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Found this to be pretty helpful when I started
Thank you!
When rebates are paid, are they taxed? How does the pharmaceutical manufacturer list the rebate on their financial statement (costs of goods sold, accounts payable, etc.)? Also, is there an independent third party looking at the difference in patient outcomes between competitors in relation to price so it’s not always just the company with the highest rebate winning formulary position?
This is by no means comprehensive, but here are my thoughts from a PBM perspective. I would need to know the area you’re in to even know if this is the type of info you’re looking for, but here goes. It takes a lot of time to learn, so you are not alone. I am a pharmacist, 2 years PBM experience, and I still have so much to learn—I’m sure others can add to this/edit if needed.
The way rebates are calculated is very complex and frankly convoluted, but at a high level are calculated as a percentage of the drug cost. Rebates (or DIR, direct and indirect remuneration) are part of the PBM financial risk-reward model. Pharmacies who assume MORE risk have the opportunity to pay LESS in rebates at the end of the year. These pharmacies think they will hit certain thresholds, which may be patient care related (high Star measure scores) or based on dispensing/volume metrics. Pharmacies who assume less risk pay a fixed rate and have more certainty in what they will pay in a year.
Rebates tie in with whether a pharmacy is preferred or non preferred in a pharmacy network. PBMs offer many types of networks, some will be broad with nearly all pharmacies/chains/indies/PSAOs (i.e. members in these networks have lots of in-network pharmacies at which they can fill their prescriptions, usually at a lower cost than out of network). Some networks will be more narrow, by excluding certain pharmacies and chains, which translates to savings that the health plan can/should pass on to the member (in exchange for fewer pharmacy options). From my experience, preferred pharmacies take on more risk but expect, among other benefits, a higher volume of members/scripts because members want to fill at a pharmacy where they will pay lower copays. This higher volume means more money for the pharmacy. Perhaps an unnecessary tangent but hope you found this helpful.
Didn’t even think about the rebates the pharmacies were paying...🤦♂️
So thank you! Can the pharmacy estimate the rebates they’ll payout with a large degree of confidence? My understanding is that rebates are not paid at the time the patient pays for their medication, but is instead paid out quarterly, biannually, or annually.
Do pharmacies pay rebates on medications with an orphan drug designation?
Remind me in the AM by posting here or DMing me.
Why do pharmacies pay rebates? What do the get out of it?
They get to be “in network” for the large payers.