Industry middlemen driving up prices of generic drug prescriptions as much as 20 percent: research

The Hill

U.S. consumers are overpaying billions for generic drugs due to the cost being driven up by middlemen in the pharmaceutical industry, according to a report from the University of Southern California (USC).

According to the white paper from USC’s Schaeffer Center for Health Policy and Economics, business practices carried out by pharmacy benefit managers (PBMs) have “inflated” the cost of generic medications.

The report cited the rise of generic medications as an American success story, as they allowed more people to access medicines and also enabled the U.S. health care system to save money. According to the most recent estimates cited by USC, generic medications are dispensed 97 percent of the time when they are available.

However, as insurance companies began covering more medicines, sellers began raising the prices, as most consumers did not know the actual cost of their prescriptions, only what they paid at the counter, the report said.

The role that PBMs play in the rising cost of medications has been noted for some time. One way in which PBMs profit off of prescriptions is through a practice called “spread pricing,” which is when they reimburse a pharmacy for one price while also charging health insurance providers a higher price and keeping the difference, or the “spread.”

“Commercial tactics such as spread pricing, copay clawbacks and formularies that advantage branded drugs over less expensive generics have funneled the savings from low-cost generics into intermediaries’ pockets, rather than the pockets of patients,” the report said.

In one example, the report cited how Medicare Part D standalone drug plans paid $2.6 billion more for 184 generic drugs when compared the the prices that Costco members paid in cash for the same medicines...

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