023. We used Preferred Reporting Items for Systematic Reviews and Meta Analysis (PRISMA)-Scoping Review extension to present the results.

46 articles were eligible out of 1,281 initially screened. 8 articles addressed pharmaceutical unit production costs; 1 empirical study focused on Equivalent Units of Production (EUP) practices, revealing discrepancies between industry costing practices and academic models; and, the remaining 37 articles explored fair pricing frameworks, emphasising value-based pricing, ethics, and policy considerations. Three gaps emerged: no studies link pharmaceutical pricing to continuous process costing/EUP, despite extensive fair pricing research; absence of standardised methodologies for applying continuous costing in pharmaceutical contexts; and lack of state-regulated uniform costing systems or enforceable mark-up ceilings, impeding cost transparency and fair pricing.

No evidence linked pharmaceutical pricing models to continuous process costing/EUP. Addressing this gap requires mandatory disclosures of regulated uniform costing methods and mark-up ceilings in published annual financial reports. This will improve transparency, social accountability, fair pricing, and medicine affordability – aligning with UN SDGs 3 (Good Health) and 10 (Reduced Inequalities).