Would Price Transparency for Generic Drugs Lower Costs for Payers and Patients?

In 2016, roughly 62,000 retail pharmacies filled over 4.4 billion drug prescriptions, costing almost $400 billion and accounting for more than 10 percent of overall U.S. health care spending. Almost 9 of 10 retail prescriptions---4 billion---were for low-cost generic drugs, accounting for about $100...

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Bibliographic Details
Published in:Policy File 2017
Main Authors: Lieberman, Steven M, Ginsburg, Paul B
Format: Report
Language:English
Subjects:
Consumers
Drugs
Economic policy
The Brookings Institution
Online Access:Request full text
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Summary:In 2016, roughly 62,000 retail pharmacies filled over 4.4 billion drug prescriptions, costing almost $400 billion and accounting for more than 10 percent of overall U.S. health care spending. Almost 9 of 10 retail prescriptions---4 billion---were for low-cost generic drugs, accounting for about $100 billion in drug spending. The actual cost of generic drugs is small fraction of what pharmacies are paid for these drugs. In contrast, brand name drugs, which lead the way for innovation in the pharmaceutical industry, have much more expensive ingredients and are less profitable for retail pharmacies. This paper provides background information on generic prescription drug pricing and outline a proposed policy to generate information on actual average prices paid by retail pharmacies to acquire generic drugs. The U.S. system for selling prescription medicines involves multiple parties, differs markedly for generic and brand drugs, has complex, nontransparent financial arrangements, and limits available information in asymmetric ways that disadvantage third-party payers and patients.