I had an interesting conversation with a PBM industry insider at a recent Happy Hour event in Houston last week. I learned a lot that I probably shouldn’t know.
“Bill, are you familiar with ABC Independent School District down in the Valley?” he asked. “Boy, are they getting screwed! They have a consultant, do you know (REDACTED)? I told him we could pay him the same as he’s getting now and still save the district millions!”
“You mean to tell me their consultant is getting paid on the back end from the PBM?” I asked in amazement.
“Yes,! Someone has to get the rebates. It’s baked into the system” he responded. “You can’t take it out. If we could, no one would be screaming about the high price of drugs!”
“What do you mean?” I asked
“Bill, let me give you an example. The rebates on specialty drugs are 70%. The 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.”
