The Pharmaceutical Supply Chain: Gross Drug Expenditures Realized by Stakeholder – Study Backgrounder

Conversations about spending on prescription medicines are often misleading because they do not account for the significant rebates, discounts, and fees paid by brand biopharmaceutical companies or for the distribution costs involved in getting medications to patients. A new study by the Berkeley Research Group (BRG) analyzes the distribution and payment process for prescription medicines and estimates the share of spending realized by biopharmaceutical companies and other entities along the supply chain.

  • Brand biopharmaceutical companies realize less than half of total prescription medicine spending.

  • Other stakeholders in the drug distribution and payment process—including wholesalers, pharmacies, PBMs, health plans, providers, and the government—realize a substantial share of gross drug spending.

  • Patients are facing higher deductibles and increased coinsurance for brand medicines. Rebates and discounts biopharmaceutical companies pay to PBMs and payers do not directly reduce cost-sharing for these patients.

  • Contrary to claims of rapidly escalating costs for medicines, spending growth slowed substantially in 2016.

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