A Call to End Drug Rebates

Healthcare can be transformative and the ability to extend and improve life continues to rapidly roll in. But while medical advances are explosive, our creative skills in controlling costs proceed at a snail’s pace.

I realize that change is hard, but it boggles my mind that we can’t take simple steps to reduce cost trends. Regulating drug pricing, in my view, can easily have the same “a-ha” as when Medicare took the logical step of banning reimbursement for “never events.” As we now can’t believe that Medicare ever reimbursed a hospital for a second surgery to correct a botched first procedure, I am hopeful that one day we will look at past pharma reimbursement protocols in the same way.

Kaiser Health News recently published an article on Inflectra, a lower-cost biosimilar to Remicade (which treats rheumatoid arthritis at $4,000 per month). The article points out that the manufacturer’s rebate practices are thwarting the sale of Inflectra. In fact, Inflectra’s manufacturer is suing the makers of Remicade, alleging antitrust violations. Pzifer, Johnson & Johnson and Janssen Biotech are the combatants in this litigation.

Drug rebates, which have grown to astronomic levels, are payments made to Pharmacy Benefit Managers (PBMs) that encourage dispensing of one brand over another within a diagnostic category. In insured plans these rebates are shared between the PBM and the health plan that covers the patient. In a self-funded arrangement, the employer is also cut into the pricing scheme. So, with all of this side-pocket profit, there is little incentive to shift patients to the lower-cost drug.

Eliminating rebates would simplify efficient purchase decisions and would lower costs – so why not do it? And while legislators are at it, how about banning paid ads for these high-cost drugs, except in medical publications? A-ha! Simple steps to reduce costs and align financial interests.

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