Researchers discovered how drug spending is allocated across the pharmaceutical supply chain in a new study from Berkeley Research Group.
For the study, researchers estimated the total initial gross drug expenditures of patients and insurers — along with how much money different stakeholders within the pharmaceutical supply chain received for the drug sales — before arriving at the net amount actually realized by drugmakers. The stakeholders, or non-manufacturer entities, include distributors, pharmacy benefit manufacturers and pharmacists, among others.
Researchers defined "initial gross drug expenditures" as the sum of payments for prescription drugs made by patients and their health plans at the point of sale, before any rebates, discounts or fees are provided by manufacturers. The analysis uses wholesale acquisition cost sales and invoice sales data from IMS Health's National Sales Perspectives, along with other secondary research.
In 2015, brand name drug manufacturers retained 47 percent of total gross spending on medicines, or about $219 billion. Generic drugmakers retained 23 percent — or about $108 billion — and non-manufacturing entities retained about 27 percent, or $125 billion in 2015.
Retrospective rebates, discounts and fees have increased from $67 billion in 2013 to $106 billion in 2015. As a result, the share gross drug expenditures retained by brand name drugmakers declined from 41 percent in 2013 to 39 percent in 2015, while the share retained by non-manufacturer entities increased from 38 percent to 42 percent in the same time period, according to the report.
"The BRG study is the first to show what happens when the list price of a medicine meets the forces of private market negotiation, costs associated with a complex supply chain and mandated government discounts in Medicaid, the VA and the 340B program," said Stephen J. Ubl, president and CEO of the Pharmaceutical Research and Manufacturers of America, which commissioned the study. "The study begs an important question: Are we doing enough to ensure the growing amount of rebates and discounts flow to the patient?"
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