Nearly half of brand medicine spending goes to the supply chain and others
We are in a new era of medicine where breakthrough science is transforming patient care, but these innovations are meaningless if patients can’t afford them.
Here we address the questions Americans have about their medicine costs by exploring trends in medicine spending, how insurers cover medicines, the role middlemen like pharmacy benefit managers play and what the biopharmaceutical industry is doing to make medicines more affordable.
1)In 2018, how much did the biopharmaceutical industry invest in research and development?$14 billion$42 billion$81 billion$102 billion — In 2018 alone, the biopharmaceutical industry invested $102 billion in R&D – almost triple the NIH’s entire budget that year. More ►
2)How much did spending on medicines grow in 2018?20%15%5%0.3% — In 2018, spending on prices for brand medicines grew just 0.3% after factoring in discounts and rebates at the slowest rate in years, according to one of the nation's largest PBMs. More ►
3)Where does nearly 50% of spending on brand medicines go?Your pharmacyThe biopharmaceutical companyThe supply chain and other entities — Nearly half of spending on brand medicines – the sum of all payments made at the pharmacy or paid on a claim to a health care provider - went to the supply chain and other entities in 2018, and not to the biopharmaceutical companies that research, develop and manufacture the medicines. More ►The government
4)Insurers negotiate discounts on medicines, but what percentage of insured patients pay out of pocket based on the list price?5%50% — More than half of all commercially insured patients' out-of-pocket spending is based on the full list price of their medicines. More ►15%0%
5)Does my coupon count toward my deductible and out-of-pocket maximum?YesNoIt depends — Normally, cost sharing paid by copay coupons count toward a patient’s deductible and out-of-pocket maximum. However, many insurers and pharmacy benefit managers are implementing copay accumulator programs that change how copay assistance for some medicines applies to patient cost sharing. When this tactic is applied, copay coupons do not count toward a patient’s deductible or out-of-pocket maximum. More ►
6)How much are hospitals marking up the cost of medicines?700% — Even after negotiations with payers, hospitals still receive nearly 2.5 times more than what they paid to acquire medicine. More ►25%100%10%
7)How many assistance programs do biopharmaceutical companies offer?100+400+600+900+ — Biopharmaceutical companies offer over 900 assistance programs. More ►
8)How much would sharing negotiated discounts and rebates with patients at the pharmacy counter save commercially insured patients with high deductibles and coinsurance each year?$10$500$800 — Sharing negotiated discounts and rebates with patients at the pharmacy counter could save commercially insured patients with high deductibles and coinsurance more than $800 annually and would increase premiums by 1% or less. More ►$1200
9)How do pharmacy benefit managers - middlemen in the biopharmaceutical supply chain - currently get paid?As a percent of the list price of a medicine — his creates a system where middlemen make more money when your medicine prices increase. Patients with high-deductible health plans or coinsurance do not always realize the benefit of growing discounts and rebates because their out-of-pocket costs are often based on the medicine’s undiscounted list price. Reforms to prevent pharmacy benefit managers and others in the supply chain from being paid off the list price of a medicine can fix broken incentives and make the system work better for patients. More ►A fee based on the value their services provideAs a percent of what patients pay at the pharmacy
Score:0/9AnswersQ1)In 2018, how much did the biopharmaceutical industry invest in research and development?CORRECT ANSWER: $102 billion - More ►Q2)How much did spending on medicines grow in 2018?CORRECT ANSWER: 0.3% - More ►Q3)Where does nearly 50% of spending on brand medicines go?CORRECT ANSWER: The supply chain and other entities - More ►Q4)Insurers negotiate discounts on medicines, but what percentage of insured patients pay out of pocket based on the list price?CORRECT ANSWER: 50% - More ►Q5)Does my coupon count toward my deductible and out-of-pocket maximum?CORRECT ANSWER: It depends - More ►Q6)How much are hospitals marking up the cost of medicines?CORRECT ANSWER: 700% - More ►Q7)How many assistance programs do biopharmaceutical companies offer?CORRECT ANSWER: 900+ - More ►Q8)How much would sharing negotiated discounts and rebates with patients at the pharmacy counter save commercially insured patients with high deductibles and coinsurance each year?CORRECT ANSWER: $800 - More ►Q9)How do pharmacy benefit managers - middlemen in the biopharmaceutical supply chain - currently get paid?CORRECT ANSWER: As a percent of the list price of a medicine - More ►Stay Connected
Where does nearly 50% of spending on brand medicines go?
There’s a long line of middlemen collecting a significant portion of what gets paid for medicine. Nearly half of spending on brand medicines—the sum of all payments made at the pharmacy or paid on a claim to a health care provider—went to hospitals, health insurers, pharmacy benefit managers, the government and others in 2018, up from 33% five years prior. Policymakers can’t help patients afford their medicine if they ignore where almost half the money is going.More +
The amount prices for brand medicines grew in 2018
If medicine costs are growing more slowly, why doesn’t it feel that way?
Net prices for brand medicines grew just 0.3% in 2018, less than the rate of inflation. Unfortunately, it doesn't feel this way for patients because insurers are increasingly using high deductibles, which result in patients paying the full list price for their medicines, even if their insurers receive significant discounts. And middlemen, like pharmacy benefit managers and insurers, have been shifting more of the costs of health care to patients for years – with deductibles increasing 360% since 2006.More +
Why am I paying more than my insurer for my medicine?
