Drug Costs The confluence of significant list price increases, the growth of HDHPs and lightning-bolt stories such as the 500 percent price increase forEpiPen put a tremendous amount of pressure on the rebating system. (Photo: Shutterstock)

Clients often ask about the future of drug rebates. How do they keep growing? Are they sustainable?

Rebates have been used by pharmacy benefits managers (PBM), health plans and plan sponsors to partially offset the cost of prescription drugs. In the past, rebates were viewed as a desirable financial component of the PBM pricing equation, however, in recent years rebates are viewed as a necessary evil. Rebates are retrospective discounts off the list price of drugs that PBMs negotiate directly with drug manufacturers. PBM’s leverage their aggregate book of business and essentially threaten to move market share away from one manufacturer to another competing manufacturer’s product in an effort to lower a drugs price.

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