We recently heard of a broker calling on employers with the promise of negotiating higher rebates, and only charging a modest “shared savings” price based on guaranteed increased rebates.
The unfortunate reality is that most buyers and brokers/consultants continue supporting the false narrative of larger rebates equating to a better deal. With rebates growing exponentially (especially in certain classes of drugs), the lure of what seems like a windfall of money is proving increasingly tough to resist for plan sponsors and their advisors.
A Problem. Not a Solution.
Despite per employee rebates paid to employers increasing almost threefold since 2017, our benchmarking data reveals total drug costs have still risen by close to 24% over that same time.
Health plans continue chasing rebates simply because they are presented as savings and dangled like a golden carrot. However, it does not address the cost problem as everyone would like. There are multiple long-term implications to this approach and here are just a few:
- Rebate-driven contracts block employers from pursuing lower cost generics, biosimilars, and therapeutic alternatives.
- Rebates incentivize PBMs to support clinically immaterial patent extensions and shifts the priority away from comparative effectiveness.
- Under most contracts, PBMs can hit any guarantee they set for a particular employer. This happens by making formulary changes, cross subsidizing drug channel guarantees, MAC manipulation, changing drug tiers, etc.
Conflicts of interest, laziness, and naivety on the broker/consulting side have muddied the waters even more. So how do you break free from this flawed purchasing strategy?
Turning a blind eye to the rebate game starts with finding a like-minded advisor who can help identify and structure a conflict-free, transparent, and clinically-driven PBM arrangement. That means a firm who won’t simply spreadsheet PBM discounts and rebates, and who also understands contract terms and the comparative value of medications and their true net costs.
Does it work? It has for our clients. For example, one of our larger clients transitioned a couple years ago from a rebate-driven to a clinically-driven PBM arrangement resulting in an 8% loss of rebates and a net cost reduction of over 20%. Overall, our Value-Based Drug Management approach has yielded tens of millions of dollars in savings while enhancing quality of care and member service for a number of employers willing to take this road less traveled.
You can watch and wait as PBMs, manufacturers, coalitions, and brokers/consultants continue profiting from your plan (taking comfort in being part of the herd). Or you can follow the smaller, but already well-established path of putting clinical efficacy and cost reduction ahead of rebates and, in doing so, confidently fulfill your fiduciary duty.