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On February 26, 2019, seven executives from multinational
pharmaceutical companies testified in front of the
US Senate Finance Committee on drug prices. As a potential
proposal to alleviate the economic burden on patients, several
executives stated that their companies would lower list prices if
rebates given to PBMs (pharmacy benefit managers) and insurers were
shared with patients.
Per Pfizer's CEO Albert Bourla "It is our very clear intention
that we will not keep a single dollar from these rebates. We will
try to move every single penny to the patients."
We constructed an economic model to estimate the budget impact
of passing through a share of negotiated manufacturer rebates to
patients at POS (Exhibit 1). This model has already been applied on
the Medicare population with type 2 diabetes in
a 2018 study and projected billions of medical savings over 10
years. Recently, we applied the model to a commercially insured
population with high-deductible health plans (HDHP) and preferred
provider organization (PPO) plans. The study population included
adults with type 2 diabetes on brand medicines eligible for
rebates. Three treatment regimens were modeled and then aggregated
- brand oral antidiabetic only, brand insulin only, and
beneficiaries on both types of treatments. Average negotiated price
("list price") of brand diabetes medications was $474 with 47% of
the list price paid to insurance plans as rebate. The average OOP
cost per beneficiary was estimated to be $256. If the entire rebate
were passed on to patients at POS, the OOP cost per patient would
decrease by $120 to $136 per fill (Exhibit 2).
Total annual direct cost per beneficiary, covering both medical
services and prescription drugs, averaged $17,114 before rebate
sharing. We estimated that passing through 100% of the rebate at
POS would reduce the annual direct cost of diabetes by $884 per
beneficiary with $791 of the savings coming from out-of-pocket
costs. (Exhibit 3) With the improved adherence, health plans would
spend more on diabetes medicines (shown as negative savings in the
exhibit) but those costs would be more than offset by the reduction
in overall medical costs from better disease management, resulting
in a net saving of $93 for the plans.
To put the results in context, we estimated the total savings in
the direct medical cost of diabetes in the commercially insured
population over ten years. (Exhibit 4) Our projections indicated
that passing through rebate at POS is expected to reduce aggregate
medical costs by $41.1 billion (5.1%) over the next ten years. Both
patients and insurance plans were expected to have lower medical
spending, with plans saving $4.4 billion and beneficaries saving
$37.1 billion. (numbers don't add up to $41.1 billion due to
rounding). Further analysis indicated that sharing just half of the
rebates would still result in savings for both individual
beneficiaries and health plans. These findings suggest that passing
rebates directly to patients at POS can lead to positive changes in
patient behavior which in turn can generate substantial savings for
both individuals with diabetes and health plans.
