pharmacy rebates
Employee Benefits

Rebates: A Consumer Folly

Ed Oleksiak
Ed Oleksiak
Sr. Vice President, Employee Benefits

Rebates come in all shapes and sizes. You’ve probably purchased a consumer product that came with a manufacturer’s rebate coupon. Let’s be honest…the manufacturer is hoping you don’t submit the rebate. In fact, 30-50 percent of us won’t submit the rebate coupon resulting in a windfall to the manufacturer.

Rebates also play a significant role in purchasing a new car. The car dealer may have their own rebate or a manufacturer’s rebate or a new graduate rebate or a military service rebate, and on and on. No matter what rebate you’re entitled to, you never actually pay full sticker price as long as you know to ask for the rebate.

With consumer product rebates and auto rebates, you actually know the rebate associated with each product you purchase. Compare that to the pharmacy industry which has created a cloak of secrecy rebate program making it impossible to know the actual price of any one prescription.

Imagine if you went to purchase a car and you were told “Here’s the price of the car, and when this quarter’s sales are wrapped up, we’ll send you your share of the rebate.” Seems a bit rough. Generally, that’s how the pharmacy industry rebate program works.

We’ve seen double-digit increases in pharmacy cost for years and a significant portion of the increase is the result of increasing rebates. Every year, we see increases in the rebates received by health plans. Unfortunately, as rebates increase, the initial cost increases. So, the net result is an increase in employer costs and consumer costs.

I like to compare it to increasing the amount taken out of your pay for federal tax purposes. When you file your taxes, you get a bigger refund, but it’s simply your own money being returned to you.

I recently had the honor of meeting with Health and Human Services (HHS) Secretary Alex Azar and the HHS Senior Advisor for Drug Pricing Reform John O’Brien, along with a couple of other members of the National Association of Health Underwriters (NAHU). We had lively discussions about the burden increasing pharmacy costs place on employers, employees, and all consumers of healthcare. Rebates must be dealt with if we’re to get pharmacy costs under control and to get a clearer picture of the actual cost of a single prescription. Secretary Azar has taken steps to eliminate rebates within Medicare Part D plans and Medicaid. The hope is the private sector plans will follow suit.

There’s some fear that if we eliminate pharmacy rebates, health costs will rise. I believe that until we eliminate these “cloak of secrecy” rebate programs, we’ll never get pharmacy costs under control.

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