Rebates Increase Drug Costs…?

Rebate Manufacturer Administrative Fees increase brand drug costs…?

Pharmaceutical drug rebates are a common practice in the PBM industry. Rebates are typically negotiated between Pharmacy Benefit Managers (PBMs), rebate aggregators, and pharmaceutical manufacturers to reduce the cost of brand medications. In recent years, there has been a growing trend of PBMs charging Manufacturer Administrative Fees (MAF) to pharmaceutical manufacturers. Here is how they work and their negative impact on patients.

What are Drug Rebate Manufacturer Administrative Fees?

MAF are fees charged by PBMs to pharmaceutical manufacturers for the administrative services required to manage drug rebates. MAF are negotiated and agreed upon in contracts between PBMs, rebate aggregators, and pharmaceutical manufacturers. The fees range from a few cents per prescription to several dollars per prescription.  

How Do Drug Rebate Manufacturer Administrative Fees Work?

MAF are designed to cover the cost of administrative services that PBMs or rebate aggregators provide to pharmaceutical manufacturers. PBMs, or rebate aggregators, provide a range of services, including contract negotiations, rebate processing, and data analysis. MAF are typically charged based on the volume of prescriptions dispensed by pharmacies to patients. PBM also charge self-funded employers fees to cover the cost of rebate administrative services.  

Impact of Drug Rebate Manufacturer Administrative Fees on Patients.

MAF have a significant impact on patients in several ways: 

Increased costs: Typically, PBM retain MAF without disclosing their full value. This increases the cost of drugs for patients by reducing the amount of rebate that PBMs pass on to self-funded employers. As a result, patients face higher out-of-pocket costs for their medications.

Lack of Transparency: MAF also creates a lack of transparency in drug pricing, making it difficult for consultants, self-funded employers, and their employees to understand how much drugs really cost. 

Incentives to Increase Drug Prices: MAF provide incentives for pharmaceutical manufacturers to increase drug prices to cover the cost of MAF, ultimately leading to higher drug costs for patients.

As the pharmacy industry continues to evolve its understanding of transparency, it is essential to understand the implications of MAF to ensure that patients have access to affordable healthcare services. 

References:

Pharmaceutical Care Management Association. (2019). Explaining the Drug Rebate System. Retrieved from https://www.pcmanet.org/wp-content/uploads/2019/06/Explaining-the-Drug-Rebate-System-2019.pdf

American Pharmacists Association. (2021). Understanding Pharmacy Benefit Managers (PBMs). Retrieved from https://www.pharmacist.com/understanding-pharmacy-benefit-managers-pbms

National Institute for Health Care Management. (2018). The Impact of Pharmacy Benefit Managers on Prescription Drug Costs and Quality. Retrieved from https://www.nihcm.org/publications/the-impact-of-pharmacy-benefit-managers-on-prescription-drug-costs-and-quality

U.S. Department of Health and Human Services. (2018). American Patients First: The Trump Administration Blueprint to Lower Drug Prices and Reduce Out-of-Pocket Costs. Retrieved from https://www.hhs.gov/sites/default/files/AmericanPatientsFirst.pdf