The People's Perspective on Medicine

Are Rebates to Blame for Drug Price Increases?

Pharmacy benefit managers use a complex and obscure system of rebates. Drug manufacturers claim these are the true culprits behind rising drug prices.

Many drug companies have raised prices over the last few months, but they say it’s not to improve their bottom line. Indeed, a number of pharmaceutical manufacturers maintain that they are raising prices because pharmacy benefit managers or PBMs force drug companies to pay bigger rebates. The PBMS are middlemen between manufacturers, insurance companies and pharmacies. They often negotiate secret deals that are hard to evaluate.

HHS Suggests Changes to Rebates:

The US Department of Health and Human Services is proposing a rule that could change the way PBMs do business. The head of HHS, Alex Azar, is a former pharma executive. To begin with, he said the proposal would eliminate rebates. It would also change how drugs are priced at the pharmacy counter. HHS intends for patients to benefit from discounts created by pharmacy rebates. Currently, in most instances patients or insurers pay higher prices, even for essential drugs such as insulin.

Figuring out who is paying what can be extremely difficult. The revised HHS rules aim for greater transparency.

A commenter writing for Forbes recommends a completely different rule change: allow Medicare to negotiate prices with the companies. Congress struck a deal forbidding such bargains when it passed the Part D legislation that covers prescription drugs for seniors. In the current climate, legislators might not be willing to revisit this provision, however.

PhRMA Welcomes the Proposed Rule Changes:

The Pharmaceutical Care Management Association, a trade group for PBMs, maintains that reducing or eliminating rebates would make drugs pricier for consumers. The manufacturers’ trade group, PhRMA, is in favor of the proposal. Whether consumers will truly benefit remains to be seen.

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About the Author
Terry Graedon, PhD, is a medical anthropologist and co-host of The People’s Pharmacy radio show, co-author of The People’s Pharmacy syndicated newspaper columns and numerous books, and co-founder of The People’s Pharmacy website. Terry taught in the Duke University School of Nursing and was an adjunct assistant professor in the Department of Anthropology. She is a Fellow of the Society of Applied Anthropology. Terry is one of the country's leading authorities on the science behind folk remedies. .
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I live in the U.S. My prescription drugs are so expensive here that I choose an online pharmacy i.e medsengage.com. It is safe for ordering prescription drugs and also affordable for me.

Drug rebates are intended to hook patients on a particular drug, and when one doesn’t work any longer then that rebate is no longer available because the retired are under the auspices of Medicare/Medicaid. Drug companies have caveats, and being on a government program after age 65 is when the rebates stop, just when a patient needs a drug the most. It’s fraud, along with bait and switch.

I have been prescribed Xiidra. It’s about $625 a month. My insurance refuses to cover it, nor will they apply it to my out-of-pocket max. The manufacturer will not allow use of their savings card because I have insurance. None of this makes sense to me The real question is, how do I get the drug at an affordable price?

As an MBA and CPA, I have never understood how adding a middle layer to drug distribution, i.e. PBM’s, could possibly result in lower costs to consumers or insurance companies. I’m sure the PBM’s can point to individual drugs where some savings might have occurred, at least temporarily, but since PBM’s employ thousands of white collar workers and have all the other expenses of large corporations, plus make profits, there’s no way they can lead to lower costs overall. As your article shows, the drug manufacturers have no intention of reducing their own profits, and I’m sure private insurance companies will adjust premiums accordingly, so it must lead to higher costs for consumers in copays, insurance premiums, deductibles, or other costs. The idea that PBM’s save us money just doesn’t pass the sniff test.

I think that neither one of them has consumers’ best interests in mind.

The cost of a rebate is really not the issue. All the rebates in the world won’t effectively reduce the Rx costs a substantial amount. The issue is why there is one price for a drug in the USA and another on the international market. Example: Eliquis 5 mg. One months supply (60) tablets $515 at a US pharmacy. Same drug purchased from Canada sourced in Australia $161. This price is well below my cost of acquisition of $450.

OK, all you supposed representatives of the people, why does this exist? Heaven help those that don’t have any insurance and even with insurance the cost is prohibitive. Quit dumb partisan investigations, disrespecting the houses of Congress, and do something constructive.

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