New Study Sheds Light on Rebate Guarantees and the Role of Employer Benefits Consultants and Brokers in PBM Selection

NPC research published in the American Journal of Managed Care underscores the role employer benefits consultants may play in perpetuating employer reliance on guaranteed rebate arrangements.

  • Pharmacy Benefit Managers (PBMs)
Desk with medicines and calculator

For immediate release: July 22, 2024

Contact: Michael Pratt, 202-827-2088, [email protected] 

Washington, DC – Pharmacy benefit managers (PBMs) are a large part of the value chain in the pharmaceutical ecosystem. Recently, public scrutiny has reemerged on PBMs, with a new Federal Trade Commission study examining PBMs’ influence on the industry at large, calling for more transparency and oversight. Policymakers who are part of this wave of investigation are encouraged to review the perpetual cycle of rebate guarantees and agreements in tandem with the use of employer benefits consultants, according to a new study from the National Pharmaceutical Council (NPC) published in the American Journal of Managed Care. The research, “Prescription Rebate Guarantees: Employer Insights,” was co-authored by Rochelle Henderson, PhD, MPA, Julie A. Patterson, PharmD, PhD, and John Michael O’Brien, PharmD, MPH.  

Rebate arrangements between PBMs and employers have become quite common, with employers receiving money through rebates on traditional or specialty medicines. Rebates are returned either throughout or at the end of a benefit year, as a flat rate or a percentage share of rebates of eligible prescriptions. Some rebates fall under a guarantee arrangement, where employers are guaranteed a rebate amount (or percent) for the length of a respective contract. As the occurrences of rebates continue to increase, so has employers' use of employer benefits consultants and brokers to aid in selection of PBMs — making it crucial to recognize the role these consultants may play in perpetuating employers’ dependence on guaranteed rebate arrangements, with particular attention to the specialty drug market which is projected to account for 56% of total spending in developed markets in 2027.  

NPC's research provides the first peer-reviewed analysis into how employers might value rebate dollars when comparing proposals from competing PBMs and the role of employer benefits consultants in choosing said rebate proposals. The study found that nearly two-thirds (62.7%) of employers with self-funded pharmacy benefits reported current rebate agreements for specialty drugs that include a rebate guarantee. This high prevalence raises concerns that there may be some obscuring of employer visibility into the actual net prices of drugs, resulting in formulary inclusion of higher-cost products and an increase in overall total pharmacy costs.  

“This examination of a large employer reliance on brokers and consultants calls into question the financial incentives of these individuals when recommending particular PBMs and contracting strategies,” said Dr. Patterson, study co-author and NPC Senior Director of Research. "We saw an association between employers working with benefits consultants and the importance of guaranteed rebate amounts in PBM strategy choices. It emphasizes the opportunity employers have to better understand the benefit options being offered, as these decisions impact access to medicines for their employees and their overall healthcare costs.”  

NPC’s research also illustrates the significant role that consultants and brokers play in selecting PBMs, with nearly 60% of employers indicating that these were the most influential individuals or groups in their rebate strategy during the PBM selection process.

Key takeaways from the publication include:  

  • The common occurrence of rebate guarantees in the study sample raises concern given that rebate guarantees may obscure employer visibility into the actual net prices of drugs, resulting in formulary inclusion of higher-cost products and higher overall total pharmacy costs. 
  • Employers should consider the role of employer benefits consultants in presenting drug contracting options and, ultimately, PBM selection. 
  • It is important to keep the employer perspective in mind when considering reforms to the current rebate-centric incentives of pharmacy benefit management. 

“As PBMs continue to face scrutiny on their operations, it is important to recognize the role that reliance on rebates may play in perpetuating inequity,” said Dr. O'Brien, study co-author and NPC President and CEO. “These cycles may be causing higher list prices and out-of-pocket costs for patients and thus fundamentally impacting patients' access to the medications they need.” 
 

About the National Pharmaceutical Council 

The National Pharmaceutical Council (NPC) is a health policy research organization dedicated to the advancement of good evidence and science, and to fostering an environment in the United States that supports medical innovation. Founded in 1953 and supported by the nation's major research-based pharmaceutical companies, NPC focuses on research development, information dissemination and education on the critical issues of evidence, innovation and the value of medicines for patients. For more information, visit www.npcnow.org and follow NPC on LinkedIn.