Discussion of the costs of prescription drugs is prominent on the national stage with the 2020 Presidential campaign underway. But you may be wondering just how the complexities of drug pricing and insurance coverage for prescriptions impact you locally. It seems like those prices are continually rising and you are probably hearing from your employees how tough it has become to pay for the medications they need.
Central to the prescription drug debate is how pharmaceutical manufacturer rebates – which are essentially cash discounts paid for the purchase of their products – affect the final cost to consumers. For many years, these rebate programs were shrouded in mystery. The vast majority of the rebate payments went to organizations known as pharmacy benefit managers (PBMs) and the PBMs administered the pharmacy claims for health plans. Direct rebate payments often went no further than the PBM, although it was claimed that somehow the rebates were used to reduce the overall cost of prescriptions to the plan. However, with no transparency or accountability, whether the discounts reached insurers, plan sponsors or plan participants could not be calculated.
"Employer-sponsored programs, as the ultimate purchaser, should earn more pharmacy rebates."
More recently, health plans and plan sponsors have put pressure on PBMs to receive their share of manufacturer pharmaceutical rebates. In fact, there is a strong argument that employer-sponsored benefit programs, as the ultimate purchaser of health care, should earn much more pharmacy rebates. Unfortunately, most employers, including charter schools, are too small to have the leverage to negotiate effectively. But there are ways you can improve your position to get greater benefit from the rebates on prescriptions purchased through your employee benefits program:
- Consider carving out your prescription drug coverage from your medical plan to eliminate one layer in the purchasing chain.
- Join a carve out program with other employers to gain greater influence in negotiating with the PBM and manufacturers.
- Insist on having the allocation of pharmaceutical rebates spelled out in the contract for your prescription drug benefit.
- Look for a program that provides transparency and independent verification to account for pharmacy rebates.
It is possible to lower your prescription drug spending without passing along higher costs to your employees. You have the opportunity to gain a better negotiating position with the insurers, PBMs and pharmaceutical companies.
