Are You Really Saving With Rx Rebates?

Who doesn’t love a good discount??There’s a reason why rebates have been around for over a century! Just as with common consumer goods, the pharmacy benefit manager model with up to 30% rebates appeals to our sense of shopping savvy.

Through RFP processes, companies and their benefits advisers chase better discounts – or as one client put it – “I want to make sure I get my fair share.” Around 6 months after drug purchases occur, the employer gets their money back in the form of a quarterly rebate check. So, what’s not to love about the pharmacy benefit management model of “capturing and passing on” a generous portion of the rebates?

Misrepresentation Of The Real Net Price

Delayed rebate payments with rebate percentages based on classes of drugs (rather than individual drugs) and the ability to modify these drug classifications make pricing and associated guarantees difficult to verify. Employers don’t really know how much they spend in any given financial quarter, AND they are challenged to evaluate alternative sourcing strategies because costs are not apples to apples.

There is more to what makes rebates a poor salve to manage Rx, a major and fast-growing component of the health plan cost. Instead of receiving rebates, some employers receive an admin credit instead of a rebate check. The good news is that the employer gets money sooner. The bad news is that they usually receive a lower percentage of the rebate. The even worse news is that the employer may be led to believe their admin costs are low (and do not need to be managed). - Basically, it makes it look like rebates effectively “reduce” the fixed costs of health plan management (network access, administration, broker fees, etc.). With this sleight of hand, rebates both reduce the cost of drugs AND fixed costs. In some cases, employers may be led to believe they have zero fixed costs!

How To Eliminate This Distortion

The solution is to eliminate the distortion by gaining control over the data and creating a unit price that can be managed by appropriately allocating the rebates to the relevant Rx expenditures.

While rebate rules are often restricted to protect the PBM (Pharmacy Benefits Manager) manufacturer contract terms, my team at Wellnecity knows a lot about rebate terms (that’s why we ingest contract terms) and the distribution by drug class to create a highly accurate dataset with drug cost by member pre- and post- rebate.?

With this information, Wellnecity is able to:

·???????Evaluate rebate performance

·???????Evaluate performance vs. contract guarantees

·???????Evaluate alternative sourcing solutions against post-rebate unit costs

·???????Accrue rebates in the period they were earned

·???????Understand current period financial performance

Or said differently – proactively manage health plan performance!

In the above example, we helped the client evaluate the potential value of implementing an international sourcing program when the PBM was incorrectly suggesting that international rates were not less than drug costs after the rebate.

Below, we show that the admin offset offered by the health plan was substantially below normal rebate ranges, enabling the benefits adviser to effectively negotiate for a substantially larger credit.

How closely has your organization examined Rx rebates? Wellnecity can help track down the necessary data to make a fully informed negotiation with your PBM. Contact me today at [email protected].