More consolidation among healthcare distributors and pharmacy benefit managers has led to higher drug prices, according to a new article.
The major players in both the distribution market and the PBM sector dominate their markets, the article published Monday in JAMA said. As the firms grew, prices for prescription drugs swelled, the article found.
Skyrocketing drug prices are dragging on the entire healthcare system, experts said. Price spikes have caused healthcare providers to shift strategies, often making it more difficult to deliver the best care, executives said.
"Competition is the answer to a lot of these huge price spikes," William Woodward, the senior director of sourcing operations for pharmacy at the group purchasing organization Vizient, told Modern Healthcare last week. "I don't think price controls are the way to go. The more competition, the more competitive pricing will be."
U.S. distribution companies AmerisourceBergen, Cardinal Health and McKesson account for more than 85% of the market share, with estimated combined drug distribution revenues of $378 billion in 2015, according to the JAMA article.
As for PBMs, industry consolidation resulted in three companies—CVS Caremark, Express Scripts, and UnitedHealth's Optum—controlling a 73% share of the PBM market. The 15 largest firms generated more than $270 billion in revenue in 2015 through retail and mail-order pharmacy, compared to $48 billion in revenue for independent pharmacies.
Patients with private insurance paid an average of $8 more for branded prescription drugs from 2011 to 2015. The average payment increased from $36 to $44 per patient, while payment for prescription drugs remained flat at $8, the article found.
Drug companies have been pressured to change their pricing policies after high-profile disputes like the one involving EpiPen. The emergency allergy drug's price grew 500% from 2007 to 2016.
White House officials said Friday at a Stanford University conference that the administration is working to curb prices. While President Donald Trump has vowed to limit drug price hikes, details on his plan have been sparse.
White House budget director Mick Mulvaney said he talked with the president about being more "heavy-handed" on the rebates private companies negotiate with drugmakers.
In addition to the typical product discounts and stipends for returns, manufacturers provide a series of cash payments to health plans, PBMs and distributors in the form of rebates.
Pharmaceutical companies are not required to pay a mandatory rebate off the average price through Medicare's prescription drug benefit plans, as they would in Medicaid. Rather, private companies negotiate with drug companies, translating to discounts for their members via Medicare's prescription drug benefit plans. Extending Medicaid drug prices to more patients in the U.S. could lead to lower prices, experts said.
In 2015, $115 billion, or 27% of total pharmaceutical sales, was paid by manufacturers to various entities throughout the drug distribution and financing systems, according to the JAMA article.
