- There’s a big difference between the initial price tag of a medication, how much payers and patients actually pay for it, and the net revenue drugmakers take home, according to a report released earlier this week.
- Funded by PhRMA, the leading trade association for the industry, the report analyzed the “complex process” that puppeteers drug spend and pricing.
- The report argues increased industry competition coupled with more gated access to formularies of pharmacy benefit managers (PBMs) are spurring price hikes. But even with those increases, manufacturers are reaping lower percentages of gross revenues.
The PhRMA-backed report made the case that drugmakers are not solely to blame for ballooning treatment prices, which have come under intense scrutiny from state and federal legislatures, industry executives and research organizations.
"As competition in the pharmaceutical marketplace has increased in recent years, brand manufacturers have been making larger payments for market access to their medicines,” the Jan. 18 report said. “Government-mandated discounts and fees have also increased over the last five years. Many of these discounts are not plainly visible, leading to misperceptions about the relative share of gross and net drug expenditures realized by brand manufacturers."
To be clear, each player has taken home large chunks of the drug sales revenue as well.
The report found that non-manufacturers, which include wholesalers, PBMs, health plans and pharmacies, snag 42% of gross drug spending — which doesn't take into account any type of discount — from the initial point-of-sale payment for a drug by a payer or patient.
Branded drugmakers take home 39% of those gross expenditures, with generics manufacturers gobbling up 19%.
When discounts, rebates and fees are taken into account, however, the numbers change. Branded pharmaceutical companies realize 47% of those net drug expenditures, while generics businesses reap 23% and non-manufacturers hold onto 29%. The report estimated net drug expenditures reached $469 billion in 2015.
Notably, retrospective discounts, rebates and manufacturer fees related to branded drugs increased almost 60% between 2013 and 2015, from $67 billion to $106 billion. The report also found non-manufacturers’ took home increasing portions of initial gross drug expenditures during that same period, while manufacturers — both branded and generic — saw their percentages shrink.
Aaron Vandervelde and Eleanor Blalock of Berkeley Research Group LLC authored the report, and used data and information from IMS Health’s National Sales Perspectives, Quintiles IMS, the IRS and a host of sources to develop the figures published within it.