In their recent op-ed, Drug Rebates Aren’t Kickbacks, Joe Antos and Jim Capretta claim that rebates are incentives because drug companies charge less when more of their drugs are sold to patients. The facts speak otherwise. Rebates create an environment where higher list prices drugs are favored providing zero incentives for pharma companies to introduce lower priced medicines in competitive therapeutic classes.
Over the last five years, according to the Department of Health and Human Services, pharmaceutical spending has increased by 38% while the average individual health insurance premium has increased by 107%. During the same time period, rebates, discounts and fees paid by the biopharmaceutical industry to insurers and PBMs have risen from $74 billion to $153 billion - an increase of 107%. Not only are rebates, discounts and fees outpacing the increase in spending on drugs but they haven’t slowed precipitous premium increases.
Because PBMs retain a portion of negotiated rebates and other price concessions as compensation for their services, list prices are rising rapidly even as net prices have held steady. A key unintended consequence of this dynamic is that patients do not directly benefit from significant price negotiations in the market today. Unsurprisingly, manufacturers are willing to raise prices and transfer the greatest list-price-based rebate value to middlemen to secure preferred formulary position at the expense of real free-market competition while also limiting the therapeutic options of physicians and patients.
Over the last five years, according to the Department of Health and Human Services, pharmaceutical spending has increased by 38% while the average individual health insurance premium has increased by 107%. During the same time period, rebates, discounts and fees paid by the biopharmaceutical industry to insurers and PBMs have risen from $74 billion to $153 billion - an increase of 107%. Not only are rebates, discounts and fees outpacing the increase in spending on drugs but they haven’t slowed precipitous premium increases.
Because PBMs retain a portion of negotiated rebates and other price concessions as compensation for their services, list prices are rising rapidly even as net prices have held steady. A key unintended consequence of this dynamic is that patients do not directly benefit from significant price negotiations in the market today. Unsurprisingly, manufacturers are willing to raise prices and transfer the greatest list-price-based rebate value to middlemen to secure preferred formulary position at the expense of real free-market competition while also limiting the therapeutic options of physicians and patients.
