Drug Costs The confluence ofsignificant list price increases, the growth of HDHPs andlightning-bolt stories such as the 500 percent price increaseforEpiPen put a tremendous amount of pressure on the rebatingsystem. (Photo: Shutterstock)

Clients often ask about the future of drug rebates. How do they keep growing? Arethey 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 PBMpricing equation, however, in recent years rebates are viewed as anecessary evil. Rebates are retrospective discounts off the listprice of drugs that PBMs negotiate directly with drugmanufacturers. PBM's leverage their aggregate book of business andessentially threaten to move market share away from onemanufacturer to another competing manufacturer's product in aneffort to lower a drugs price.

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