- Manufacturer sells $100 drug to wholesaler and nets back $5 to wholesaler
- Wholesaler sells $100 drug to retail pharmacy and pharmacy nets back $2 to wholesaler
- Retail pharmacy is reimbursed $114 by PBM (Claw back potential)
- PBM earns $30 commission (rebate) from the manufacturer
SUMMARY
- Manufacturer upcharges list price by 35% to pay intermediaries*
- Manufacture net price = $65
- Wholesaler margin = $3
- Retail pharmacy margin – $12
- PBM profit = $30
*Intermediaries include wholesalers, PBM aggregators, PBMs……and may include (and often do) TPAs, insurance brokers, insurance consultants, insurance companies.
This is illustrative only but gives the reader insight into how money flows through pharmacy sales in the United States.
The big winners are the PBMs.
Rx commissions (rebates) can be worth thousands of dollars for a 30-day supply of a single medication for one plan member. Imagine a plan paying $75,000 in annual commissions on Joe Sixpack’s $10 co-pay prescription. The United States is the only country on the planet that has Rx rebates baked into retail pharmaceutical sales.
You can’t take the rebates out of the current system. It’s baked in. Therefore, someone has to get them. 20% – 40% of a typical plan’s spend goes to rebates.
