Alternative Models for Pharmaceutical Rebates

The combination of rising drug costs at the health system level and increasing financial stress for individual patients has triggered intense national concern. One target has come under particular scrutiny: rebates.

Drug makers in the US face no federal process whereby prices are evaluated in comparison to evidence of clinical benefit, but they must negotiate with a myriad of payers (including both insurers and pharmacy benefit managers [PBMs]). Discounts to the list price of drugs (rendered post-sale as rebates) are negotiated in exchange for preferential formulary placement, which increases sales. Rebate agreements are often quite complex, with the possibility of “stacked” rebates paid to PBMs: combined payments related to formulary placement, variously named administrative fees, price increase protection guarantees, and other programs.

Date of review: December 2018

For more information, please contact info@icer.org.

Final Report