The Deal About Rebate Reform

Will rebate reform policy save chronic illness sufferers like us from financial doom?

Managing diabetes is already difficult and exhausting to maintain on a daily basis. But what if you are one of 34 million people with diabetes also struggling with increasing medicine costs?

You find yourself having unsuccessfully heated conversations with your doctor and insurance company because that $432.61 Lantus medication that your doctor prescribed is not covered by your insurer. To make matters worse, there’s no generic alternative for Lantus.

Or let’s say that your insurer does cover Lantus. You go to pick up your medication from the pharmacy only to find out that you’re paying more out of pocket, placing a financial burden on you.

In fact, this is actually how the current drug distribution and payment system is designed.

And the end result: we are footing the bill.

According to the Diabetic Leadership Council, a patient advocacy organization for diabetes:

“The substantial costs of living with a chronic illness are compounded year over year, penalizing and marginalizing high risk patients, perpetuating medical inequity. According to the CDC, chronic diseases are the leading causes of death and disability, driving $3.8 trillion in annual health care costs (18% of the GDP). Ultimately, people living with chronic diseases not only bear the burden of daily illness management but also predatory medical costs. Those living with diabetes perpetually pay higher costs to live, $9,600 annually, exacerbated by inflated prescription drug costs due to grossly unfair rebate practices.”

This is the foundation of rebate reform. In order to understand why this is being considered, you have to understand the key players involved; how drug rebates currently work and how this is financially burdening so many of us.

Patients Rising Now, another advocacy organization, created a great infographic showing how prescription drug distribution and payment works:

Key players in the drug distribution and payment process involves the following:

  • Drug Manufacturer
  • Wholesaler
  • Pharmacy Benefit Manager (PBMs)
  • Pharmacy
  • Health Plan (Insurers)
  • Patient (Us)

We will focus on the flow of rebate. The flow of rebate is represented by the orange line.

The key players involved in this flow are:

  • Drug manufacturer
  • Pharmacy Benefit Manager (PBMs)
  • Health plan (Insurers)
  • Patient (Us)

How Do Drug Rebates Work?

Rebates are discounts paid by drug manufacturers after the prescription has been dispensed to insurers, pharmacy benefit managers and pharmacies. These are cash payments that are sent to PBMs, which then shared with the plan sponsor (insurer) that they serve. The insurer generally uses the savings to lower the premium for the patients, rather than passing the discount to them at the point of sale.

This concept has been around for years. At first, drug manufacturers paid rebates for every brand name drug on the market. However, drug manufacturers started to consolidate the rebates into fewer products to maximize their share. Currently, rebates are attached to more expensive brand drugs and specialty medications. The more expensive brand drugs and specialty medications gives insurers and pharmacy benefit managers an incentive to include a drug on their formulary, which is a list of medications that may be prescribed that are covered by the insurer.

PBMs negotiate contracts with the drug manufacturers on behalf of the insurers. It determines the placement of drugs to specific tiers. These tiers determine how much a patient owes out-of-pocket for a prescription drug. Preferred drugs are typically have lower co-pays. The details of the contracts between PBMs and drug manufacturers are kept confidential.

The PBMs financially benefit from the rebates by encouraging fast-growing list prices for the drug. The insurers financially benefit by having us, patients, pay our share of the list price of the drug (the original price of the drug) instead of the net price (the total cost of the drug after rebate). This places a major financial burden on us, especially if we are relying on expensive medication.

Organizations like the Diabetes Leadership Council believe that patients should never have to pay more for medical products and services than their health plan pays. This is why advocacy programs are targeting congress to pass non-partisan rebate reform policies to help reduce patient costs. A rebate reform would require PBMs and insurers to pass savings to the patient, making it easier to afford to access to the medicine that they need.

Currently, there are talks in Congress surrounding rising prescription drug costs, including two hearings on the issue. My hope is this will be the traction that we need to be able to get some meaningful reform passed so we don’t have to suffer from anymore additional stress because of medical costs.

We should not be forced to choose between taking care of family or medicine we need that will allow us to do so.

It’s past time to change the narrative.

Until Next Time,

The Genetic Diabetic

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