PBM practices lead US consumers to overpay for generics by 20%

Home/Reports | Posted 01/07/2022 post-comment0 Post your comment

Consumers in the US are overpaying for generics medicines by as much as 20%, a University of Southern California study reports [1]. The white paper calls for transparency across the generic prescription drug supply chain and policies to increase competition and stop anti-competitive practices.

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The report by the University of Southern California’s Schaeffer Center for Health Policy and Economics has found that pharmacy benefit managers (PBMs) are engaging in practices that bring the prices of generics up. PBMs are intermediaries who negotiate price and formulary placement on behalf of health plans.

The report notes that, when available, generics are prescribed 97% of the time. As they are lower-cost alternative to originator products, they can help to bring the cost of medication down overall and provide greater access to treatments.

However, PBM’s have been reported to engage in activities that run counter to the aim of making medicines more affordable to consumers/patients [2, 3]. Their tactics include spread pricing, copay clawbacks and profit-orientated formularies and these advantage branded drugs over less expensive generics. These activities prevent the consumer seeing the financial benefit of using generics and instead the savings end up with the intermediaries. The report highlighted the amount of money that can be funnelled into PBM pockets by citing the case of Medicare Part D standalone drug plans in 2018 where US$2.6 billion more was paid for 184 generic drugs, than was spent by Costco members who paid cash for the same drugs.

Overall, the report notes that these PBM practices are unfair and drive the cost of prescription drugs up.

The USC report concludes by suggesting the implementation of policies that require transparent reporting from PBMs regarding generic drug prices and those that make it possible to audit and review PBM transactions and prices. In addition, it suggests restricting rebate contracting that drives PBMs to prefer brands over generics and using fixed fees per transaction rather than fees based on a share of a drug’s price.

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1. Trish E, Van Nuys K, Popovian R. U.S. Consumers overpay for generic drugs. USC University of Southern California. Available from: https://healthpolicy.usc.edu/research/u-s-consumers-overpay-for-generic-drugs/utm_source=newsletter&utm_medium=email&utm_
2. GaBI Online - Generics and Biosimilars Initiative. Reasons and solutions for the high cost of insulin in the US [www.gabionline.net]. Mol, Belgium: Pro Pharma Communications International; [cited 2022 Jul 1]. Available from: www.gabionline.net/biosimilars/research/Reasons-and-solutions-for-the-high-cost-of-insulin-in-the-US
3. GaBI Online - Generics and Biosimilars Initiative. Pharmacy benefit managers use spread pricing to increase profits in Michigan [www.gabionline.net]. Mol, Belgium: Pro Pharma Communications International; [cited 2022 Jul 1]. Available from: www.gabionline.net/generics/general/Pharmacy-benefit-managers-use-spread-pricing-to-increase-profits-in-Michigan

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