Prescription Drug Rebates, Explained

Prescription Drug Rebates, Explained


(mild music) – [Narrator] Lately
there’s been a lot of talk about prescription drug costs. One word that comes
up often is rebates. You may be familiar
with how rebates work for other consumer goods. When you buy a certain product, the manufacturer gives
you some money back, which is called a rebate. But when it comes to
prescription drugs, rebates work a
little differently. Let’s start with
the drug company, which sets a price
for their drug, sometimes called the list price. It’s often used to determine
how much someone pays when they fill a prescription. If you have insurance,
you might pay a percentage of the list price, or if you
haven’t met your deductible, you might pay the whole amount. If you don’t have insurance, you might also pay
the full list price. But behind the scenes, the drug company may
also offer a rebate, or a discount on the list price to a pharmacy benefit
manager, or PBM. Health insurance
companies use PBMs to manage their
pharmacy benefits. This includes developing
the formulary, which is a list of drugs the
insurance company will cover, and negotiating prices
with drug companies for the drugs covered
on the formulary. So why do drug companies
offer rebates to PBMs? Typically they offer
rebates for brand-name drugs so that these drugs
get preferred placement on the formulary. This preferred status
encourages patients to use the drug
company’s medications rather than competing products. When patients fill
a prescription for one of these medications, the drug company pays
a rebate to the PBM. As a result, the actual price
that the PBM pays for the drug is lower than the list price. PBMs may share some or
all of these rebates with insurance companies to help lower overall
insurance costs, which allows them to charge
enrollees a lower premium. But rebates do not directly
lower the out-of-pocket cost that patients pay for a drug because remember,
what patients pay is based on the list price, even if the drug company
has given a rebate to the PBM for that drug. These rebate arrangements have
received a lot of attention from lawmakers as
they consider ways to lower prescription
drug costs. The Trump Administration
had proposed banning rebates between drug companies and PBMs for people who have
prescription drug coverage through Medicare,
known as Part D. Instead, drug companies
could have offered rebates directly to people
enrolled in Part D when they filled
their prescriptions. But the Administration retracted
this proposal amid concerns that it would lead to higher
costs for insurance companies, higher premiums for enrollees, and higher Medicare spending
by the federal government. It is still possible
that lawmakers could
make some changes to this rebate system to
help people save money on their prescriptions,
but they’re also talking about many other ways
to lower drug costs, like bringing more
generic drugs to market, using lower drug prices
in other countries as a benchmark for
prices in the U.S., allowing the federal government to negotiate drug
prices under Part D, and letting Americans buy
lower-cost prescription drugs from other countries. The fate of these
and other proposals is still up in the air. (mild music)

Leave a Reply

Your email address will not be published. Required fields are marked *