In 2023, the United States experienced the most significant increase in prescription drug spending (13.6%), totaling $89 billion.1 This was driven by higher utilization and the introduction of new, expensive specialty and biotech drugs. In 2024, other factors continue to drive costs and disrupt the pharmacy landscape, including the implementation of new business models, pharmacy benefit manager (PBM) practices, the rebate system, regulatory changes, advancements in provider status, and potential Federal Trade Commission (FTC) interventions.2,3
Disrupters in Payment in 2024
Amazon expanded its health care services and developed relationships with insurance organizations with PBM RxAdvance. Amazon also continues to expand expedited drug shipping with its last-mile delivery system RxPass subscription and drone delivery service, Prime Air. Licensed in all 50 states and with a Whole Foods retail presence, Amazon’s move into retail pharmacy seems imminent.4
Walmart is retreating from the primary care business, closing 51 clinics and its telehealth service despite previously expanding into new markets. Walmart attributed the closures to the tight labor market and increasing labor costs. Walmart, known for driving costs down, indicated that it failed to see a sustainable business model in this sector due to health care costs going up, high competition, and, in many cases, reduced reimbursement.5
CVS Health’s $10.6 billion acquisition of Oak Street Health allows it to expand further into the primary care market, adding a multi-state chain of clinics for older adults.6
The Mark Cuban Cost Plus Drug Company continued its growth. CEO Mark Cuban has continued to be very vocal against PBM practices, advocating for his business model, which aims to reduce costs in the system, providing consumers with fair prescription drug pricing and bypassing traditional PBMs. This model helps consumers avoid high drug prices by charging wholesale prices plus a flat 15% markup and pharmacist fee. Cost Plus developed its own PBM, does not accept other health insurance, and works directly with health insurers, drugmakers, and pharmacies to lower prices. It offers more than 100 generic drugs to treat various illnesses, including diabetes, asthma, and heart conditions.7,8
Biosimilars continue their growth after the launch of a biosimilar for adalimumab in 2024. Until the emergence of glucagon-like peptide-1 receptor agonists, adalimumab was the No. 1 US drug expenditure. To promote competition in drug pricing and reduce red tape surrounding drug access, the Affordable Prescriptions for Patients Act of 2023 (S 150) and the Biosimilar Red Tape Elimination Act (S 2305) are pending in Congress. As biosimilars increase in numbers and use, they are poised to lower drug costs for self-administered biologic therapies.9
GoodRx, known for its price comparison tool and effective marketing, now offers additional services like GoodRx Gold with a membership discount, GoodRx Care telehealth services, and data collection services for drug companies and PBMs. These services are estimated to earn over $100 million annually from PBM administrative fees, advertising, and data sales.
Opportunities and Challenges in Payment in 2024
FTC Investigation of PBMs
In July 2024, the FTC released an interim report highlighting how large, vertically integrated PBMs create unfair advantages, increase consumer costs, limit drug availability, restrict consumer choices with closed networks, and reduce access to care. PBMs impose harmful contractual terms on community pharmacies, affecting their ability to operate and serve communities. This ongoing inquiry, launched by the FTC in 2022, may lead to additional regulation.10,11
PBM Reform
While the FTC investigates the harm caused by PBM practices, state and federal governments continue to work on PBM reform. However, the PBM lobby opposes legislation aiming to regulate the industry. There is bipartisan support in Congress for PBM reform through various legislative efforts, focusing on banning spread pricing, ensuring fair reimbursement, establishing reasonable contract terms, and enhancing PBM transparency.
About the Authors
Craig Kimble, PharmD, MBA, MS, BCACP, TTS, is director of experiential learning, manager of clinical support services, and an associate professor in the Department of Pharmacy Practice, Administration, and Research at Marshall University School of Pharmacy in Huntington, West Virginia.
Thomas L. Pile, PharmD, CDCES, is a clinical assistant professor in the Department of Pharmacy Practice, Administration, and Research at Marshall University School of Pharmacy in Huntington, West Virginia.
Alberto Coustasse, MD, DrPH, MBA, MPH, is director of the Health Informatics program and a professor of management and health care administration at the Lewis College of Business at Marshall University in Huntington, West Virginia.
Provider Status
Pharmacists are increasingly recognized for providing clinical services and are increasingly compensated for patient care. This recognition is growing at the state and federal levels, with efforts to have pharmacists recognized as providers by the Centers for Medicare & Medicaid Services gaining momentum. Successful programs such as state-level fee-for-service and managed care plans allow pharmacists to bill for services and receive comparable reimbursements. This shift has improved collaboration and patient care in many outpatient settings.12
Labor Market, Drug Shortages, and Drug Pricing
Other market factors affecting drug prices include continued labor shortages, with some pharmacies seeing up to 40% turnover in staff.13,14 Shortages of drug products are significant (more than 300 at any given time) and predicted to continue, causing an upward impact on drug pricing.15,16 Finally with a complicated rebate, regulatory, and distribution system, drug pricing is expected to continue to be increasingly complex.17
Conclusion
The US pharmacy industry is valued at more than $312 billion, with annual growth of 3%. Market disrupters, ongoing regulatory reform, and technological advancements should reshape the current landscape, presenting both opportunities and challenges. Continued bipartisan legislative efforts and recognizing pharmacies as health care providers will create a more equitable, transparent, and efficient market. The ongoing FTC investigation and reforms in PBM practices promise fairer pricing and better access to care for consumers and pharmacies.
