Drug Costs

Who Benefitted From Drugmaker Rebates?

February 8, 2019 8:56 am

President Donald Trump last week put forth a plan to ensure the billions of dollars in discounts and rebates offered each year by biopharmaceutical firms benefit consumers instead of health insurers and pharmacy benefit managers (PBMs) like CVS Caremark and Express Scripts.


As Drug Channels Institute CEO Adam Fein explained this week in a The Wall Street Journal op-ed, in 2018, drug manufacturers paid $166 billion in rebates and discounts, amounting to a 40 percent reduction in prices for off-brand drugs.” (Drugs like insulin, Fein noted, received more significant discounts.)


These discounts reduce the net price of drugs. Wall Street Journal reporter Peter Loftus cited data from SSR Health: “During the third quarter of 2018, list prices for U.S. branded drugs increased 4.1 percent, compared with 5.3 percent a year earlier. Net prices, meanwhile, fell 5.1 percent, compared with a 0.4 percent gain a year before.” Research from Leerink Partners found that, for all of 2018, net price growth in the United States was 2 percent, down from 6 percent just two years later.


Pharmacy Benefit Managers admit drug prices are rising very slowly. In a report released this week, Express Scripts noted:

 - In 2018, U.S. drug spending increased 0.4 percent for commercial plans, the lowest trend in 25 years;

 - S. drug spending for Medicare plans fell 0.3 percent in 2018;

 - The average consumer spent $11.55 per 30-day prescription, only 6 cents more than in 2017.


Unfortunately, according to recent research out of New York state, though these rebates are growing, they’re not being used to lighten patient’s burden.


According to the Pharmacists Society of the State of New York (PSSNY), PBMs paid independent New York pharmacies an average of $10.85 per generic-drug prescription in 2017. Private health plans that provide state-financed Medicaid coverage reported a cost of $14.34 per prescription, representing a 32 percent markup over what pharmacies were paid. Those markups doubled from 2016. As Bloomberg’s Robert Langreth, David Ingold and Jackie Gu explained, PBM practices are why the prices for heartburn medication Nexium—and other treatments—can vary significantly from state to state.


In a letter, the PSSNY board said, “The anticompetitive business practices … negatively impact the ability of pharmacists and other healthcare professionals to provide patient care.” (In a blog post available here, we highlight one independent New York pharmacist who said he is worried PBM practices mean he’ll eventually have to close up shop.)


As Washington policymakers consider drug prices, the first task on their list should be to ensure the $166 billion in drug-manufacturer rebates go toward lowering patient costs and improving patient care.