Rebate Pumping

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PBMs have been accused of promoting drugs that yield the highest dollars in rebates, not ones that are necessarily in the patient's best interest (most efficacious).

Drug companies pay PBMs for promoting the use of extremely expensive brand-name drugs for which there are no generic alternatives and are offered only by a single manufacturer.

For each health plan, PBMs create a list(s) of approved drugs known as a formulary. These are the only drugs that the health plan will pay for under the coverage of its pharmacy benefit. PBMs often create a formulary with the intent to "substitute" lower cost drugs with higher cost brand drugs to increase rebate payments from drug manufacturers to the PBMs. This is known as "rebate pumping". This practice can potentially impact patient care since these higher cost drugs are often not the most appropriate (efficacious) drug in the therapeutic class.

Rebate pumping raises cost to health plans and its beneficiaries since it drives larger spreads and more PBM profits. Rebates represent a very significant source of PBM revenues. Average rebates are $3 to $6 per prescription. The average rebate for the top 25 rebate-eligible prescription medications is greater than $20 per prescription.