Increasing transparency on generic drug cost data could save $4 billion
Skip to main content
MDHC_Logotype_white
Subscribe
  • My Account
  • Login
  • Subscribe
  • News
    • This Week's News
    • COVID-19
    • Providers
    • Insurance
    • Government
    • Finance
    • Technology
    • Safety & Quality
    • People
    • Regional News
    • Digital Edition
    • UPMC's patient volumes stabilize, boosting 2020 profits
      CMS: Group health plans must cover COVID-19 diagnostic testing
      As hospital numbers fall, fatigued staff get relief at last
      Another Pennsylvania health network vaccinates employee kin
    • UPMC's patient volumes stabilize, boosting 2020 profits
      CMS: Group health plans must cover COVID-19 diagnostic testing
      As hospital numbers fall, fatigued staff get relief at last
      As COVID surged, vaccines came too late for at least 400 medical workers
    • The Check Up: Dr. Imran Andrabi
      The Check Up: Dr. Imran Andrabi of ThedaCare
      Dr. Imran Andrabi
      Q&A: ThedaCare CEO says lessons from COVID-19 will inform new approaches to population health management
      Hospitals confront water shortages in winter storm aftermath
      beaumont-hospital-royal-oak_i_i_i.jpg
      Beaumont says nearly 2,000 second-shot vaccinations canceled due to vaccine shortage
    • CMS: Group health plans must cover COVID-19 diagnostic testing
      High MLRs inspire insurers to focus on quality improvements
      Blue Cross and Blue Shield of Oklahoma, OU Health Physicians mired in contract dispute
      Beyond the Byline: Insurers are betting on virtual-first plans as COVID-19 shifts care pathways
    • CMS: Group health plans must cover COVID-19 diagnostic testing
      Another Pennsylvania health network vaccinates employee kin
      Why AstraZeneca and J&J's vaccines, in use elsewhere, are still on hold in America
      Lawmakers probe if Cuomo's policy fueled nursing home deaths
    • UPMC's patient volumes stabilize, boosting 2020 profits
      Genomics firms taking advantage of SPACs trend to go public faster
      COVID-19 could dent hospital revenue by at least $53 billion in 2021, AHA says
      deloitte GDP image chart graph going up
      Sponsored Content Provided By Deloitte
      Breaking the cost curve
    • Teladoc reports $383.3M in fourth-quarter revenue, up 145%
      man and woman looking at ipad wearing face masks stock image
      Sponsored Content Provided By Surescripts
      Improvements to benefits data can enhance ePrescribing and the patient experience
      Oscar Health's $1B IPO sets the stage for more health tech exits in 2021
      A map of the U.S. with images of the coronavirus.
      The digital divide becomes a new social determinant of health
    • Why AstraZeneca and J&J's vaccines, in use elsewhere, are still on hold in America
      COVID vaccine websites violate disability laws, create inequity for the blind
      Walgreens to sell Labcorp COVID-19 PCR home collection kits over-the-counter
      angela karpf headshot
      Sponsored Content Provided By B. Braun
      Making patient safety a policy priority
    • Michael Jordan, Novant team up to address health equity
      Former Ascension CEO, the first to lead the health system, passes away
      Biden's pick to head CMS would be first Black woman to hold post
      RAKESH SURI MD_i.jpg
      Cleveland Clinic creates president of international operations position
    • Midwest
    • Northeast
    • South
    • West
  • Insights
    • ACA 10 Years After
    • Best Practices
    • Special Reports
    • Innovations
    • The Affordable Care Act after 10 years
    • Dr. John Fischer
      Patient-reported outcomes tool for hernia surgery helps physicians improve care
      New care model helps primary-care practices treat obesity
      doctor with patient
      COVID-19 treatment protocol developed in the field helps patients recover
      Rachel Wyatt
      Project to curb pressure injuries in hospitals shows promise
    • What's next for on-demand telehealth companies?
      A CalOptima PACE vaccination clinic.
      Will COVID-19 be the catalyst for creating a more sustainable healthcare system?
