Rebates
• Spin – Rebates are a villain in producing higher drug costs
• What are they? --
o Discounts for favorable formulary placement
o Rebates are like discounts based on the volume of sales
• Entities involved – PBM, rebate aggregator, Health Plan, drug manufacturer
• What is rebated? -- brand name drugs only
• Contract between PBM or payer and drug manufacturer
o Terms of contracts are secret
o Manufacturers don’t want other manufacturers to know what they have guaranteed for discounts
o PBMs don’t want clients to know how much they keep
o PBMs negotiate discounts so the overall cost is lower, but they keep a percentage of the savings
• Largest contractor for rebates is Medicare
• Response
o CVS is giving patients a lower cost by giving rebates/discounts at point-of-sale
o Walgreens and others are doing the same
• Industry question – Are rebates going away, or are they just being moved to another cost that ultimately the patient or insurer still pays
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