Get the Facts
How Prescription Drug Rebates Reduce Costs

Fact: Pharmacy benefit managers (PBMs) leverage competition and negotiate rebates from drug manufacturers to lower drug costs.

Some drug companies try to shift blame for higher prices by blaming the PBMs who negotiate rebates and discounts on behalf of employers, unions, and government programs that offer coverage.


This makes no sense. Would anyone believe a TV manufacturer if it said its price hikes were due to aggressive discounting and rebating by a big box retailer?


Furthermore, a new study debunks the notion that the prices drugmakers set are contingent on the rebates they negotiate with pharmacy benefit managers (PBMs).  Ironically, many higher priced drugs involve little or no such rebates.

  • Typically, 90 percent of rebates are passed back to the plan, employer, union, or government payer to lower premiums or other cost sharing.
  • If one PBM is not getting the best deal, the employer or plan sponsor will find another PBM that will. 
  • Only 1-in-5-voters buy the drugmakers’ “rebates cause high prices” message.
  • Consumers are well aware that drug companies set drug prices, and they know higher prices mean higher out-of-pocket costs.

No Correlation Between Increasing Drug Prices and Manufacturing Rebates in Major Drug Categories

A new market analysis contradicts claims that drug pricing is contingent on the level of rebates and discounts manufacturers negotiate with PBMs. 


Major findings:

Higher-than-average price increases in drug categories where manufacturers negotiate low rebates; Lower-than-average price increases in drug categories where manufacturers negotiate high rebates; Prices increasing regardless of rebate levels. 

Pharmacy Benefit Managers (PBMs): Part of the solution to high drug prices

The competition-based PBM approach has been highly successful, yielding broad access to prescription drugs and 90% consumer satisfaction rates.  A recent study shows PBMs are on track to reduce prescription drug coverage costs by $654 billion over the next decade for government and commercial payers. 

Pharmacy Benefit Managers (PBMs): Protecting Consumers and Employers From High Drug Prices

PBMs’ commitment to low prices can be seen in how they protected consumers and health plans from the new, $14,000 anti-cholesterol PCSK9 inhibitors. Once physician groups determined, that for most people, these drugs were no more effective than less expensive options, PBMs recommended benefit designs that encouraged patients to try generic statins first.

Pharmacy Benefit Managers (PBMs): Generating Savings for Plan Sponsors and Consumers.

PBMs now implement prescription drug benefits for some 266 million Americans who have health insurance, and will save $654 billion over 10 years.

Solving the Mystery of Employer-PBM Rebate Pass-Through

PBMs pass back to employers more than 90% of total rebate dollars, received from brand-name pharmaceutical manufacturers, according to Drug Channels.

IMS Health: PBM-Negotiated Discounts Reduce Drug Prices

Heightened efforts by health plans and pharmacy benefit managers to limit price growth, resulted in concessions that reduced price increases on an estimated net basis to 2.8 percent, significantly lower than in prior years.

IMS Health: Negotiations Result in Significant Cost Reductions for Most Medicines in Medicare Part D

Across twelve therapy classes widely used in Medicare Part D, medicine costs to plans and patients are 35% below list prices and net costs to Medicare Part D plans alone range from 46 to 69% below list prices.

PricewaterhouseCoopers: PBMs Driving Competition to Reduce Drug Costs

PBMs are using competition between products to more aggressively negotiate drug costs. This is putting a downward pressure on the growth rate of total healthcare spending.

Survey: Consumers Hold Drug Companies Responsible for High Drug Prices and Out-of-Pocket Costs

Survey results show that by an almost 3-to-1 margin, voters blame high drug prices for increased cost-sharing, and only 1-in-5 voters buy the drugmakers’ “rebates cause high prices” message.

Former CBO Chief Douglas Holtz-Eakin: Private Prescription Drug Negotiation: The Key To Successful Public Policy

In contrast to the heavy hand of government regulation, private drug plans and pharmacy benefit managers (PBMs) compete to achieve lower costs, promote use of generics, use formularies to promote more affordable brand options, and offer other beneficiary-friendly and cost-savings tools.

Forbes: Mylan’s EpiPen Price ‘Cut’ an Outdated Drug Industry PR Move. 

“Mylan is simply the latest drug maker trying to re-frame a pricing problem into a coverage problem,” said Mark Merritt, president of the Pharmaceutical Care Management Association. 

Drugmakers’ Share of Spending Fall, Industry-Funded Report Says

“The report “shows something that we’ve been saying all along: that payers have been demanding and getting bigger and bigger discounts and rebates as drug prices rise,” said Mark Merritt, CEO of the Pharmaceutical Care Management Association, an industry association that represents PBMs. While individual clients of PBMs can get rebate information, Merritt said that it would undermine competition in the market to publicize detailed information on rebate amount.

Americans for Tax Reform: Medicare Part D Already Works

Medicare Part D is an example of the free market ensuring lower costs and greater access to care. Preventing government bureaucrats from interfering with private-sector negotiations allows pharmacy benefit managers (PBMs), pharmaceutical manufacturers, and pharmacies to negotiate lower drug prices and reduce overall healthcare costs amongst themselves.