      A map of the U.S. with images of the coronavirus.
      The digital divide becomes a new social determinant of health
      Ascension’s St. Mary’s Hospital Surgery Center at Towne Centre and Allegheny Health Network’s Bethel Park surgery center
      Hospitals see opportunity, risk in ambulatory surgery centers
    • Dr. Daniel Hall
      UPMC pilots machine learning, telehealth to inform patient transfers
      A woman being recorded using her inhaler on a smartphone.
      Digital check-ins, connected inhalers help control asthma
      A phone screen showing the question, "Mary we hope this information was helpful and we'd like to keep guiding you. Are you interested in knowing when it's your turn to receive the vaccine?"
      Chatbots, texting campaigns help manage influx of COVID vax questions
      A woman with a wearable sensor talking to her provider.
      Wearable sensors help diagnose heart rhythm problems in West Virginia
  • Transformation
    • Patients
    • Operations
    • Care Delivery
    • Payment
    • What's next for on-demand telehealth companies?
      Rising prescription copays drop adherence, spike mortality, research shows
      Dr. John Fischer
      Patient-reported outcomes tool for hernia surgery helps physicians improve care
      Highmark Health inks six-year cloud, tech deal with Google
    • Hospitals' Medicare billing practices suggest upcoding, OIG says
      California hospitals prepare ethical protocol to prioritize lifesaving care
      Amazon, JPMorgan Chase, Berkshire Hathaway disband Haven
      Digital pathways poised to reshape healthcare continuum in 2021
    • Dr. Daniel Hall
      UPMC pilots machine learning, telehealth to inform patient transfers
      A woman being recorded using her inhaler on a smartphone.
      Digital check-ins, connected inhalers help control asthma
      Humana partners with in-home provider for 24/7 care
      A phone screen showing the question, "Mary we hope this information was helpful and we'd like to keep guiding you. Are you interested in knowing when it's your turn to receive the vaccine?"
      Chatbots, texting campaigns help manage influx of COVID vax questions
    • Coordinated payment policies could speed transition to value, experts say
      CMMI's geographic direct contracting model needs an overhaul, experts say
      Hospitals fight UnitedHealthcare policies over lab test, specialty drug payments
      Cigna eliminates prior authorization for coronary CT scans
  • Data/Lists
    • Rankings/Lists
    • Interactive Databases
    • Data Points
    • Health Systems Financials
      Executive Compensation
      Physician Compensation
  • Op-Ed
    • Bold Moves
    • Breaking Bias
    • Commentaries
    • Letters
    • Vital Signs Blog
    • From the Editor
    • Dr. Alan Kaplan
      The risks, rewards of taking organizations 'where they haven’t gone before'
      Wellstar CEO calls adapting for the pandemic her bold move
      Howard P. Kern
      Recognizing the value of telehealth in its infancy
      Dr. Stephen Markovich
      A bold move helped take him from family doctor to OhioHealth CEO
    • Dr. Stephen Markovich
      Making sure we're aligned along the path to achieving inclusion
      Barry Ostrowsky
      Ending racism is a journey taken together; the starting point must be now
      Laura Lee Hall and Gary Puckrein
      Increased flu vaccination has never been more important for communities of color
      John Daniels Jr.
      Health equity: Making the journey from buzzword to reality
    • In-person visitation must be part of the national COVID-19 response
      We've lost so much to the pandemic, but we've also made gains that will endure
      Medical groups key to meeting president's vaccine pledge
      We need a better social care referral loop, but it requires technology as well as the human touch
    • Letters: Eliminating bias in healthcare needs to be ‘deliberate and organic’
      Letters: Maybe dropping out of ACOs is a good thing for patients
      Letters: White House and Congress share blame for lack of national COVID strategy
      Letters: VA making strides to improve state veterans home inspections
