When it comes to high drug prices, Big Pharma blames someone else
In discussions about why U.S. drug prices are so high, everyone from drug companies to supply chain middlemen to health insurers points fingers at someone else.
Rebates, or negotiated refunds that lower the total price of a drug, have become the latest frontier for the battle.
Drug companies, which have been vilified for sky-high drug prices, charge that rebates are a prime example of dysfunction in the health-care system, and one that health insurers and middlemen called pharmacy-benefit managers are significantly benefiting from.
Rebates make it so “patients are often paying more than a plan paid for the medicine,” said Stephen Ubl, president and chief executive of the biopharmaceutical trade group PhRMA, at the Forbes Healthcare Summit in New York City on Thursday.
Because of the almost painfully complicated nature of American drug pricing, that does certainly happen, although it’s unclear how frequently.
For as many players and middlemen involved in the U.S. pharmaceutical system, there is little transparency about the economics involved, which works to the benefit of those companies.
According to Ubl, who referenced estimates from a PhRMA study released earlier this year, health plans and PBMs are making billions in rebates.
But, speaking at the same event, Express Scripts Holding Co. ESRX, +2.70% Chief Executive Timothy Wentworth begged to differ: About 90% of those rebates flow to health plans, he said.
(There were no representatives of health insurers on the Thursday panel. Trade group America’s Health Insurance Plans did not immediately return MarketWatch’s request for comment.)
Related: Big pharma won’t stop raising prices in 2017 — it’ll just do it smarter
Rebates were last in the spotlight when Mylan NV MYL, -0.33% Chief Executive Heather Bresch was hauled before the House Oversight Committee last year to account for price hikes on its EpiPen allergic reaction treatment.
Bresch said then that the company retains about $ 274 on an about $ 600 EpiPen two-pack after rebates and fees, and makes a profit of only about $ 50 per pen.
The rise of high-deductible health plans has also exposed patients to drug list prices, and lowering those prices wouldn’t necessarily allow for consumer savings because of the complicated U.S. drug system, Bresch said.
Read more: Lawmakers rake Mylan CEO Bresch over hot coals over EpiPen price hikes
But for patients, the issue goes beyond high-deductible plans.
Copays on a drug can be more expensive than the out-of-pocket cost without insurance due to something called a “clawback.” Clawbacks are collected by PBMs, but lawsuits have also been filed against health insurers.
So far, rebate blame has been placed squarely at the feet of pharmacy-benefit managers, since critics say they are incentivized to push up drugs’ list prices.
How health insurers respond to charges of rebate dysfunction, though, remains to be seen.