Washington, D.C. (January 9, 2020) — Nearly half of total 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, according to a new analysis from the Berkeley Research Group (BRG). Innovative biopharmaceutical companies that research, develop and manufacture medicines retained just 54% of total point-of-sale spending on brand medicines. The share of spending received by other stakeholders increased from 33% in 2013 to 46% in 2018.

“This data reaffirms that we need to look at the entire supply chain in order to solve patient affordability challenges,” said Stephen J. Ubl, president and chief executive officer of PhRMA. “We need to fix the misaligned incentives in the supply chain, including the broken rebate system, to ensure patients benefit at the pharmacy counter from the significant discounts and rebates.” 

According to the BRG analysis, the share of total spending on brand medicines that biopharmaceutical companies retain has been steadily declining as rebates and discounts have increased. Between 2015 and 2018, the amount innovative biopharmaceutical companies retained from the sale of brand medicines increased, on average, 2.6% annually, in line with inflation. In this same timeframe, companies brought nearly 200 new innovative treatments and cures to patients.

Additionally, nearly half of the increase in the total amount spent on brand medicines went back to payers during this same time period. And 20% went to hospitals, pharmacies and other health care providers, which is the same amount that went to biopharmaceutical companies that research, develop and manufacture medicines.

Meanwhile, the amount hospitals, pharmacies and other health care providers retained on the sale of brand medicines nearly doubled between 2013 and 2018, increasing from $24.7 billion to $48.6 billion. This trend was primarily driven by unprecedented expansion in the 340B drug pricing program. In fact, the amount hospitals and other 340B entities retained from the sale of brand medicines purchased through the 340B program was 9 times larger in 2018 than in 2013.

“Hospitals and other health care providers have largely been left out of the drug pricing debate even though the amount they receive from the sale of brand medicines has doubled in the past 5 years,” continued Ubl. “In order to lower patients’ out-of-pocket costs, we must also fix programs like 340B, which has enabled hospitals and others in the supply chain to profit without any assurances that patients see any benefit.”

View the full analysis here.

About PhRMA

The Pharmaceutical Research and Manufacturers of America (PhRMA) represents the country’s leading innovative biopharmaceutical research companies, which are devoted to discovering and developing medicines that enable patients to live longer, healthier, and more productive lives. Since 2000, PhRMA member companies have invested more than $900 billion in the search for new treatments and cures, including an estimated $79.6 billion in 2018 alone.