Current Edition

Pharmas, PBMs and payers all take a slice along drug supply chain, Pew finds

  • Spending on retail prescription drugs rose by almost 27% between 2012 and 2016, and a bigger share of health insurance premiums went toward pharmacy benefits, according to a new Pew Charitable Trusts study examining various players in the drug supply chain.
  • Pharmacy revenues more than doubled from about $31 billion to nearly $77 billion during the period. Net spending for retail prescription drug coverage also increased from $251 billion in 2012 to $314 billion in 2016, the report found. 
  • At the same time, drug manufacturer rebates increased from almost $40 billion in 2012 to nearly $90 billion in 2016. PBMs passed through 78% of rebates to payers in 2012 and 91% in 2016. However, other PBM revenue, includingadministrative fees,rose sharply higher, offsetting some of those savings

Pew’s report shines a light on the complex pharmaceutical supply chain just as policymakers on both sides of the aisle show fresh interest in reining in prescription drug pricing. Profit increases at each step can trickle down to patients in the form of higher out-of-pocket costs and premiums. 

Allan Coukell, senior director of health programs at Pew, said the study is unlike others because the researchers included “premiums allocated to the pharmacy benefit — important because including them gives a more complete picture of where a patient’s money goes.”

Other attempts have been made to document the flow of spending on pharmaceuticals. A study published in Health Affairs last summer, for example, found that drug manufacturers capture about two-thirds of total revenues retained from U.S. drug spending. 

The 27% growth between 2012 and 2016 that’s highlighted in Pew’s report is faster than any other healthcare expenditure category. New specialty drugs are blamed for some of the cost increase and CMS believes retail prescription costs will continue to outpace other healthcare spending growth through 2026.

Health officials and policymakers view pharmaceuticals as one place to contain costs. However, the flow of money involving pharmaceuticals isn’t clear. A supply chain with players at each step complicates the picture, with drugmakers, wholesales, pharmacies, PBMs and payers each holding a role. 

In its report, Pew showed that rebates and discounts are helping to offset the rising cost of branded drugs. Though rebates have controlled costs, PBMs have simultaneously increased fees, driving healthcare spending higher. 

Seven of the biggest drugmakers recently faced criticism from lawmakers at a Capitol Hill hearing in which senators also warned PBMs to expect more scrutiny in the coming months. 

Sen. Ron Wyden, D-Oregon, also asked pharma officials to produce written answers about whether they would lower list prices if Congress eliminated rebates — a contentious issue for PBMs.