Ending Rebates Is the Right Thing to Do for American Patients

This week, the Senate Finance Committee questioned executives from the top pharmacy benefit managers (to understand why drug prices have risen so drastically over the last several years. Coincidentally, the day before, on April 8, the public comment period closed for a proposed new Health and Human Services rule calling for the elimination of drug manufacturer rebates to PBMs under Medicaid managed care and Medicare Part D.

For most Americans, the word rebate means free money. When it comes to the cost of prescription drugs, rebates also mean free money – for PBMs. Patients, the purchasers and end users don’t receive the benefit of the rebate where they needed it most, at the pharmacy counter. Most don’t even know about these rebates, which are more like kickbacks since they are given to PBMs in exchange for drug placement on plan formularies.

HHS is working to put safeguards around prescription drug rebates from manufacturers to insurers and PBM middlemen. This is an important first step for the nation’s most vulnerable patients. If implemented, PBMs could no longer require manufacturer rebates in exchange for inclusion on Medicare Part D formularies, and that could result in savings for patients instead of additional profits for PBMs.

PBMs have long claimed they negotiate the price of medications between drug manufacturers and insurance companies. Yet for decades, manufacturers have been required to offer rebate incentives to PBMs and their insurance company clients for inclusion on prescription drug formularies. Without doing so, specific medicines would not be available to patients. PBMs say rebates make medications more available and affordable to those who need them, and if ended, would decrease their negotiating power and raise drug costs.


But think about that for a moment: savings aren’t going to the patients buying the medications, they’re going to PBMs who are pocketing the difference — and these kickbacks add up to billions of dollars.

Since the “Safe Harbors” proposed rule was announced, the pressure has been on, and it appears to be working. Cigna Corp. and their newly acquired PBM, Express Scripts, announced their customers would finally get a price break on insulin, a medication whose list cost has skyrocketed over the last several years. As Senate Finance Committee Chair Chuck Grassley (R-Iowa) pointed out in letters to PBM leadership, these kinds of changes are important but should have been made years ago, not as a PR move ahead of congressional hearings on the issue.

While the proposed new rule currently only includes Medicaid and Medicare recipients, it’s a positive move for all consumers who need prescription medications. If Congress passes similar, proposed legislation into law, all consumers could see the medication cost savings originally intended for them.

But for now, PBMs seem less concerned with patient health than with covering their tracks and trying to preserve this steady revenue stream. Ending rebates is the right thing to do for American patients. It means that instead of rationing medications or skipping picking up a prescription, patients will be in a better position to afford, and therefore adhere to the medications their doctors prescribe. This means a healthier America.

We applaud efforts across Washington to tackle the kickbacks and make prescription drugs affordable again.

M. Scott Newman is president of Pharmacists United for Truth and Transparency.

Morning Consult welcomes op-ed submissions on policy, politics and business strategy in our coverage areas. Updated submission guidelines can be found here.

Morning Consult