    • Sponsored Content Provided By Optum
      How blockchain could ease frustration with the payment process
      Sponsored Content Provided By Optum
      Three steps to better data-sharing for payer and provider CIOs
      Sponsored Content Provided By Optum
      Reduce total cost of care: 6 reasons why providers and payers should tackle the challenge together
      Sponsored Content Provided By Optum
      Why CIOs went from back-office operators to mission-critical innovators
  • Awards
    • Award Programs
    • Nominate
    • Previous Award Programs
    • Other Award Programs
    • Best Places to Work in Healthcare Logo for Navigation
      Nominations Open - Best Places to Work in Healthcare
      Nominations Open - 50 Most Influential Clinical Executives
    • 100 Most Influential People
    • 50 Most Influential Clinical Executives
    • Best Places to Work in Healthcare
    • Health Care Hall of Fame
    • Healthcare Marketing Impact Awards
    • Top 25 Emerging Leaders
    • Top 25 Innovators
    • Minorities in Healthcare
      • - Luminaries
      • - Top 25 Minority Leaders
      • - Minorities to Watch
    • Women in Healthcare
      • - Luminaries
      • - Top 25 Women Leaders
      • - Women to Watch
    • Excellence in Nursing Awards
    • Design Awards
    • Top 25 COOs in Healthcare
    • 100 Top Hospitals
    • ACHE Awards
  • Events
    • Conferences
    • Galas
    • Webinars
    • COVID-19 Event Tracker
    • podium march webinar logo lockup
      Sponsored Content Provided By Podium
      Webinar: Critical Touchpoints for Every Patient’s Journey — How Technology Plays an Important Role
      scp health logo lockup march 2021
      Sponsored Content Provided By SCP Health
      Webinar: COVID’s call to action — Reset for success in 2021
    • Women Leaders in Healthcare Conference
    • Social Determinants of Health Symposium
    • Healthcare Transformation Summit
    • Leadership Symposium
    • Virtual Briefings
      • - Hospital of the Future
      • - Mental Health
      • - Patient Safety & Quality
      • - Strategic Marketing
      • - Virtual Health
      • - Workplace of the Future
    • Best Places to Work Awards Gala
    • Health Care Hall of Fame Gala
    • Top 25 Minority Leaders Gala
    • Top 25 Women Leaders Gala
  • Listen
    • Podcast - Next Up
    • Podcast - Beyond the Byline
    • Sponsored Podcast - Healthcare Insider
    • Video Series - The Check Up
    • Sponsored Video Series - One on One
    • Next Up Podcast: Educating patients on the COVID-19 vaccine with Tanya Andreadis
      Dr. Joseph Cacchione
      Next Up Podcast: Educating patients on the COVID-19 vaccine with Dr. Joseph Cacchione
      Dr. Karen DeSalvo
      Next Up Podcast: What to expect with telehealth and healthcare technology in the next four years
      Carter Dredge
      Next Up Podcast: Ready, set, innovate! Innovation and disruption in healthcare
    • Beyond the Byline: Insurers are betting on virtual-first plans as COVID-19 shifts care pathways
      Beyond the Byline: How residents' stories shape our coverage of the vaccination rollout in nursing homes
      Beyond the Byline: Regulators aim to boost value push with fraud and abuse law updates
      An older man wearing a mask receiving a vaccine.
      Beyond the Byline: Verifying information on the chaotic COVID-19 vaccine rollout
    • Outreach during COVID-19
      Leading intention promote diversity and inclusion
      Introducing Healthcare Insider Podcast
    • The Check Up: Dr. Imran Andrabi
      The Check Up: Dr. Imran Andrabi of ThedaCare
      The Check Up: Tanya Blackmon
      The Check Up: Tanya Blackmon of Novant Health
      The Check Up: Dr. Patrick Hwu
      The Check Up: Dr. Patrick Hwu of the Moffitt Cancer Center
      The Check Up: Suresh Gunasekaran
      The Check Up: Suresh Gunasekaran of the University of Iowa Hospitals & Clinics
    • ivana naeymi-rad one on one intelligent medical objects
      Video: Ivana Naeymi Rad of Intelligent Medical Objects
  • MORE +
    • Advertise
    • Media Kit
    • Newsletters
    • Jobs
    • People on the Move
    • Reprints & Licensing
MENU
Breadcrumb
  1. Home
  2. Finance
June 15, 2017 01:00 AM

