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Prescription Drugs: The Problem Is The Price, Not Rebates

posted by AHIP

on September 24, 2018

Every American deserves affordable, comprehensive health care coverage. That includes affordable prescription drugs.  But drug prices are out of control.  Why?  Because drug makers take advantage of a broken market to set high prices, then raise them year after year—sometimes even raising them several times a year. 

Big Pharma wants everyone to believe that pharmacy benefit managers (PBMs) are to blame. They argue that negotiating bigger savings for consumers through discounts and rebates actually drives up the price of prescription medications.

Here is the reality:

  • The focus on rebates is a distraction because most drugs are not even rebated by drug makers.
  • Higher drug prices are caused by drug makers padding their profits—not by higher rebates.
  • Most drugs are not rebated by drug makers.
  • Rebate levels are driven by market competition—not price.
  • Rebates are nominal or non-existent if there is no leverage to negotiate them.

When drug prices go down, patients pay less. That’s why health insurance providers and PBMs use our bargaining power to negotiate directly with drug companies—so we can deliver lower premiums and lower costs. CVS’ second quarter 2018 earnings report and a recent study from Express Scripts, among others, adds to the growing body of evidence that proves it.

Using bargaining power to negotiate lower prices is a good thing. Without it, drug costs will go up—not down. And patients, consumers, and taxpayers will pay more.

For more information about the true relationship between rebates, list price increases, and market competition, check out this AHIP study.