Pharmaceutical manufacturers often pay significant rebates on brand-name medications to pharmacy benefit managers or health plans to reduce the cost of pharmacy benefits and promote their brand-name drugs. Traditionally, these rebates have been provided to payers—not to health plan members.
Pharmaceutical manufacturers often pay significant rebates on brand-name medications to pharmacy benefit managers or health plans to reduce the cost of pharmacy benefits and promote their brand-name drugs. Traditionally, these rebates have been provided to payers—not to health plan members.
Payers use these rebates to reduce their costs, in theory lowering members’ premium rates. In this scenario, plan members using brand-name medications have the same out-of-pocket (OOP) costs for prescriptions, whether a rebate is received or not. However, the rise in prevalence of high-deductible health plans (HDHPs), increases in the list prices of drugs, and the rise in rebates to mitigate payer costs have raised interest in passing rebates directly to health plan members at the point of sale (POS).
A recent report, prepared for the Pharmaceutical Research and Manufacturers of America (PhRMA) by the actuarial firm Milliman, found that POS rebates may lower patient costs and would have a minimal impact on premiums for health plan members with employer-sponsored benefits.
The report used Milliman’s proprietary Claims Simulation Model and a national commercial claims data set to model the impact of applying all POS rebates to predict the resulting reallocation in payer costs and member cost-sharing, relative to a baseline scenario across different plan types typically found in the commercial employer-based insurance market:
A traditional preferred provider organization (PPO) plan:
An HDHP with pharmacy co-pays after deductible (Co-pay HDHP):
An HDHP with pharmacy coinsurance after deductible (Coinsurance HDHP):
The analysis used 3 hypothetical patient profiles with conditions represented by specific pharmacy utilization data, and assumed that patients took at least 1 medication in the underlying categories of complex diabetes, diabetes with chronic respiratory disease, or autoimmune disease.
The model assumed that brand-name dipeptidyl peptidase-IV inhibitors and insulins used in the treatment of diabetes provide 40% rebates off allowed retail costs, and that anti—tumor necrosis factor agents used to treat autoimmune diseases and anti-asthmatic products used to treat chronic respiratory disease provide rebates of 30% off allowed retail costs, while other brand medications provide 35% rebates, and specialty medications provide 15% rebates.
The analysis posits that the following would result from a change to providing POS rebates:
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