Academic Literature

Spending On Prescription Drugs In The US: Where Does All The Money Go?

Supply chain intermediaries, or “middlemen,” are being blamed for capturing much of the money that is often categorized as drug spending.
Originally published on 07/31/2018 in Health Affairs

A number of studies have attempted to quantify this by focusing on the gap between the list and net price. However, these analyses focus primarily on manufacturers’ rebates and do not account for revenues retained from other transaction costs and mark-ups.

A clearer understanding of the total market size, as well as the revenues retained from the purchase, distribution, and payment of prescription drugs throughout the U.S. supply chain, may be useful for policy makers as they seek reforms while working to preserve incentives for innovation and efficiency. The Drug Pricing Lab's analysis provides an estimate of the revenues or gross profits associated with prescription drugs’ path from the manufacturer to the patient, effectively allocating the total amount of drug spending among the different purchasers and payers across the US drug supply chain.

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