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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