Finsights Blog

Quick Thoughts on Rebates

As the Senate Finance Committee questions some of our pharmaceutical industry leadership, there are obviously strong opinions and emotions around this topic.

Here’s the net message that should be given and heard: rebates definitely affect how products are priced. Even before talking about PBMs, a manufacturer will consider statutory rebates such as what is due to Medicaid (URA) and HRSA (340b). That 23.1% comes right off the top and must be accounted for in the gross-to-net equation. As the manufacturer looks past the statutory rebates to PBMs, if the drug class has competition, the PBM rebates come sharply into focus. Apart from clinical deficiencies, rebates (or lack thereof) form the basis on which products get placed into non-preferred tiers or are blocked.

The PBM’s economic value proposition to the Plan Sponsor is two-fold 1) what the Plan Sponsor pays in relation to AWP (net of rebates if it’s passed-through) and 2) what one Plan Sponsor pays in comparison to other Plan Sponsors in the peer class. This is how the industry works. Between admin fees, base rebates, performance rebates and price increase rebates, if any of these moneys are held, it creates an economic incentive.



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