A Billion Here, A Billion There: Selectively Disclosing Actual Generic Drug Prices Would Save Real Money

Brand and generic prescription drugs dispensed by retail pharmacies cost nearly $400 billion and accounted for more than 10 percent of health care spending in 2016. Despite totaling more than $100 billion, reimbursement for generic drugs has received relatively little policy attention. The combination of a complex distribution system and limited information about actual prices artificially inflates what patients and insurers pay retail pharmacies for generic drugs. A recent study by the Washington State Office of the Insurance Commissioner confirms that retail pharmacies profit more when dispensing generic versus brand drugs. Opportunities exist to lower spending on generic drugs—and reduce total health care spending. After summarizing key trends and factors in the generic drug market, this post outlines a proposal to selectively disclose de-identified information on generic ingredient costs, which would enable health plans to negotiate reduced reimbursements to retail pharmacies for generic drugs. The high prices for many brand drugs have understandably dominated public policy discussions: In the case of certain chronic conditions or life-threatening diseases, expensive drug therapies can cost tens or even hundreds of thousands of dollars per patient. Patients purchase almost $300 billion of brand drugs annually from retail pharmacies, where a brand prescription averages $714 (Note 1). Brand drugs account for 73 percent of retail drug spending, despite comprising only ...
Source: Health Affairs Blog - Category: Health Management Authors: Tags: Costs and Spending Drugs and Medical Innovation Payment Policy generic drug ingredient costs generic drugs Prescription Drugs Source Type: blogs