Out-of-pocket costs for the sickest continue to soar despite a dramatic slowdown in medicine prices and spending. That’s because private payers reportedly receive rebates between 30% and 70% for medicines that treat a number of chronic conditions including diabetes, asthma, hepatitis C and high cholesterol, yet these negotiated discounts are not always shared with patients. Biopharmaceutical companies are working to fix the health care system so it works better for patients by making insurance work like insurance again and making sure rebates and discounts are shared with patients at the pharmacy counter.More +
More than half of commercially insured patients’ out-of-pocket spending for brand medicines is based on the full list price
Who are pharmacy benefit managers?
Middlemen in the prescription drug supply chain called pharmacy benefit managers (PBMs) negotiate large rebates from biopharmaceutical companies on behalf of insurers and employers. But rather than getting paid based on the value their services provide, their compensation is tied to the list price of a medicine, in the form of retained rebates. They also charge fees to biopharmaceutical companies and health plans that are often based on list prices, and these fees nearly quadrupled between 2014 and 2016. This creates a system where middlemen make more money when your medicine prices increase.
Why don’t middlemen always let my copay coupons count toward my deductible?
In recent years, pharmacy benefit managers and insurers have been increasingly shifting more health care costs to patients through deductibles and coinsurance. Coupon programs - offered by biopharmaceutical companies - provide a valuable source of assistance for many commercially insured patients who are facing rising out-of-pocket costs because of their insurance coverage.
Increased likelihood patients with high-deductible health plans will discontinue treatment if subjected to a copay accumulator adjustment program
Amount discounts can lower the price of insulin, according to industry analysts
Why are patients paying so much for insulin?
New innovations have transformed how we treat diabetes, but unfortunately, too many patients struggle to afford their insulin at the pharmacy counter. Even though prices for insulin after discounts and rebates have fallen in recent years, these savings negotiated by insurance companies are not shared directly with patients. Biopharmaceutical companies are working to fix the health care system so it works better for patients, and in the meantime, they are making it easier for patients who are struggling to afford their medicines to find the robust patient assistance programs available to them. Looking for resources about medicine costs and programs that may help you afford your medicines? Visit www.mat.org.More +
Why are medicines less expensive in other countries?
International comparisons often assess list prices in the United States against artificially low prices set by governments in other countries. By focusing on list prices, these comparisons exclude significant savings and discounts negotiated by insurers and pharmacy benefit managers as well as rebates and discounts required by law for government programs such as Medicaid and the Department of Veterans Affairs. When we do pay more in the United States, it helps ensure patients have better access to the latest medical innovations. Americans get access to new medicines years earlier on average than other wealthy nations. Additionally, 9 out of 10 medicines dispensed to U.S. patients are generics that are often cheaper in the United States.
Spending on retail and physician-administered medicines represents 14% of U.S. health care spending
The number of assistance programs offered by biopharmaceutical companies
How can I get more transparency about medicine costs and financial assistance programs?
Biopharmaceutical companies have a responsibility to not just develop treatments and cures, but to also help patients access them. That’s why the biopharmaceutical industry voluntarily directs patients to links to cost information in their direct-to-consumer (DTC) television advertising. The industry also launched the Medicine Assistance Tool, or MAT, to provide these links referenced in DTC television advertising and help patients connect to financial assistance programs. These are just a few of the ways the biopharmaceutical industry is continuing to work to ensure patients have more transparency about medicine costs. Learn more at www.mat.org.More +
How can we make medicines more affordable for patients?
Biopharmaceutical companies are helping to fix the health care system so it works better for patients by improving patient affordability. That includes supporting solutions that would making sure rebates and discounts are shared with patients at the pharmacy counter, establish an out-of-pocket cap, provide for predictable monthly out-of-pocket costs, and lower coinsurance from 25% to 20%. We also need to delink supply chain payments from the list price of a medicine.
Hospitals receive 2.5 times what they paid to acquire medicine (after price negotiations)
How are hospitals driving up health care costs?
Health care providers like doctors and nurses are there for patients at pivotal moments, but hospital administrators often take advantage of the system to pad their bottom lines at the expense of patients. For example, cancer medicines cost nearly twice as much in hospital outpatient facilities than in physician offices in the commercial market. And hospitals routinely mark up medicine prices, with nearly 1 in 5 hospitals marking up medicine costs on average 700%. On top of these mark ups, many hospitals are using a program meant to support low-income patients called 340B for their own financial benefit.More +
What role does the government play in funding the development of medicines?
Biopharmaceutical companies are responsible for developing new medicines. In 2018, the biopharmaceutical industry invested $102 billion in R&D – almost triple the NIH’s entire budget that year. While government-funded basic science research often lays the groundwork for developments in medical science, biopharmaceutical companies shoulder most of the burden in taking these basic research findings and developing them into treatments and potential cures.
The record number of medicines approved by the U.S. Food and Drug Administration in 2019
The amount more that the biopharmaceutical spent on research and development in 2016 than on marketing and promotion
Do biopharmaceutical companies spend more on marketing and promotion than research and development?
The biopharmaceutical industry spends three times more on the research and development of new treatments and cures than on the marketing and promotion of medicines. In 2016, U.S. biopharmaceutical companies spent $90.5 billion on research and development, over three times more than the $28.1 billion spent on marketing and promotion that year.More +
Looking for resources about medicine costs and programs that may help you afford your medicines?
Join our mailing list for the most up-to-date information.
More About Cost
Stories from Our Blog
PhRMA submits comments on CMS’s Part D specialty tier proposalApr 7,2020
Merck’s Dr. Julie Gerberding on the threat of antimicrobial resistance and COVID-19Apr 6,2020
The biopharmaceutical industry’s unique role in responding to COVID-19Apr 2,2020