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TAKE CARE: Advocacy Blog Series

Drug Rebates 

We’re excited to continue our advocacy blog series meant to help you take care when it comes to important arthritis health care and coverage issues. If you are just now tuning into this series, check out our previous blog posts on accumulator adjustment programs, pharmacist gag orders, and President Trump’s drug pricing blueprint.

This week we dig in to the world of drug rebates, which are often negotiated between pharmaceutical manufacturers and pharmacy benefit managers (PBMs). Read on to learn more about how drug rebates play a role in the drug supply chain and impact access to medications.

What are drug rebates?

Rebates are defined as a reduction in the price of a product. In the case of the pharmaceutical supply chain, rebates are obtained by PBMs from drug manufacturers as part of the negotiating process over both the price and placement of drugs on a formulary. The rebate amount is usually based on the structure of the contract between these two parties. Importantly, a rebate is different from a discount, which is a reduction in the dollar amount that a seller charges a buyer.

Why are drug rebates receiving attention?

Rebates have been in the news due to increasing concerns about the cost of prescription medications. Although national spending on retail prescription drugs in the United States comprises about 10 percent of overall health spending, new and innovative specialty medicines like biologics are an outsized driver of these costs. One solution is to ask insurance companies and PBMs to share these rebates with patients. Doing so could help lower patient out-of-pocket costs for medications.

Are health insurance companies already starting to pass on rebates to consumers?

Yes, insurance companies UnitedHealthcare and Aetna announced earlier this year that they would begin passing on drug rebates to their fully-insured plan members at the point of sale. About 7 million and 3 million Americans, respectively, could benefit from this change. These actions will take effect beginning in 2019. 

What does this mean for access to my medication?

The announcements by UnitedHealthcare and Aetna affect the fully-insured health plans they manage. Typically, smaller employers are fully-insured, which means they purchase health insurance from an insurance company directly. This differs from self-insured plans, whereby employers provide health care benefits directly to employees. If you have insurance through either of these carriers and are curious about whether your plan passes rebates on to you, speak with your Human Resources department.

What is the federal government doing about drug rebates?

The Department of Health and Human Services (HHS) is contemplating two ways to address drug rebates.

First, HHS is considering requirements similar to what we described earlier – by making Medicare Part D plans share rebates at the pharmacy counter. Medicare Part D is the prescription drug benefit.

Second, the administration is thinking more broadly about whether rebates should be limited or banned entirely. One way the rebate system could be modified is changing a statute that currently protects rebates from being considered illegal.

How is the Arthritis Foundation getting involved?

The Arthritis Foundation is supportive of policies that require health insurers and PBMs to pass through rebates to patients at the point of sale to help lower out-of-pocket costs. It’s encouraging that a few insurers have already acted for the benefit of patients and we hope others will follow the example set by UnitedHealthcare and Aetna.

We understand that health care costs continue to be a complex issue for patients and all parts of the health care industry. We will continue to work diligently to identify solutions that put patients first. If you’d like to stay informed of federal and state-based health care issues, consider signing up to be an Advocate. Becoming a part of our Advocacy grassroots network is an easy way to get involved and stay informed.

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