Module 1
How Drug Spend Flows
Two benefits, one patient, and a supply chain in which six companies manage nearly 95 percent of American prescriptions while owning the pharmacies that dispense them.
By the end of this module, you will be able to:
- Distinguish medical benefit from pharmacy benefit drug spending and what manages each
- Separate the drug costs an organization can influence from those it cannot
- Describe the concentration and vertical integration the FTC documented
- Two Benefits, One Patient The same drug can be paid for two entirely different ways depending on who administers it. That split explains most of what is confusing about drug spend. About 5 min
- The Scale of Drug Spend Part D spending is projected to nearly double in a decade. Drug spend is the fastest-growing component of nearly every total cost of care arrangement. About 5 min
- PBMs and the Supply Chain Six companies manage nearly 95 percent of American prescriptions and are vertically integrated with insurers and pharmacies. The FTC documented what that produces. About 6 min
Module quiz
Answer all questions to see your score.
1. What determines whether a drug falls under the medical or pharmacy benefit?
In Medicare these correspond to Part B and Part D. The same therapy can shift between them depending on setting, which is the basis of site-of-care strategy.
2. Which direction should adherence spending move for an organization at risk for total cost?
An organization managing pharmacy to a pharmacy budget rather than to total cost of care will get this backwards and can raise total spending.
3. What did the FTC find about PBM market structure?
The top three processed nearly 80 percent of the roughly 6.6 billion prescriptions dispensed in 2023. A second report found specialty generic markups generating over $7.3 billion above estimated acquisition cost.