REFERENCES
- Tichy E, Hoffman JM, Tadrous M, et al. National trends in prescription drug expenditures and projections for 2024. Am J Health-Syst Pharm. 2024;81(14):583-598. doi:10.1093/ajhp/zxae105
- Hernandez I, Hung A. A primer on brand-name prescription drug reimbursement in the United States. J Manag Care Spec Pharm. 2024;30(1):99-106. doi:10.18553/jmcp.2024.30.1.99
- Hernandez I, San-Juan-Rodriguez A, Good CB, et al. Changes in list prices, net prices, and discounts for branded drugs in the US, 2007-2018. JAMA. 2020;323(9):854-862.
- Getting started with Amazon Pharmacy. Amazon. Accessed July 14, 2024. https://www.amazon.com/gp/help/customer/display.html?nodeId=TXqDwXw9QFQ2O3Ncpn
- Rascoe A, Benk R, Japsen B. Walmart is ending its telehealth service and closing over 50 health clinics. National Public Radio.May 5, 2024. Accessed July 12, 2024. https://www.npr.org/2024/05/05/1249231441/walmart-is-ending-its-telehealth-service-and-closing-over-50-health-clinics
- CVS Health completes acquisition of Oak Street Health. News release. CVS Health. May 2, 2023. Accessed July 12, 2024. https://www.cvshealth.com/news/company-news/cvs-health-completes-acquisition-of-oak-street-health.html
- Mark Cuban Cost Plus Drugs Company. Accessed July 11, 2024. https://costplusdrugs.com/
- Hernandez J. Billionaire Mark Cuban launches online pharmacy aimed at lowering generic drug prices. National Public Radio. January 24, 2022. Accessed July 11, 2024. https://www.npr.org/2022/01/24/1075344246/mark-cuban-pharmacy
- Hernandez I. Projected prescription drug expenditures in 2024: looking ahead to the inflation reduction era. Am J Health Syst Pharm. 2024;81(14):569-570. doi:10.1093/ajhp/zxae104
- Scathing FTC interim report on PBMs warrants further investigations, immediate action by policy makers and regulators. News release. National Community Pharmacists Association. July 9, 2024. Accessed July 11, 2024. https://ncpa.org/newsroom/news-releases/2024/07/09/scathing-ftc-interim-report-pbms-warrants-further-investigations
- FTC releases interim staff report on prescription drug middlemen. News release. Federal Trade Commission. July 9, 2024. Accessed July 11, 2024. https://www.ftc.gov/news-events/news/press-releases/2024/07/ftc-releases-interim-staff-report-prescription-drug-middlemen
- Hogue M. Payment for pharmacists’ services is spreading quickly across the states. American Pharmacists Association. April 26, 2024. Accessed July 11, 2024. https://www.pharmacist.com/CEO-Blog/payment-for-pharmacists-services-is-spreading-quickly-across-the-states
- National State-Based Pharmacy Workforce Survey. National Alliance of State Pharmacy Associations. April 2022. Accessed July 15, 2024. https://naspa.us/wp-content/uploads/2022/05/National-State-Based-Pharmacy-Workplace-Survey-Final-Report-APRIL-2022-FINAL.pdf
- Carrasquillo M, Petrovskis M, Roberts PA, Taylor RA. Bridging the gap: technician shortage and education standards. Am J Health Syst Pharm. 2022;79(10):720-722. doi:10.1093/ajhp/zxac006
- Kaakeh R, Sweet BV, Reilly C, et al. Impact of drug shortages on U.S. health systems. Am J Health Syst Pharm. 2011;68(19):1811-1819. doi:10.2146/ajhp110210
- Severity and Impact of Current Drug Shortages. American Society of Health-System Pharmacists. July 2023. Accessed July 15, 2024. https://www.ashp.org/-/media/assets/drug-shortages/docs/ASHP-2023-Drug-Shortages-Survey-Report.pdf
- Twenter P. Drug cost trends in 2024 are nearly unprecedented, research finds. Becker’s Hospital Review. January 17, 2024. Accessed July 15, 2024. https://www.beckershospitalreview.com/pharmacy/drug-cost-trends-in-2024-are-nearly-unprecedented-research-finds.html?oly_enc_id=3658A5975523C2X