Increasing transparency on generic drug cost data could save $4 billion

Alex Kacik
  • Tweet
  • Share
  • Share
  • Email
  • More
    Print
    Getty Images/Glowimages RF

    Increasing transparency on the cost of generic drugs could save about $4 billion a year in overall healthcare spending in the U.S., according to a new paper.

    Making actual generic drug acquisition costs available to third-party payers would empower health plans to negotiate lower rates and essentially level the playing field in a pharmaceutical supply chain that's shrouded in secrecy. Ultimately, patients would pay less at the expense of pharmacy benefit mangers' profits, researchers said. If the average prescription generic drug priced at $26 was reduced by $1, that would reduce health spending by $4 billion every year, data shows. The average price for branded drugs is $308.

    The actual amounts paid to drug manufacturers for both branded and generic prescriptions, including reductions negotiated by PBMs, are protected as confidential trade secrets, according to analysis from the Leonard D. Schaeffer Initiative for Innovation in Health Policy, which is a partnership between the Center for Health Policy at Brookings and the USC Schaeffer Center for Health Policy & Economics. A disincentive to keep reimbursement low for their health plan clients poses a conflict of interest for PBMs, which get paid in part based on the "spread" – the difference between the high list price set by drug companies and the actual price paid by PBMs.

    Researchers proposed making information about average actual generic drug acquisition costs available to health plans in a selective way, requiring wholesalers to report their net prices when selling drugs to retail pharmacies as a condition of licensure. When a pharmacy acquires a generic drug, it pays an average of 30% off the published list price, researchers said.

    "Providing payers with the average net prices pharmacies actually pay for generic drugs would shed light on how limitations on effective competition leads to health plans paying excessively more than pharmacy and wholesaler costs," the paper reads.

    The CMS would collect and aggregate the costs through national averages while the HHS would serve as the regulator, similar to the Medicaid drug rebate program. It would be paid through the Prescription Drug User Fee Act authorized by the Food and Drug Administration.

    Yet, it would be important that the information would be kept confidential and protected as a trade secret to allay the Federal Trade Commission's concerns that increasing price transparency could lead to price collusion, said co-author Steven Lieberman from the Center for Health Policy at Brookings.

    "Selectively reporting (cost) averages to (health) plans would not impair manufacturer competition nor would it facilitate price collusion," Lieberman said at the center's webinar Wednesday.

    In 2016, U.S. payers and patients spent nearly $380 billion filling 4.45 billion drug prescriptions, which accounts for more than 10% of overall healthcare spending. Almost 9 of 10 retail prescriptions were for low-cost generic drugs, amounting to about $100 billion.

    High-profile lawsuits have brought drugmakers' relationships with PBMs, which process drug claims and negotiate drug discounts with pharmaceutical companies on behalf of payers, into the forefront. PBMs take a cut from the rebates they negotiate, but it's hard to pinpoint how much they receive and how much is passed on to their clients.

    Legislators and other healthcare leaders are tackling drug pricing through two main avenues: increasing competition in the marketplace and improving transparency.

    "The real successes in transparency have not been giving consumers better information, it has been informing policy makers, large employers that make decisions," said co-author Paul Ginsburg, the chair of health policy studies at the Brookings, at the webinar.

