Nearly Half of Medicare Drug Spending Goes to Middlemen

My thanks to Wendell Potter for this story. Nearly half of Medicare spending on medication does not buy medicines, it goes to middlemen. Go to the link. Wendell has done a great job. That fact is critically important because our country is unique among developed nations in this respect. Researchers at Johns Hopkins and the University of Utah found that for every $100 spent on Medicare drug benefits, $41 went to the pharmacy benefits managers, $30 to the manufacturers, $17 to the pharmacies that dispense the drugs, and $12 to the wholesalers. So only $3 out of every $10 goes to the companies that make the drugs. The three biggest pharmacy benefit managers control 80% of the market. They are all owned by big insurance companies that answer to stockholders. So, the insurance companies who determine where you can get your medications own the pharmacy benefits managers they send you to. It is hard to imagine a more flagrant conflict of interest. Middlemen get 70% of the money.

“In fact, as the researchers noted in an October 2023 article in JAMA: “All but 29.9% of Medicare Part D dollars spent on 45 high-utilization generic drugs went to intermediary gross profit.”

Four out of five times Medicare patients who have not met their deductible can get their medicines cheaper by paying the cash price rather than using their insurance and paying the price negotiated by their pharmacy benefits manager. The pharmacy benefits prices are higher than the cash prices. For example, many generics at Walmart are $4 a month. If you use your insurance card, and you have not paid your deductible you will pay more.

No other developed country allows this kind of profiteering, and this is a big part of the reason that we pay two or three times as much for medications.  Our laws and policies produce health care that costs twice as much as the care in other countries and they live longer. If we keep doing the same thing, we will never have better health at lower cost. It is time for a change!