A primer on brand-name prescription drug reimbursement within the US – Healthcare Economist

That’s the title of a current paper by Hernandez and Hung (2024). The article offers a superb overview of how medication get reimbursed within the US and who the important thing gamers are. I present an abbreviated abstract beneath, however do learn the full article.

The gamers

• Producers analysis, develop, and produce new drug merchandise to market.
• Wholesalers act as distributors of drug merchandise. Wholesalers buy the drug product from producers and distribute it to pharmacies and well being care suppliers.
• Pharmacies dispense self-administered pharmaceuticals to sufferers. Forms of pharmacies embody retail, mail order, on-line, specialty, and institutional.
• Well being care suppliers prescribe all pharmaceuticals and administer drug merchandise that must be offered beneath the supervision of a well being care skilled (e.g., infusions, some injections).
• Sufferers are shoppers of drug merchandise from well being care suppliers (physician-administered) or pharmacies (self-administered).
• Well being plans or insurers (aka payers) present protection for medical and pharmacy companies to their members. Personal insurance coverage is funded by employers and workers; public insurance coverage (eg, Medicare, Medicaid) are funded with tax {dollars}. Medication distributed to sufferers at outpatient pharmacies are coated beneath the pharmacy advantage of an insurance coverage coverage, whereas provider-administered medication are coated beneath the medical profit. Well being plans or insurers typically subcontract the administration of pharmacy advantages to pharmacy profit managers (PBMs). Well being plans or insurers are additionally known as payers.
• PBMs administer the pharmacy advantage of insurance coverage insurance policies and design formularies, negotiate reductions with producers, set up pharmacy networks, negotiate contracts with pharmacies or pharmacy companies administrative organizations, and course of and pay claims.
• Group buying organizations (GPO) are shopping for consortiums that mixture buying energy amongst their members, permitting them to barter higher reductions than they’d entry on their very own. GPOs embody well being programs, clinics, specialty pharmacies, retail pharmacies, and PBMs.
• Pharmacy companies administrative organizations handle and negotiate contracts with PBMs on behalf of unbiased pharmacies. Some pharmacy companies administrative organizations are affiliated or owned by wholesalers.

Move of funds for drug coated by the Pharmacy Profit

Funds between these gamers are summarized by the graphic beneath for medication sufferers obtain by way of a pharmacy. The pharmacy might be a normal free standing pharmacy (e.g., CVS, Walgreens), a pharmacy inside a hospital, or perhaps a mail-order pharmacy.

Move of funds for drug coated by the Medical Profit

Right here, moderately than pharmacies delivering medication to sufferers, medical suppliers provide the medication. These suppliers obtain reimbursement each for the price of the drug administered and likewise the skilled companies rendered to manage this drug.

Trying ahead

The article additionally identifies a lot of key themes:

• Drug costs have been rising in recent times, however rebates have been rising much more
• Federal authorities drug worth negotiation is starting with the Inflation Discount Act (IRA)
• Elevated vertical integration with insurers buying PBMs and the creation of GPOs owned by PBMs
• Well being plans are more and more transferring specialty provider-administered medication to the pharmacy profit, by way of “white bagging” (having a specialty pharmacy dispense the drug and ship it to the supplier) or “brown bagging” (having a specialty pharmacy dispense the drug to sufferers to carry to the supplier for administration)