It sounds good, eliminate prescription drug rebates and stick it to those greedy pharmacy benefit managers and insurance companies … but it’s not that simple. Prescription drug rebates help lower premiums for everyone, especially employers and their employees which follows the concept of insurance. For now eliminating rebates is proposed in the context of government plans like Medicare and Medicaid, but that could change and eventually effect everyone.
Eliminating rebates means nothing to patients unless they pay a coinsurance percentage for their medication. If they pay a fix co-pay, their cost is unchanged. From the manufacturers perspective there is little difference eliminating a rebate or lowering the price of the drug by the same amount.
The rebates collectively lower costs for all plan participants in the form of lower premiums. Some employers collect 100% of rebates, others pay negotiated fees to PBMs and still others use a combination of both, always attempting to negotiate the best deal for the plan sponsor and indirectly for employees paying premiums.
Employers financially motivate employees to seek the lowest cost prescriptions. That’s why there are incentives to use genetics, preferred formulary drugs (higher rebates) and also mail order pharmacies run by pharmacy benefit managers (PBMs) to take advantage of volume and automated operations and one less entity in the process; the retail pharmacy. Of course, in recent years this is all bad news for the independent mom and pop pharmacies.
Despite all the hype, eliminating drug rebates merely shifts costs around, somebody is still subsidizing somebody else. In this case the great majority of covered individuals will increase their subsidization of the few who are heavy users of the drugs by paying higher premiums.