By Bill Rusteberg
We’ve all heard it. “We pass 100% of all rebates on to you” says your favorite PBM.
The truth is PBMs often book rebates into different accounting silos in order to retain a portion while gifting back what remains to self-funded plan sponsors. One silo may be labeled “Rebates”, another is labeled “Other.” The “Other” silo has sub-silos each with it’s own label, giving rise to a complicated bookkeeping maze with tax favored offshore tentacles spreading beyond domestic scrutiny.
But let’s assume in a weak moment of deep reflection PBMs return 100% of rebates as they say they do. If that’s true, then why inflate drug prices by the rebate amount in the first place only to give it back later? It doesn’t make sense.
This is the only country on the planet where PBMs exist and where health plans are paying the highest prices for drugs than of any country this side of Pluto.
Someone has to get the rebates. It’s baked into the system. You can’t take it out. This is just like in the old days when we used to scrounge around the neighborhood looking for discarded Coka Cola bottles which we could redeem for 2 cents each at the local food store.
Unfortunately this doesn’t happen in today’s rebate world. Consumers can no longer do what we used to do as kids, proving de facto proof of purchase in return for lucrative 2 cent rebates. (9 coke bottles bought enough money for a delicious hot dog at the post bowling alley! – Mom, I’m not that hungry for dinner tonight!)
Imagine taking your empty prescription bottle back to the pharmacy and getting back 50% – 70% of what you paid for it. Wouldn’t that be cool!
Instead consumers are forced to trust intermediaries to do that for them. “We pass 100% of all rebates back to you!” they say.
Rebates on specialty drugs are far greater than 2 cents of yesteryear, its 50-70%.
PBM’s set up offshore NGO’s through which rebates are funneled. The NGO takes 40% off the top. The aggregator takes 10%, sending the remaining 35% to the PBM. The PBM often splits the 35% into several buckets, one of which is called the ‘Rebate Bucket.’ The Rebate Bucket represents a number less than 35% which the PBM either keeps in whole or in part and/or distributes to insurance agents, brokers, consultants and plan sponsors.
Everybody gets a cut. That’s the reality of the American pharmaceutical industry.
California Enacts Sweeping PBM Reform
