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For Today’s Hearing on the Drug Delivery System, ‘Follow The Pill’

October 17, 2017
The Senate Committee on Health, Education, Labor, and Pensions will hold a hearing this morning on the cost of prescription drugs. The second in a series of hearings on drug costs, today’s hearing is expected to take a close look at the drug delivery system. It’s an important topic, but also a very complicated one. The drug cost ecosystem includes multiple players and each one has a unique role in bringing medicines from research labs to pharmacies and deciding how much patients pay for prescription drugs. These key players include:

  • Biopharmaceutical developers. These are the brand name drugmakers, who invest significant resources and time discovering and developing new medicines. Roughly 90% of biotech companies are not earning a profit, yet they provide cures and treatments that improve the lives of patients and provide tremendous value to society.

  • Pharmacy benefit managers, or PBMs. They are middlemen who help determine what patients pay for prescription drugs. A drugmaker sets the list price for a drug (the price that is usually the center of media attention), but that is almost never what a drug manufacturer makes or what patients actually pay. Instead, the list price is essentially the opening bid in a complex set of negotiations that are led by PBMs.

  • Insurance companies. More than anyone, insurance companies ultimately decide how much patients pay out of pocket for prescription medicines. They manage what’s known as the drug formulary, which is broken down into different tiers. Working with PBMs, insurers determine which specific tier in a formulary a specific drug will be listed on, and this determines how much patients pay for their prescriptions.

  • Generic drug companies. Approximately 90% of all prescription drugs sold to patients are generic drugs. As the New York Times has noted, “If your doctor writes you a prescription, there is a very good chance it will cost you $10 or less.” Once a biopharmaceutical innovator discovers a new medicine, there is a limited period of market protection for the innovator to recoup the costs of researching and developing the new medicine. After this period of market protection expires, generic competition ensues that helps drive down costs for patients.

Again, the drug delivery system is complicated. If you’re still scratching your head trying to figure out how this all works, BIO has the answer. The video below will allow you to follow the pill throughout the drug delivery system and learn more about how patients out-of-pocket costs for prescription medicines are actually determined.

And you can always learn more by visiting These resources are all part of BIO’s efforts to provide the public and policymakers a clear understanding of how the drug innovation and delivery system works and to ensure patients have access to affordable medicines.

View the Follow the Pill video online here.

Learn more about the drug cost ecosystem here.