{"id":75408,"date":"2023-10-22T00:11:23","date_gmt":"2023-10-22T04:11:23","guid":{"rendered":"https:\/\/ifintechworld.com\/investing\/middlemen-pocket-70-of-medicare-spending-on-widely-used-generic-drugs-study-finds\/"},"modified":"2023-10-22T00:11:25","modified_gmt":"2023-10-22T04:11:25","slug":"middlemen-pocket-70-of-medicare-spending-on-widely-used-generic-drugs-study-finds","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=75408","title":{"rendered":"Middlemen pocket 70% of Medicare spending on widely used generic drugs, study finds\u00a0"},"content":{"rendered":"
\n

About 70 cents of every dollar spent on widely used generic drugs under Medicare\u2019s 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.\u00a0<\/p>\n

The largest chunk of 2021 Medicare Part D spending on those drugs \u2014 more than 40% \u2014 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 \u2014 leaving just 30% for the pharmaceutical companies that manufactured the medications, according to the study.<\/p>\n

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At a time when lawmakers are weighing multiple proposals to reform PBM business practices, the study underscores these companies\u2019 market power and illustrates the profits they can generate through \u201cspread pricing,\u201d 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. \u201cIf competition was strong, we would not see such a high margin, especially for PBMs,\u201d Bai said.\u00a0<\/p>\n

The study also sheds light on a key factor behind shortages of many generic drugs: Drugmakers generally aren\u2019t making much money on those products. With most of the total spending on those drugs going to intermediaries, there\u2019s relatively little left for drugmakers, and \u201cthey have no incentive to ramp up production\u201d of those medications, Bai said.\u00a0\u00a0<\/p>\n

More than 50 million people are enrolled in Medicare Part D prescription-drug plans, according to health-policy research nonprofit KFF.<\/p>\n

The study focused on generic drugs covered by Medicare\u2019s Part D prescription-drug benefit that have more than two manufacturers, more than $100 million in total Part D spending and are used by more than 1 million Medicare beneficiaries.\u00a0\u00a0<\/p>\n

For some of those generic drugs, middlemen collected far more than 70% of the Medicare Part D spending, the researchers found. For the blood-pressure drug amlodipine, for example, intermediaries\u2019 gross profit amounted to $6.07 of the $7.01 in spending per claim in 2021 \u2014 or nearly 87%, the study found. Middlemen\u2019s gross profit also amounted to more than 80% of spending per claim on the cholesterol drug ezetimibe, the muscle relaxant baclofen and the antibiotic doxycycline, among others, according to the study.\u00a0<\/p>\n

Simply banning PBM spread pricing, as some lawmakers have proposed, won\u2019t necessarily help patients save money on their prescriptions, Bai said, because it doesn\u2019t address the core issue of insufficient market competition. If spread pricing is banned, she said, PBMs will likely find other ways to bring in cash, such as increasing fees \u2014 and there are other types of intermediaries that are also collecting sizable profits. \u201cWe have to look at the supply chain as a whole,\u201d Bai said.\u00a0<\/p>\n

The issue isn\u2019t limited to Medicare, Bai said. Employers sponsoring health plans and their workers face similar issues.\u00a0<\/p>\n

Some researchers have lately suggested a big change to address the problem: Ending insurance coverage of low-cost generic drugs. Erin Trish and Karen Van Nuys, researchers at the University of Southern California\u2019s Schaeffer Center for Health Policy and Economics, made this proposal in a Washington Post opinion piece earlier this year, writing, \u201cinsurance coverage has enabled middlemen to feast on billions of these prescriptions each year, keeping prices higher than they need to be.\u201d Premiums could be reduced to reflect the narrower coverage, they wrote.\u00a0<\/p>\n

Bai agrees that the idea makes sense. \u201cThese drugs are low-priced, but because of the complicated insurance arrangements, PBMs take a big cut,\u201d she said. Insurance \u201cbecomes very inefficient when it applies to low-cost medical services and products,\u201d she said, because the cost of the added administrative complexity outweighs the benefit of pooling risk in a health plan.<\/p>\n

Some patients are already pursuing the insurance-free option on their own, circumventing their health plans and turning to cash-pay options like Mark Cuban\u2019s Cost Plus Drug Co.\u00a0<\/p>\n<\/p><\/div>\n<\/div>\n

Read the full article here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

About 70 cents of every dollar spent on widely used generic drugs under Medicare\u2019s 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.\u00a0 The largest chunk of 2021 Medicare Part D spending on those drugs \u2014 more than 40% \u2014 went […]<\/p>\n","protected":false},"author":1,"featured_media":55994,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"video","meta":{"footnotes":""},"categories":[239],"tags":[83],"class_list":["post-75408","post","type-post","status-publish","format-video","has-post-thumbnail","hentry","category-investing","tag-featured","post_format-post-format-video"],"yoast_head":"\nMiddlemen pocket 70% of Medicare spending on widely used generic drugs, study finds\u00a0 | iFintechWorld<\/title>\n<meta name=\"description\" content=\"About 70 cents of every dollar spent on widely used generic drugs under 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