PBM executive: Industry has been discussing end of rebates for a 'long, long time'

Drug prices
Pharmacy benefit managers have been talking about a future without rebates for a while. (Getty/Tero Vesalainen)

WASHINGTON, D.C.—Though the Trump administration’s steps to end drug rebates have been met with outrage from pharmacy benefit managers (PBMs), these companies have been talking about a future without rebates for a long time, experts say. 

Byron Mickle, senior vice president for sales and marketing at Navitus Health Solutions, a Wisconsin-based PBM, said during a panel at the World Health Care Congress that eliminating the rebate model is a good foundation for policy to address other issues in drug pricing, such as the cost of specialty drugs. 

“We’ve been talking about rebates going away for a long, long time,” he said. “We would prefer that—but from a competitive standpoint you have to stay relevant.” 

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Insurers who are contracting with PBMs can’t treat each the same, Mickle said, and need to remember that even if the mechanisms for pricing are uniform, under the surface, there are key differences. 

RELATED: Industry Voices—Why it’s time for PBM rebates to come to an end 

Assuming all PBMs are alike is similar to expecting the same taste from an apple and an orange because they’re both fruits, Mickle said.

So what should insurers be looking for? Mickle said it’s crucial not to “buy discounts” and instead to “buy dollars.” Discounts can be manipulated by a PBM, even if on paper they seem like a good deal for an insurer. 

Another way to get the full picture of a PBM partner? Spend time tuning in to what they say to their investors, he said. They offer different information on an investor call than you might get as a client. 

“Don’t listen to what they're telling Main Street,” Mickle said. “Listen to what they're telling Wall Street.” 

RELATED: Senators ask OIG to investigate PBM spread pricing in Medicaid 

The panel was focused around drug policy in Medicaid, which meant controversial spread pricing practices were also central to the discussion. Several states have cracked down on the PBMs in their Medicaid managed care programs after finding significant profits earned through the practice. 

Mickle said a pass-through approach in which an insurer is billed for the same amount paid by the pharmacy is gaining steam, because it’s more transparent than the spread approach. Pass-through payments, as opposed to rebates, also allow for greater clarity in what a PBM is earning in a contract, as PBMs can retain portions of rebates. 

Instead, a pass-through payment compensates the PBM through a negotiated administrative fee. 

“There’s no consistency around the word ‘transparency,’ but pass-through does go a little further in defining it,” Mickle said. 

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