Robyn Curtis, a staff adviser at the University of SouthernMississippi in Hattiesburg, has a 13-year-old daughter withdiabetes. Each month, the girl’s insulin pump requires three vialsof NovoLog-brand insulin, which cost $890 under her plan, Curtissays. Her daughter’s insurance has a $2,600 deductible.

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So Curtis was beside herself when she learned that NovoLogoffers rebates -- almost always paid to insurance companies anddrug-benefit managers, not patients -- that might have cutthe out-of-pocket cost in half earlier thisyear.

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“Every penny until $2,600 we pay,” she says. “It’soutrageous.”

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Millions of U.S. patients with high-deductible health insurancefind themselves in that very situation -- and don’t know it. Behindthe scenes, drugmakers gave insurers and benefit managers more than$100 billion a year in rebates and other discounts to reduce theskyrocketing cost of drugs for diabetes, asthma,arthritis and allergies.

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No one balks when insurers get rebate checks after they actuallypaid for a drug. But, increasingly, Americans are forced to pay formedication out of their own pockets -- at least for part of theyear.

Pay full cost

That’s because more are enrolling in insurance plans withdeductibles as high as $4,000 for a family. The Kaiser FamilyFoundation says that a quarter of workers in employer plans mustpay the full cost of drugs before their coverage kicks in. That’sup from 17 percent in 2011. In such cases, insurers receive therebates even though they haven’t paid a dime.

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As Congress excoriates drugmakers for increasing the price ofeven old drugs by as much as 5,000 percent, this rebate practiceundercuts the industry’s argument that its discounts shieldconsumers from high list prices.

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Eight pharmaceutical companies contacted by Bloomberg, includingNovo Nordisk A/S, which makes NovoLog; Merck & Co., Pfizer Inc.and EpiPen maker Mylan NV, said their contracts with benefitmanagers and insurers generally require rebates be paid to them onall prescriptions, even when the patients pay the full cost becauseof high deductibles.

High-deductible plan

On a $600 prescription, “if the patient has a high-deductibleplan, then the insurer could pocket the $300 rebate and not shareit with the patient,” says Adam Fein, president of PembrokeConsulting, which advises drugmakers on sales and distribution.

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Pharmaceutical companies such as Mylan say the situationreflects a changing insurance market outside their control. Duringthe last decade, the average deductible for an employee hasquadrupled, to $1,221, according to the Kaiser Family Foundation.Americans insured under the Patient Protection and Affordable CareAct, or Obamacare, often must pay $3,000 or more before theirinsurance kicks in.

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“We regret that our programs did not keep pace with the evolvinghealth-care system, and, as a result, some patients are facingout-of-pocket costs that were never intended, potentially leadingto stress upon them and their families,” Mylan said in a letterlast month to Congress, which objected to the $600 price for twoEpiPens.

50-percent discounts

Mylan has said it discounts its EpiPen, on average, by more than50 percent. Novo Nordisk said it offers a similar price cut on itsU.S. medicines. While the vast majority of patients don’t pay thefull cost, “a small but growing” number now must do so because ofrising deductibles, according to spokesman Ken Inchausti.

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Typically, rebate money from drug companies is bundled togetherinto quarterly payments that can amount to hundreds of thousands ofdollars. These rebate checks can result in lower premiums, saidGlen Perry, who directs pharmacy services for Blue Cross BlueShield of Michigan, a not-for-profit insurer.

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CVS Health Corp., which administers drug plans for employers andinsurers, gives “the vast majority of rebates” back to thoseclients, said spokeswoman Christine Cramer. Express Scripts HoldingCo., which plays the same role, said it returns about 90 percent ofrebates to its customers, generally keeping about 10 percent as itscompensation.

Chronic conditions

Many employers and insurers have come up with a simple way toavoid the problem for many of their clients: exempt medicine fordiabetes and other chronic conditions from deductibles in the firstplace.

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But why not break up the rebate checks and send the cash back tothe patients who paid for the drugs? Representatives of corporatehealth plans say it would be impractical to do so because they getthe money months after employees bought the drugs.

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Says Laurel Pickering, chief executive of the Northeast BusinessGroup on Health, a coalition of large employers: “It would be verydifficult to figure out how to administer that.”

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Copyright 2018 Bloomberg. All rightsreserved. This material may not be published, broadcast, rewritten,or redistributed.

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