For self-funded plan sponsors, understanding how prescription rebates work is crucial. As Stacey Richter points out during our discussion with Mark Cuban on the “Relentless Health Value” podcast, “Rebates can be defined however the PBM wants them to be defined.”
So what are prescription drug rebates? They are financial kickbacks that self-funded employers can receive, negotiated by their Pharmacy Benefit Manager (PBM) with drug manufacturers. While these rebates can help lower the overall costs, the savings often fail to directly reach patients, leading to confusion and frustration.
As Mark Cuban highlights on the podcast, “CEO of a big company, did you know that your sickest employees are paying for that rebate you get?” As CEO, it made him sick to his stomach when he realized that his sickest employees were subsidizing rebate checks.
When PBMs negotiate rebates, they secure discounts based on the volume of drugs sold, which theoretically lowers overall drug prices. However, the reality is that patients and their pharmacists often lack visibility into these rebates, resulting in inflated prices at the pharmacy counter.
For instance, specialty brand drugs typically command much higher rebates—often exceeding 40%—compared to retail brand drugs, which may have rebates around 10%. This significant disparity from these higher rebates can drive up the list prices of specialty drugs, leaving patients to bear the brunt of these increased costs, even though substantial rebates exist. Moreover, many patients rely on manufacturer copay assistance programs, which over 95% of specialty claims utilize, to help manage their out-of-pocket expenses—an important topic that deserves further exploration.
Ultimately, without transparency in the rebate process, the system can perpetuate higher out-of-pocket expenses for those who need medications the most, creating a challenging landscape for both patients and employers striving to manage healthcare costs effectively.
Scripta Savings Tips: Key Takeaways for Plan Sponsors
Push for Detailed Rebate Disclosures: Request comprehensive rebate breakdowns from your Pharmacy Benefit Manager (PBM). This helps you assess how rebate savings are distributed, which is essential for making informed decisions that support plan members effectively.
Evaluate Specialty Drug Costs and Alternatives: Specialty medications often carry significant rebates, which can drive up list prices. Explore lower-cost, therapeutically proven alternatives that achieve the same patient outcomes, as these can significantly reduce costs without compromising care. Additionally, ensure strategies like copay assistance programs are in place to help members manage costs when specialty drugs are necessary.
Consider Alternatives to Rebate-Driven Strategies: Collaborate with your PBM to explore cost-saving options beyond rebates, such as formulary adjustments, promoting lower-cost generics, and providing members with transparent, member-friendly shopping tools like Scripta’s. This can reduce costs without relying solely on rebate structures.
By implementing these strategies, plan sponsors can gain better control over drug spending, support members’ health, and ultimately reduce overall healthcare costs.
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