Making actual generic drug acquisition costs available to third-party payers would empower health plans to negotiate lower rates and essentially level the playing field in a pharmaceutical supply chain that’s shrouded in secrecy, according to a new paper.
Making actual generic drug acquisition costs available to third-party payers would empower health plans to negotiate lower rates and essentially level the playing field in a pharmaceutical supply chain that’s shrouded in secrecy. Ultimately, patients would pay less at the expense of pharmacy benefit mangers’ profits, researchers said. If the average prescription generic drug priced at $26 was reduced by $1, that would reduce health spending by $4 billion every year, data shows. The average price for branded drugs is $308.
The actual amounts paid to drug manufacturers for both branded and generic prescriptions, including reductions negotiated by PBMs, are protected as confidential trade secrets, according to analysis from the Leonard D. Schaeffer Initiative for Innovation in Health Policy, which is a partnership between the Center for Health Policy at Brookings and the USC Schaeffer Center for Health Policy & Economics. A disincentive to keep reimbursement low for their health plan clients poses a conflict of interest for PBMs, which get paid in part based on the “spread” – the difference between the high list price set by drug companies and the actual price paid by PBMs.
Researchers proposed making information about average actual generic drug acquisition costs available to health plans in a selective way, requiring wholesalers to report their net prices when selling drugs to retail pharmacies as a condition of licensure. When a pharmacy acquires a generic drug, it pays an average of 30% off the published list price, researchers said.
“Providing payers with the average net prices pharmacies actually pay for generic drugs would shed light on how limitations on effective competition leads to health plans paying excessively more than pharmacy and wholesaler costs,” the paper reads.
The CMS would collect and aggregate the costs through national averages while the HHS would serve as the regulator, similar to the Medicaid drug rebate program. It would be paid through the Prescription Drug User Fee Act authorized by the Food and Drug Administration.