Putting patients first: Why PBM reform must ensure that middlemen pass along 100% of rebates

This is the first in a series of Bio.News articles looking at the need for pharmacy benefit manager (PBM) reform through the lens of the patient. Middlemen too often act in ways that pad their bottom line, but this is not simply a narrative about how money is diverted into PBM coffers. Understanding the larger story about the ways that patients are left vulnerable is critical to understanding why changes are required. 

For many popular medicines, manufacturers will offer PBMs rebates, essentially trading pricing concessions in return for better patient access. But what happens to those rebate dollars once they are paid to the PBM is often a mystery.

PBMs say that nearly all rebates are passed along to employer and health plan clients, but there’s reason to doubt those claims and believe that PBMs aren’t telling the whole story. That helps to explain why some of the bills before Congress include a provision calling for “rebate passthrough”: a provision that would guarantee that no funds are diverted away from health plans and back toward PBMs.

Here are just a few reasons to believe that such an effort is needed: 

• Increasingly, PBMs are finding alternatives to rebates that nonetheless allow them to extract value, including an explosion in the fees collected, as well as a complex corporate shell game to capture dollars that would otherwise go to the manufacturers of biosimilars.
• The Pharmaceutical Strategies Group’s annual trends report found that only 78% of employers surveyed received all of the rebates negotiated by PBMs, suggesting that many employers do not receive the full benefit of the rebates.
• That aligns with Kaiser Family Foundation numbers. That group’s survey found that only 19% of employers believe they are getting “most” of the rebates negotiated. Another 37% said they didn’t know.

The lack of transparency around where rebates go is often framed as an issue for employers, but—at the end of the day—it is the patients who are the most vulnerable:

• Plan sponsors use rebate dollars to address patient costs, either by reducing premiums or by bringing down cost-sharing. When rebate dollars don’t flow to plans, the loss ends up being paid for by patients.
• Though not contemplated in pending legislation, patients would benefit even more from ensuring that not only are 100% of rebates passed through, but that the patients receiving the rebated medicines benefit directly at the pharmacy counter.

BIO’s View: Ensuring that all rebates are passed through to plans, and therefore to patients—and limiting the ability of PBMs to reclassify “rebates” to escape oversight—ought not be controversial. PBMs claim that they play a key role in facilitating the ability of patients to get their medicines, but finding ways to hoard dollars designed to be directed toward patients suggest that they’re interested in profits first. Consequently, BIO supports patients’ demands that we advocate for PBM reform that ensures 100% rebate passthrough.