Meet the Rebate, the New Villain of High Drug Prices

The pharmaceutical rebate is increasingly viewed as being at least partly responsible for the current market for prescription drugs, reports the New York Times . Rebates, critics say, have pushed up the list price of brand-name drugs, which consumers are increasingly responsible for paying. Insurers generally get to keep the rebates without passing them along to their members. The Pharmaceutical Research and Manufacturers of America has proposed change to the way the rebates are handled, and how those companies are paid. The Trump administration, meanwhile, has taken the first step toward eliminating a "safe-harbor" provision that allows rebates to be paid in Medicare's Part D drug program without violating federal anti-kickback laws. Pharmacy benefit managers and insurers argue that rebates are a diversion and that their negotiating tactics have kept total drug costs in check. As proof they point to data that shows that in 2017, net spending on brand-name drugs grew only 1.9 percent, according to IQVIA, a drug research firm, while list prices grew 6.9 percent. They warn that eliminating rebates could face legal hurdles, and say the move could wind up raising consumers' premiums because insurers and employers use their rebate payments to plug other holes.