Drug Company Rebates Don’t Have That Much of an Impact on Costs

Milliman study blames lack of competition for rising drug prices.

The blame game continues regarding the escalating cost of drugs, with AHIP this time brandishing a study by Milliman that AHIP commissioned and that says that the rebates pharmaceutical companies offer for certain drugs don’t really have that much of an impact on costs.

The drugs that generated the biggest rebates for insurers and PBMs represented only 10% of total Part D prescriptions, according to the study by Milliman. That’s the case even though those medications comprised nearly half of the total Part D spending.  

What matters more than rebates is competition, according to the study. Of the 706 brand name drugs researchers looked at, the ones that faced direct brand competition generated 40% discounts for insurers. But as competition lessened, so did the discounts. Drugs with generic competitors produced by at least three other drug companies produced rebates of about 34% of gross drug costs. Drugs that faced no competition produced only 23% discounts. Antiretrovirals, immunosuppressants, antidepressants and antipsychotics offered the lowest average rebate of just 14%.

“Brand drugs in protected classes had the lowest proportion of drugs with rebates and the lowest rebates as a percentage of gross drug cost for those drugs receiving rebates,” the study states. “Out of 124 protected class brand drugs, 16 drugs received rebates.”