America's secret drug pricing system.
What exactly is spread-pricing? Often hard to expose, it's a practice most common with generic drugs, which make up almost 90% of all prescriptions dispensed in the United States.
PBMs use this lack of transparency to keep 'spread' as profit.
Spread-pricing is the difference between what a U.S. Pharmacy Benefit Manager (PBM) charges a health-insurer for a drug and what it in-turn reimburses the pharmacy. The pharmacy doesn't know the price the insurer pays the PBM and insurers don't know how much the PBM reimburses the pharmacy. PBMs use this lack of transparency to keep 'spread' as profit.
To probe what these “middlemen” make, @Bloomberg examined the prices of 90 of the best-selling generic drugs used by Medicaid managed-care plans. For the 90 drugs analyzed, PBMs and pharmacies siphoned off $1.3Bn of the $4.2Bn Medicaid insurers spent on the drugs in 2017.
Among the generic drugs examined, pharmacies and supply chain middlemen on average added almost 32% to the cost of a drug. However, the broad-brush analysis doesn’t distinguish between how much of the markup is going to the pharmacies and how much is retained by PBMs.
While spread-pricing is largely unknown to employers and those who pay health bills, it's certainly becoming transparent that generics don’t always save money.