Prices Rise Even When Rebates Are Low
Rebates Also Unrelated to the Launch Prices of New Drugs
(Washington, D.C.) — As the Senate Committee on Health, Education, Labor and Pensions examines the drug delivery system during a hearing tomorrow, the Pharmaceutical Care Management Association (PCMA) is releasing a new analysis, “Increasing Prices Set by Drugmakers Not Correlated With Rebates,” that shows drugmakers’ pricing strategies are not connected to the rebates and discounts they negotiate with pharmacy benefit managers (PBMs). The analysis finds that prices rise even when rebates are low or non-existent.
“This study definitively shows that drugmakers set and raise prices unrelated to the rebates they negotiate with PBMs,” said PCMA President and CEO Mark Merritt. “In fact, many high-priced drugs like Sovaldi, which initially cost $84,000, involved no rebates until other competitors came to market.”
Click here to read the new study.
PBMs are hired by America’s largest, most sophisticated, health purchasers to reduce costs by, among other things, promoting generics and negotiating rebates and discounts on brand-name drugs. Typically, PBMs pass along 90 percent or more of these savings to plans, which use them to cut premiums, out-of-pocket costs and other expenses. Many health purchasers require PBMs to pass through 100 percent of rebates.
The latest research builds on an earlier Visante analysis of data on gross and net sales for the top 200 self-administered, patent-protected, brand name drugs that found no correlation between the price drugmakers set and negotiated rebates.
Major findings from the new study include:
Drug Manufacturers Raise Prices Even When Rebates are Low in Major Drug Categories
- Large price increases for rheumatoid arthritis drugs and anticonvulsants—two categories with relatively low rebates—have resulted in similarly high net price increases for those medications after rebates are deducted.
Rebates Unrelated to the Launch Prices of New Drugs
- The launch prices for drugs introduced from 2012 to 2016 were double the launch prices for those introduced prior to 2012, among the top 200 brand name drugs by 2016 sales.
- While rebates for the second drug introduced into a competitive class are higher than the first drug’s rebate 72 percent of the time, the chance of the second drug having a higher launch price than the first drug is only 50 percent.
No Correlation Between Increasing Prices Set by Drugmakers and Rebates
- Based on an analysis of price growth and estimated rebate levels for the top 200 brand name drugs by 2016 U.S. sales, we find no correlation between the prices that drugmakers set on individual drugs and the rebates that they negotiate with PBMs on those products.
As the Administration and Congress explore ways to improve the health care system, PCMA’s DrugBenefitSolutions campaign explains how PBMs reduce costs and how greater reliance on competition and PBM tools generate significant savings for public and private programs. The campaign includes a video on how prescription drug pricing works.