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Perspectives on the Value of Rebates

Posted by Matt Breese on Mar 14, 2017

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Many pharma companies offer rebates to gain a competitive advantage. When offering rebates, manufacturers cover a portion of a drug's cost to make it less expensive for patients. Typically, these rebates apply to payer contracts that involve a relationship between a pharma company and a payer. Frequently, pharmacy benefit managers (PBMs) arrange rebates. PBMs can scale contracts better across their payer clients. 

The Role of Pharmacy Benefit Managers

PBMs play a significant role in the rebate process. According to Stat News:

“Pharmacy benefit managers serve as intermediaries between the plan sponsor, such as an insurance company, and pharmacies. They determine which pharmacies will be in the plan’s network, develop the formulary (list of covered medications), and negotiate price rebates with drug manufacturers. Manufacturers provide these rebates in exchange for having specific medications listed on the formulary.”

Many healthcare experts have expressed concern that this PBM behavior contributes to rising drug costs. Simultaneously, healthcare consumers have expressed dissatisfaction with rising drug prices and out-of-pocket medical spending. According to a recent poll by the Kaiser Family Foundation, “Majorities of Democratic, Republican and independent voters all support making sure high-cost drugs for chronic conditions are affordable for patients who need them.” One method to protect these patients from being overcharged is to require more transparency from PBMs.

Improving Rebate Contract Value

For pharma brands to succeed in highly managed markets, understanding where and when to contract for preferred market access with payers and PBMs is essential. Maximizing brand revenue is dependent on the allocation of contracting dollars and the validation of strategic market access decision outcomes.

Here’s is one strategy, developed by MMIT,  for improving rebate contract value:

Rebate Contracts-649238-edited.pngIn addition, pharma manufacturers should avoid waiting for monthly or quarterly reports on contracting compliance and ROI. Pharma should also avoid contracting with only the largest players. It is important to understand the full landscape before making any contract decisions.

To learn more rebate strategies, download MMIT’s playbook: Validate Rebate Contract Value.


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Topics: Industry Trends, Market Access