The Pharmaceutical Supply Chain, 2013–2023

The flow of dollars in the pharmaceutical marketplace within the US healthcare system involves a variety of stakeholders and myriad rebates, discounts, fees, and other payments. In recent years, a renewed focus on prescription medicine spending has triggered calls for greater visibility into distribution and payment processes. Against this backdrop, the market has experienced enhanced competition, resulting in higher rebates from pharmaceutical manufacturers to pharmacy benefit managers (PBMs) and payers.

The goal of this paper is to bring greater clarity to drug distribution and payment processes and estimate the share of total prescription medicine spending realized by pharmaceutical manufacturers and other stakeholders in the supply chain. We first look at total gross drug expenditures, defined as the sum of all payments for retail and nonretail brand and generic medicines made by patients and their public or private health plans at the point of sale (e.g., pharmacy, hospital outpatient department) prior to any payments pharmaceutical manufacturers provide. We then determine the share of spending received by each stakeholder in the supply chain.

The analysis makes it possible to measure prescription drug spending by consumers, health plans, government payers, employers, and the portion thereof realized by manufacturer and nonmanufacturer stakeholders.

This study was funded by the Pharmaceutical Research and Manufacturers of America.