Prescription Drug Concessions and Rebates: Keeping the Focus on the Patient
Medications are one of the most cost-effective ways to manage illness, which is why over 70% of medical visits result in a prescription. It’s also why it’s so important in ensuring that our country’s prescription drug supply remains as accessible to as many people as possible. Health Men, Inc. is a leading health advocacy and education not-for-profit dedicated to advancing the comprehensive health of boys and men in America. We agree that maintaining high levels of access to the broadest range of medications is key to comprehensive care. And an important factor in whether or not patients take their prescription medications is the cost they pay out of their own pockets for those medications.
Virtually everyone in America who takes a prescription medication has that medication paid for through a for-profit business called a Pharmacy Benefit Management (PBM) company. These companies provide a very valuable service in the transaction between your local pharmacy and the health/prescription plan payers (including employers and state or federal government). I am just old enough as a practicing pharmacist to remember a time before PBMs were around and billing for prescriptions was a nightmare for everyone concerned. As a result, too many people who needed medications weren’t able to get them regularly.
PBMs started up in earnest around the late 1970s and have grown to be an integral part of our access to medication system; and that is for the good. By the mid-to-late 1980s, it became clear that PBMs had significant purchasing power and they took on the new role of negotiating favorable medication price contracts for the clients they served. Over time, PBMs maintained their focus on managing prescriptions and holding the line on costs. And to do so, they negotiated volume-based discounts—and rebates. My colleagues and I supported these developments because we thought they would benefit patients who would enjoy lower out-of-pocket costs for their prescription medications. But somewhere along the way, things changed. And it became clear that the volume discounts and rebates that were supposed to benefit patients ended up benefiting the PBMs.
A Government Accounting Office (GAO) Study was conducted to better understand the role of PMBs and the gross and net impact of purchasing concessions and rebates on overall costs for prescription medications, consumer out-of-pocket costs, and whether (and how) these costs affect compliance with and adherence to prescriptions. This required a very detailed analysis of a complex, and too-often mysterious process that involves numerous interlaced relationships between the health insurance and PBM markets. And it’s important to note that the cost savings achieved between these two entities does not necessarily translate into corresponding cost savings to patients. In addition, while the GAO study made no statement about adherence to medications, it is widely understood that as pharmacy co-pays increase, initial fillings of prescriptions go down, as do needed refills for chronic medications. Thus, reducing co-pays may be one of the most important ways to encourage patients to take prescribed medications over the long run.
Congress and the Administration are now focusing intently on how best to manage the cost of prescription medications—and it’s likely that this will be an issue in the 2024 elections and beyond. Considering how important access to medications is to the medical management of most conditions, this is appropriate. It is also likely that over the next several months and years, myriad legislative and regulatory proposals will be floated, debated, voted on, and/or enacted. For that reason, Healthy Men, Inc. strongly encourages public sector policy makers and regulators as well as private sector payers, benefit managers, and PBM executives to incorporate the following Five Key Principles to Sound Prescription Medication Access Payment Models:
- Create systems and procedures that are simple, transparent, and understandable to the American public. This is of paramount importance to restoring faith in a system whose processes have become mysterious, veiled in secrecy, overly complex, and convoluted.
- Honor the tenet that was at the core of the current system. Return the lion’s share of cost savings—whether from contract rates, rebates, price concessions, or anything else—to the patient. The goal should be to reduce patient out-of-pocket expenditures for prescription medications from current levels, not just hold the line on costs that are already unaffordable for many. Returning cost savings to insurance companies and PBMs (most of which are interlaced) or any other entity other than the patient is wrong.
- Caps on out-of-pocket expenditures for medications make sense only if they do not impede access to treatments. A take-from-Peter-to-pay-Paul strategy that imposes short term caps at the expense of significantly higher premiums or more restrictive access has not worked. If caps are instituted, they should be designed in a way that reduces out-of-pocket expenses without compromising other core elements of prescription care or access.
- Provide access to innovative therapies without undue restrictions. The selection of therapeutic alternatives must honor the wishes and values of patients within a system that keeps the patient-healthcare provider relationship as the focal point of treatment decision making.
- Pricing models and mechanisms should be market based, not dictated. Establishing arbitrary price targets using reference standards that are not applicable to the needs, wishes, and way of life of American patients undercuts one of the fundamental principles of free markets.
All of these have one commonality: keeping the focus on patients’ long-term best interests. At the end of the day, this approach will fulfill the ethical and social obligations of providers, government, and health benefit managers.
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