Share the Savings

Over the past year, increased media and policymaker focus on the price of medicines has led to anger and frustration targeted at pharmaceutical manufacturers, pharmacy benefit managers (PBMs), and health plans. Drug pricing is a complex and often confusing issue, shaped by a pharmaceutical distribution and payment system that involves multiple transactions among numerous stakeholders.

While there has been significant public discussion about the prices of prescription medicines, it is rarely clear what price is being discussed. There is no one price for a medicine, as prices paid by wholesalers, pharmacies, PBMs, and health plan sponsors all vary and are determined by negotiations between stakeholders, each with varying degrees of negotiating power. For example, large PBMs that negotiate on behalf of health plan sponsors and manage benefits for covering tens of millions of patients are able to leverage their market power to obtain substantial discounts and rebates on brand medicines.

Robust negotiations between biopharmaceutical companies and insurers often result in significant rebates and discounts. According to a recent study from the Berkeley Research Group, more than a third of the list price for brand medicines is rebated back to payers and the supply chain.

However, unlike care received at an in-network hospital or physician’s office, negotiated discounts for medicines are not shared with patients with high deductibles or coinsurance. A new analysis from Amundsen Consulting found more than half of commercially insured patients’ out-of-pocket spending for brand medicines is based on the full list price.

Insurers should share more of these rebates with patients. Providing access to discounted prices at the point-of-sale could dramatically lower patients’ out-of-pocket costs and increase access to important medications for patients.