New Data: Rebates are Unrelated to Drugmakers’ Pricing Strategies

(Washington, D.C.) — As the Administration considers modifying price concessions for prescription drugs in Medicare and federal programs, the Pharmaceutical Care Management Association (PCMA) is releasing new data, “Reconsidering Drug Prices, Rebates, and PBMs,” showing drug manufacturers alone set prices – independent of rebates. Pharmacy benefit managers (PBMs) have long encouraged manufacturers to offer payers alternative ways to reduce net costs. Simply put, the easiest way to lower costs would be for drug companies to lower their prices.

Click here to see the new research.

“This study further confirms that drugmakers set and raise prices unrelated to the rebates they negotiate with PBMs. Drug companies keep raising prices even when rebates go down,” said PCMA President and CEO Mark Merritt. “Simply eliminating plans’ ability to negotiate price concessions would enrich drugmakers at the expense of patients, who’d not only face higher prices but higher premiums and out-of-pocket costs too.”

The Visante study highlights top-selling Medicare Part D brand-name drugs with steady price increases and no change in rebate levels over a five-year period from 2012 to 2017. In addition, the study analyzes a number of Medicare Part B drugs, which have no PBM rebates, and large price increases.

Key findings include:

  • Among the top-selling brands in Medicare Part D, there is no correlation between growing prices set by drugmakers and the change in rebate levels that they negotiate with PBMs.
  • Rebates may go up or down, but manufacturer prices only go up.
  • Prices on drugs with smaller rebates increased during the 2012–2017 period.
  • A large number of prescription drugs with “extraordinary” price increases are in Medicare Part B, where PBM tools are not used.

According to a recent study by Oliver Wyman Consulting, commissioned by PCMA, rebates have reduced costs in Medicare Part D by $34.9 billion and eliminating them would have caused Part D premiums to rise by 52 percent in 2018.

In addition, new data released by the Centers for Medicare & Medicaid Services (CMS) for 2019 Part D premiums, total cost trend, and national average plan bids shows a negative trend for the first year since 2007. CMS cites drug manufacturer and pharmacy price concessions as factors driving these lower costs.

The Visante research builds on a growing body of evidence from third-parties showing price concessions are not correlated to pricing strategies.

Manufacturers have chosen to negotiate price concessions with PBMs using rebates, which are paid months after a drug has been dispensed and are used by payers to reduce premiums and out-of-pocket costs for patients.

PBMs are hired by America’s largest, most sophisticated, health purchasers to reduce costs by, among other things, promoting generics and negotiating rebates and price concessions on brand-name drugs. Typically, PBMs pass along more than 90 percent of these savings to plans, which use them to cut premiums, out-of-pocket costs and other expenses. Many health plans and large employers require PBMs to pass through 100 percent of rebates. All rebates in Medicare Part D must be used to enhance benefits, or to reduce beneficiary cost sharing or premiums.