Almost half of net spending on brand name drug manufacturing flowed back into supply chains …

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In 2015, brand name drug manufacturers retained 47 percent of net spending on medicines, totaling about $219 billion, according to a new study from Berkeley Research Group.

Researcher Aaron Vandervelde, who helped prepare the study, said that “retention,” in this case, is the portion of the manufacturers’ expenditure that’s allocated to all of the different players in the supply chain.

“It’s the amount that ultimately flows back to the manufacturer,” said Vandervelde. “It’s not a profit figure. We’re looking at the operational costs.

“It’s a complex supply chain,” he said.

Generic drug manufacturers retained 23 percent that same year, totaling about $108 billion, and non-manufacturing drug entities retained 27percent, or $125 billion.

[Also: California drug price measure fiercely opposed by pharmaceutical industry]

The goal of the study was to ascertain how drug spending is spread out over the pharmaceutical supply chain. Researchers estimated  the total initial gross drug expenditures of insurers and patients, along with how much money supply chain stakeholders received for drug sales, to determine the net amount the drugmakers actually retain. Those stakeholders include, among others, manufacturers, distributors and pharmacists.

“Initial gross drug expenditures,” in this case, means prescription drug payments made by patients and their health plans before any rebates, discounts or feeds are factored in.

From 2013 to 2015, retrospective rebates, discounts and fees leapt from $67 billion to $106 billion, causing the share gross drug expenditures retained by brand name drugmakers to dip from 41 percent to 39 percent over the time, the report showed. Meanwhile, the share retained by non-manufacturer companies increased from 38 percent to 42 percent over that time.

“As competition in the pharmaceutical marketplace has increased in recent years, brand manufacturers have been making larger payments for market access to their medicines,” the researchers wrote. “Government-mandated discounts and fees have also increased over the last five years. Many of these discounts are not plainly visible, leading to misperceptions about the relative share of gross and net drug expenditures realized by brand manufacturers.”

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