Policy to bring down drug prices can’t begin and end with rebates, study says

Drug prices healthcare costs pill money
A new report warns that drug price policy much go beyond rebates. (Pixabay)

Pharmacy benefit managers and their drug rebate-driven business model have been under a microscope, but a new report warns that simply nixing that piece of the supply chain won’t solve the problem of high drug costs. 

The Commonwealth Fund conducted a review of existing research and interviewed experts on the pharmaceutical space and outlined several policy solutions that could bring greater transparency and oversight to PBMs. 

However, the key takeaway for policymakers is that changing or eliminating rebates in a vacuum won’t bring down drug prices. Other factors, such as increased consolidation in the PBM market and drug companies’ market power, will also need to be addressed. 

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And rebates as they currently exist will need to be replaced with something—whether that’s direct-to-consumer discounts or a value-based model, Elizabeth Seeley, Ph.D., a lecturer at the Harvard T.H. Chan School of Public Health and one of the report’s authors, told FierceHealthcare. 

“We shouldn’t assume that removing one aspect of misaligned incentives results in improved efficiency,” Seely said. “You really need to introduce a new system to replace it.” 

RELATED: UnitedHealth to expand use of point-of-sale drug discounts 

Rising drug prices are a hot-button issue in Washington right now, and one of the key solutions proposed by the Trump administration to address the ballooning costs is eliminating legal protections for rebates negotiated by PBMs in Medicare

Department of Health and Human Services Secretary Alex Azar has challenged legislators to follow suit and nix the safe harbors in the commercial insurance market as well. 

The main criticism from drug companies and other stakeholders that’s driving these policies is that PBMs and insurance companies use rebates to line their own pockets instead of passing those discounts on to consumers. PBMs and payers counter that the discounts are used to bring down premiums for all members. 

The Commonwealth Fund study found that the impact of rebates is actually more of a mixed bag. There are scenarios where these discounts contribute to higher drug costs and situations where they can bring down spending, Seeley said. 

RELATED: Pharma CEOs go after familiar target in drug hearings—insurers 

That’s why, in addition to ensuring that any policies targeting rebates think big-picture, it’s crucial for continued research to truly map the impact of rebates as they exist and other, future policies. 

Seeley said that there is a dearth of data at the drug-specific level on how rebates impact price, which is crucial for both policymakers and insurers who may want to rethink their approach. 

“The findings were not surprising, necessarily, but rather a sort of caution to access to find a way to access this information in order to really understand where the inefficiencies lie,” she said. 

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