The U.S. supply chain for prescription drugs is highly complex, involving several intermediaries between drug manufacturers and patients. This analysis estimates the percentages of drug expenditures that are allocated to each stakeholder in the supply chain, including manufacturers. Then, it examines the gross margins (hereinafter referred to as “margins”) of three primary intermediaries in the U.S. retail prescription drug supply chain, namely wholesalers, retail pharmacies, and Pharmacy Benefit Managers (PBMs) from Quarter 1 (Q1) 2020 to Quarter 4 (Q4) 2022.
KEY POINTS
- According to ERG's estimates, Pharmacy Benefit Managers (PBMs) had the highest profit margins among intermediaries in 2022, at $60.6 billion (31.2 percent). The model suggests that these margins increased from 2020 to 2022 across all drug types.
- In 2022, wholesaler margins were $23.4 billion (6.3 percent), and pharmacy margins were $12.2 billion (3.2 percent).
- Brand drugs yield higher margins for PBMs and wholesalers in dollar value compared to generic drugs ($30.7 billion and $14.1 billion for brand drugs, compared with $29.9 billion and $9.3 billion for generic drugs in 2022, respectively).
- Brand drugs yield lower margins for pharmacies in dollar value compared to generic drugs (-$0.5 billion for brand drugs, compared with $12.7 billion for generic drugs in 2022).
The report synopsis and report provide additional details on the data, methodology, and findings.
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