    Letter
    to the
    Editor

    Send us a letter

    Have an opinion about this story? Click here to submit a Letter to the Editor, and we may publish it in print.

    Recommended for You
    UPMC's patient volumes stabilize, boosting 2020 profits
    UPMC's patient volumes stabilize, boosting 2020 profits
    Genomics firms taking advantage of SPACs trend to go public faster
    Genomics firms taking advantage of SPACs trend to go public faster
    Sponsored Content
    Get Free Newsletters

    Sign up for free enewsletters and alerts to receive breaking news and in-depth coverage of healthcare events and trends, as they happen, right to your inbox.

    Subscribe Today

    The weekly magazine, websites, research and databases provide a powerful and all-encompassing industry presence. We help you make informed business decisions and lead your organizations to success.

    Subscribe
    Connect with Us
    • LinkedIn
    • Twitter
    • Facebook
    • RSS
    • Instagram

    Stay Connected

    Join the conversation with Modern Healthcare through our social media pages

    MDHC_Logotype_white
    Contact Us

    (877) 812-1581

    Email us

     

    Resources
    • Contact Us
    • Advertise with Us
    • Ad Choices Ad Choices
    • Sitemap
    Editorial Dept
    • Submission Guidelines
    • Code of Ethics
    • Awards
    • About Us
    Legal
    • Terms and Conditions
    • Privacy Policy
    • Privacy Request
    Modern Healthcare
    Copyright © 1996-2021. Crain Communications, Inc. All Rights Reserved.
    • News
      • This Week's News
      • COVID-19
      • Providers
      • Insurance
      • Government
      • Finance
      • Technology
      • Safety & Quality
      • People
      • Regional News
        • Midwest
        • Northeast
        • South
        • West
      • Digital Edition
    • Insights
      • ACA 10 Years After
      • Best Practices
      • Special Reports
      • Innovations
    • Transformation
      • Patients
      • Operations
      • Care Delivery
      • Payment
    • Data/Lists
      • Rankings/Lists
      • Interactive Databases
      • Data Points
    • Op-Ed
      • Bold Moves
      • Breaking Bias
      • Commentaries
      • Letters
      • Vital Signs Blog
      • From the Editor
    • Awards
      • Award Programs
        • 100 Most Influential People
        • 50 Most Influential Clinical Executives
        • Best Places to Work in Healthcare
        • Health Care Hall of Fame
        • Healthcare Marketing Impact Awards
        • Top 25 Emerging Leaders
        • Top 25 Innovators
        • Minorities in Healthcare
          • - Luminaries
          • - Top 25 Minority Leaders
          • - Minorities to Watch
        • Women in Healthcare
          • - Luminaries
          • - Top 25 Women Leaders
          • - Women to Watch
      • Nominate
      • Previous Award Programs
        • Excellence in Nursing Awards
        • Design Awards
        • Top 25 COOs in Healthcare
      • Other Award Programs
        • 100 Top Hospitals
        • ACHE Awards
    • Events
      • Conferences
        • Women Leaders in Healthcare Conference
        • Social Determinants of Health Symposium
        • Healthcare Transformation Summit
        • Leadership Symposium
        • Virtual Briefings
          • - Hospital of the Future
          • - Mental Health
          • - Patient Safety & Quality
          • - Strategic Marketing
          • - Virtual Health
          • - Workplace of the Future
      • Galas
        • Best Places to Work Awards Gala
        • Health Care Hall of Fame Gala
        • Top 25 Minority Leaders Gala
        • Top 25 Women Leaders Gala
      • Webinars
      • COVID-19 Event Tracker
    • Listen
      • Podcast - Next Up
      • Podcast - Beyond the Byline
      • Sponsored Podcast - Healthcare Insider
      • Video Series - The Check Up
      • Sponsored Video Series - One on One
    • MORE +
      • Advertise
      • Media Kit
      • Newsletters
      • Jobs
      • People on the Move
      • Reprints & Licensing