Mercer report: Nearly half of employers favor eliminating drug rebates

A Mercer survey shows employers are in favor of current proposals to reduce drug prices. (Mercer)

Close to half of employers support ending rebates negotiated by pharmacy benefit managers (PBMs), according to a new survey.

Mercer asked employers whether they favored or opposed action on rebates, and most of those who responded were in favor of eliminating rebates in some form.

Nearly half (42%) of respondents were in favor of eliminating rebates for both the public and private sector, and 5% were in favor of eliminating them for government plans only. Overall, 17% of respondents wanted to leave rebates as is. 

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“The fact that so many employers favor some kind of government action to address spiraling drug costs signals that they believe this problem is systemic,” Beth Umland, director of research on health at Mercer, told FierceHealthcare.“While there are steps employers can take, like joining a purchasing collective or steering employees to a specialty pharmacy that provides more intensive services for patients with complex conditions, those actions can slow but not stop spiraling cost growth.”   

Looking at some of the drug cost proposals on the table, respondents were most in favor of making it easier and faster to get generic drugs on the market: 91%. Another 71% of respondents were in favor of basing the price of drugs in the U.S. on prices paid in other countries. 

Some of the overwhelming support for proposals came as a surprise to researchers, Umland said.

“The overwhelming endorsement of congressional action to protect the ban on preexisting condition exclusions" was unexpected, she said. “Anytime you see 95% of employers—of all sizes and industries—agree on anything, it’s a surprise.”

The question of drug rebates is extremely timely, as Congress and the Department of Health and Human Services (HHS) have recently proposed changes to this payment system, both within the public and private healthcare sectors. Specifically, the Trump administration is targeting the outlawing of rebates negotiated between manufacturers and PBMs, and instead giving the rebates directly to consumers. 

For example, earlier this week, the House’s Committee for Energy and Commerce held a hearing with five top drugmakers and sellers to try to tackle the solutions surrounding prices and rebates for chronic medications such as insulin. 

RELATED: PBMs, drugmakers both to blame for rising insulin prices, legislators say at hearing 

And Sens. Chuck Grassley, R-Iowa, and Ron Wyden, D-Oregon, submitted a letter to HHS' Office of Inspector General raising concerns about how PBMs are operating when it comes to spread pricing models. 

Another hot topic in Congress and in the Mercer report is the issue of surprise medical bills. Half of all those surveyed said they have received notice from members about getting surprise medical bills. Among respondents with 5,000 or more employees, that number was as high as 64%. 

In addition, the survey made it clear that most employers are not convinced that there has been any major progress in the past 10 years in making provider quality and cost more transparent. In fact, only about one-third of respondents feel significant progress has been made, while the other two-thirds say “not much” or “no real progress” has occurred. 

“Progress has been slower than anyone would like. And some actions that have been taken have been disappointing,” Umland said. “It’s been estimated that only about 30% of healthcare is ‘shoppable’— meaning that the patient is in a position to shop around for better prices.” 

Finally, the survey covered the topic of HSA reforms. For employers that currently don’t offer HSA plans, the survey asked what changes were necessary for them to consider offering HSAs. When given options, 45% of respondents chose “removing the minimum deductible requirement,” as the most significant change. In second and third places were “expanding the types of preventative care that can be covered pre-deductible,” and “permitting pre-deductible use of telemedicine.” 

For employers already offering HSA plans, 65% of respondents were interested in “expanding the types of preventative care that can be covered by pre-deductible” followed by 60% wanting to increase the allowable limit on HSA contributions. Finally, 59% would like to see more pre-deductibles for chronic condition coverage in HSA plans.

But will HSA reforms come any time soon?

“The reforms are expensive in terms of projected loss of federal revenue, and Democrats in the main are a bit less enthusiastic about liberalizing HSA rules,” Geoff Manville, government relations leader at Mercer, told FierceHealthcare. “But the Trump administration is considering making some regulatory changes that would allow HSA-connected plans to offer more preventive services on a pre-deductible basis. That would be a major step forward.”

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