1. Key stakeholders

Multiple stakeholders participate in the distribution and financing of drugs dispensed by pharmacies.
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Pharmacy Drugs

1. Key stakeholders

Multiple stakeholders participate in the distribution and financing of drugs dispensed by pharmacies.


Hover on a to learn more about each stakeholder’s basic role.

Go to the doctor's office drug key stakeholders

Pharmaceutical Company Wholesaler Pharmacy Pharmacy Benefit Manager ( PBM ) Health Insurer Commercial Health Insurer Government Health Insurer Patient

The pharmaceutical company develops, manufactures and markets drugs.

The wholesaler plays the role of distributing drugs to pharmacies and other intermediaries in the supply chain.

The pharmacy dispenses drugs, including oral medications and self-administered injections, to patients.

The pharmacy benefit manager (PBM) provides administrative services on behalf of Health Plans, including negotiating drug prices, establishing formularies (lists of covered drugs) and reimbursement levels, and processing prescription claims.

A health plan is an insurance policy that reimburses beneficiaries for health services, including inpatient, outpatient and pharmaceutical drugs.

Commercial health plans are provided by employers and through health exchanges.

Government-sponsored health plans are provided by Medicare, Medicaid, the VA and other publicly funded programs.

The patient obtains the drug and pays for some portion of its cost in most cases.

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2. The drug's journey to the patient

Key Terms

Health plan

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A health plan is an insurance policy administered by a government program or commercial entity that reimburses beneficiaries for health services, including inpatient, outpatient and prescription drugs.

Health plan coverage is paid for by the patient according to plan agreements in the form of monthly premiums and additional payment methods:
Deductible – costs are paid out of pocket until the deductible limit. (see deductible)
Copay/coinsurance – costs are shared between the patient and insurer until the out of pocket limit

Payer

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A payer is a public or private entity that provides health insurance to patients, covering healthcare services and products. For prescription drugs, the payer generally reimburses the pharmacy or provider for the majority of the medication’s price, with the patient responsible for the balance through a co-payment or co-insurance. After the negotiated price has been reimbursed to the pharmacy or provider, the payer often receives a substantial rebate from the manufacturer.

Of the US population that is insured, the 2016 payer mix is as follows:

  • Employer 49%
  • Medicaid 19%
  • Medicare 14%
  • Non group 7%
  • Other public (VA, military) 2%

Pharmacy benefit

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The pharmacy benefit provides insurance coverage for drugs dispensed to patients by pharmacies.

Drugs are dispensed to patients at the pharmacy who pay out of pocket amount and a claim is filed to payer for reimbursement.

Pharmacy Benefit Manager (PBM)

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Pharmacy Benefit Managers are third party organizations that aim to reduce pharmacy and administrative costs for health plans (payers) by 1) managing formularies and 2) negotiating drug rebates and discounts. Some large PBMs also manage their own mail order pharmacies.
In 2016, the three largest PBMs in the US managed prescription coverage for 78% of patients.

Retail pharmacy

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Retail pharmacies dispense generic and branded drugs directly to patients.

The three largest retail pharmacies in the US in 2016, by total prescription revenues, were:

  • CVS Health Corporation – $61.1b
  • Walgreens - $56.8b
  • Rite Aid Corporation - $19.0b

Specialty pharmacy

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Specialty pharmacies dispense drugs where patient monitoring/ management or utilization restrictions are needed.

The three largest specialty pharmacies in the US in 2016, by total prescription revenues, were:

  • Express Scripts, Inc. - $43.9b
  • CVS Health Corporation – $35.3b
  • UnitedHealth Group (Optum Rx) – $17.4b

Wholesaler

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A wholesaler or distributor acts as a middleman between the pharmaceutical companies and the pharmacies and providers that dispense medicines to patients.

There are two types of wholesaler businesses:
Full-line wholesalers – for retail and outpatient settings
Specialty distributors – for inpatient settings (hospitals, doctors’ offices) only

The three largest wholesalers account for 85% to 90% of the distribution market in revenue: AmeriSourceBergen Corp. (ABC) $147.3, McKesson Corporation (MCK) $133.7B, Cardinal Health, Inc. (CAH) $97.4B.

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