What You Need to Know About the Drug Pricing Blame Game

Top 3 Things You’ll Learn

  1. Arguments on both sides of the drug pricing debate between manufacturers and PBMs
  2. The relationship between high drug prices and manufacturer provided drug rebates
  3. How clear contract language can help self-funded employers maximize rebate value and lower costs

In a 2019 article published in the Wall Street Journal, drug manufacturers blamed pharmacy benefit managers (PBMs) as the reason for high drug prices. This finger-pointing indicates a shift in drug makers’ typical defense of justifying high prices as a necessity for new drug research and development. Now, they are saying that drug rebates given to PBMs are responsible for their price increases, turning attention away from their profit margins. In fact, they claim their profits are suffering and that their budgets justify the drastic price hikes that payers and consumers face each year. According to drug manufacturers, PBMs are to blame for demanding higher rebates and not passing those to their clients. However, the validity of this claim has been analyzed – and debunked – in multiple research reports.

Drug makers and #PBMs continue to blame each other for high Rx prices, but the data shows no correlation between drug prices and rebates.

Correlation of Drug Prices and Rebates

Pharmaceutical manufacturers have long argued that they could lower their list prices if they didn’t have to pay rebates, while PBMs argue that high list prices demand negotiations for greater discounts so that they can help keep drugs affordable for their clients and their members.

If the drug makers’ argument were true, there should be a high correlation between rebates and list prices, but this has not been proven to be true:

  1. Research commissioned by the Pharmaceutical Care Management Association (PCMA), a trade group for PBMs, found that drug makers’ price increases are unrelated to rebates.
  2. A separate report released by CVS Health in 2018 also shows no relation between price increases and average rebates. Per the CVS report:

“…our data show that in many cases list prices are increasing faster for drugs with smaller rebates than for medications with substantial rebates. Revlimid, manufactured by Celgene, is a good example. The price has tripled since 2005 to more than $18,000, yet there are almost no rebates.”

Drug-Pricing-Blame-Game

We Can Be Your Advocate

As a PBO, drug rebates are not a revenue source for RxBenefits. Our client-friendly contracts pass through 100% of the rebates we receive to your self-funded employer clients. From contracting to clinical management, we have always worked on behalf of our clients to find low-cost solutions to help keep pharmacy benefits affordable and sustainable.

Check out our Definitive Guide to Managing Pharmacy Benefits e-book to learn more about drug manufacturer pricing practices and how high-cost drugs are impacting self-funded employers.

Sources:

The Wall Street Journal – Drugmakers Raise Prices on Hundreds of Medicines

The Wall Street Journal – Flip the Script: Drugmakers Blame Middlemen for Price Increases


Updated 8/31/2020

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