Just who gets those big drug rebates? | WISC

Here’s what we know about drug rebates:

Insurers hire pharmacy benefit managers to administer drug programs for their clients, including employers and federal and state governments, who provide drug coverage through Medicare and Medicaid managed care plans.

The managers negotiate rebates from drug manufacturers to insurers in exchange for better coverage terms — often in the form of lower co-pays for brand name drugs. This makes it more likely that policyholders will choose that cheaper brand name medication over a competitor’s version. These middlemen, however, also keep a portion of the rebate for themselves.

The rebate figures are eye-popping. Insurers received $89 billion in rebates, reducing their spending on prescription drugs to $279 billion in 2016, according to estimates from Altarum, a research and consulting firm. This doesn’t include the portion of the rebate that pharmacy benefit managers keep, which isn’t disclosed.

Insurers argue that they pass along the savings to consumers in the form of lower premiums and out-of-pocket costs. And the Pharmaceutical Care Management Association, which represents the managers, says that the rebates help keep drug spending in check even as list prices increase.

“These rebates are used by payers to reduce premiums and out-of-pocket costs for patients,” the association said in response to Gottlieb’s remarks. “Getting rid of rebates would leave patients and payers, including Medicaid and Medicare, at the mercy of drug manufacturer pricing strategies.”

But the system has come under scrutiny, both for the lack of transparency and for the burden it places on consumers. Policyholders’ co-pays are typically based on the list price of the drug, not the cost after the rebate.

Some insurers are already changing their ways. UnitedHealthcare and Aetna said in March that they would pass along the rebates to their customers enrolled in a certain type of job-based insurance coverage. It would affect a total of about 10 million policyholders at the two carriers.

UnitedHealthcare said the discounts can range from a few dollars to more than $1,000 per prescription, depending on the medication. The company also said the move would not lead to increased rates. Aetna did not provide such details.

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Just who gets those big drug rebates? – WISC.