About 70 cents of every dollar spent on widely used generic drugs under Medicare’s Part D prescription-drug benefit goes into the pockets of intermediaries, according to new research published Friday in JAMA Health Forum, a peer-reviewed journal. The largest chunk of 2021 Medicare Part D spending on those drugs — more than 40% — went to pharmacy benefit managers, the middlemen who manage prescription-drug benefits on behalf of insurers and other payers, according to the study by researchers at Johns Hopkins University and the University of Utah. Another 17% went to pharmacies, and 12% went to wholesalers — leaving just 30% for the pharmaceutical companies that manufactured the medications, according to the study.
At a time when lawmakers are weighing multiple proposals to reform PBM business practices, the study underscores these companies’ market power and illustrates the profits they can generate through “spread pricing,” or charging health plans more for a drug than the PBM reimburses to the pharmacy. And it highlights that patients may be paying far more for these generic drugs than they would if the supply chain was more efficient and competitive, said Ge Bai, a professor of accounting and of health policy and management at Johns Hopkins and co-author of the study. “If competition was strong, we would not see such a high margin, especially for PBMs,” Bai said. The study also sheds light on a key factor behind shortages of many generic drugs: Drugm …
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