Drug Price Negotiations & Rebates

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America’s pharmacy benefit managers (PBMs) are dedicated to controlling drug costs by encouraging competition among drug manufacturers and pharmacies and incentivizing consumers to take the most costeffective, clinically appropriate medications. PBMs facilitate patient pharmacy care management and provide real-time information to physicians and patients so they know, when a drug is prescribed, whether it is on the formulary and the patient’s cost-sharing obligation. PBMs uniquely have the expertise, tools, and data to ensure that pharmacies can dispense a patient’s drug, determine her cost-sharing, and know what the pharmacy will be paid, in real-time as the patient stands at the pharmacy counter.

One of the most important functions PBMs perform is negotiating price concessions with drug manufacturers to lower costs for consumers.

As part of an overall plan to address prescription drug spending, the Administration is advancing a proposed rule to change the use of PBM-negotiated price concessions —rebates— for Medicare Part D plans and Medicaid managed care organizations. The Administration is proposing to require the savings be used for a small minority of Medicare beneficiaries to lower their cost-sharing at the pharmacy counter, rather than to help all beneficiaries through lower monthly premiums. The proposed rule does not address drug prices set by drug manufacturers.

The Congressional Budget Office recently agreed with government actuaries that the proposed rule will increase premiums for Medicare beneficiaries and impact taxpayers through significantly higher spending in the programs. A number of diverse organizations, from patient groups to the business community, have expressed opposition to the proposal.

If a new system for applying rebates is to work, it must allow PBMs to do what they do best — removing PBMs from administering negotiated savings would create significant disruption for beneficiaries and pharmacies. Only PBMs have the technical capability, data and infrastructure to administer Medicare and Medicaid drug benefits, even if savings are applied at the pharmacy counter.

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