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 looking at various players along the drug supply chain.
Pharmacy revenues more than doubled from $30.8 billion to $76.9 billion during the period. Net spending for retail prescription drug coverage also increased from $250.7 billion in 2012 to $314 billion in 2016.
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 revenue, including administrative fees, skyrocketed, offsetting some of those savings
Pew’s report shines a light on the complex pharmaceutical supply chain as policymakers in both parties show more interest in rising prescription drug prices, including the middleman PBMs that often negotiate prices for employers. These across-the-board profit increases at every step of the ladder all eventually trickle down to patients in the form of higher out-of-pocket costs, premiums and taxes.
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."
New today, we release a “follow the $” report on retail drug spending - who spends how much and who is keeping the money after accounting for the complicated stakeholder financial transactions in the pharmaceutical supply chain? (thread) https://t.co/9ITN7Oloxd— Allan Coukell (@coukell) March 8, 2019
CMS has said retail prescription drug spending skyrocketed by almost 27% between 2012 and 2016 — faster than any other healthcare expenditure category. New specialty drugs are blamed for some of the cost increase. CMS believes retail prescription costs will continue to outpace other healthcare spending growth through 2026.
Health officials and policymakers view this area as one place to contain costs. However, unlike costs for procedures and services, the flow of money involving pharmaceuticals isn’t as clear. One reason is that there are multiple players in the chain, including drugmakers, wholesalers, pharmacies, PBMs and payers.
In its report, Pew showed that rebates and discounts are helping offset the rising cost of brand name drugs. Though rebates have controlled costs, PBMs have increased fees, which have increased healthcare spending.
Seven of the biggest drugmakers took fire from lawmakers at recent Capitol Hill hearing, where senators also warned PBMs to expect more scrutiny in the coming months. Sen. Ron Wyden, D-Oregon, also asked company officials at the recent hearing to produce written answers about whether they would lower list prices if Congress eliminated rebates.