Benefit Bulletin: August 2017

Benefit Bulletin: August 2017

Drug Rebates Often Not Going To Patients

A behind-the-scene rebate game between drug makers, health insurers and their pharmacy benefit managers is costing you and the Medicare program in higher drug costs.  A research paper published by JAMA Internal Medicine finds that prescription drug rebates, which are received by health plans and pharmacy benefit managers, may be driving up the amount that both beneficiaries and Medicare pay for drugs, especially the highest-priced drugs.

The U.S. pharmaceutical pricing system is so secretive that there’s a range of prices for the same medication.  Drug makers offer rebates from their list prices in exchange for a favorable position on health plans’ formularies, but those rebates aren’t necessarily passed on to Medicare patients.  Instead of doing so, that money is going to drug plan insurers and pharmacy benefit managers.

Patients and the federal government wind up paying a price that’s generally based on the higher list price and not the net price after rebates.  In addition, taxpayers pay more because Medicare pays more for the share it covers.  Because both consumers and Medicare are paying before rebate prices, people reach the Medicare Part D coverage gap, known as the doughnut hole, more quickly, where consumers pay a larger share of the drug price.

The authors of the JAMA paper offer two policy remedies that TSCL strongly agrees with:

1.) Cost sharing should be shifted from co-insurance which is a percentage of the pre-rebate cost to a flat co-pay which is no longer linked to the list price of the drug; and

2.) Alternately, plans could calculate the patient’s out-of-pocket cost-sharing on the basis of expected net price for the drug after rebates, rather than the list price.  Currently this sort of point-of-sale rebate is allowed for Part D plans, but not required.

Prescription drug costs top the list as one of the fastest - growing costs that older Americans have to cope with in retirement.  In addition to these common-sense policy changes, TSCL strongly supports legislation that would require Medicare to negotiate drug prices, speed approval of generic drugs, and allow importation of FDA approved drugs from countries where they are less expensive.


Source:  “Association of Prescription Drug Price Rebates in Medicare Part D With Patient Out-of-Pocket and Federal Spending,” JAMA Internal Medicine, May 30, 2017.