The companies that act as middlemen between pharmaceutical manufacturers and insurers secured $287 million in drug-price rebates in Oregon last year, according to new state data.
The state’s first-ever reporting on prescription drug rebates sheds light on an area that is increasingly targeted by would-be reforms intended to address practices by pharmacy benefit managers, companies known as “PBMs” that negotiate with drug manufacturers on behalf of insurers and health plans.
Reformers say the rebates amount to an incentive for consumers to buy higher-priced drugs and insurers to cover them — driving overall costs up.
While defenders of the rebates claim they save money on drug costs, the new data shows consumers do not see those savings at the pharmacy counter.
Of the $287 million in rebates and discounts, less than 1% of the savings were passed along to consumers, with 98% being passed along to insurance companies. Since insurers increasingly own their own PBMs there’s even less chance that the rebates will drive savings rather than profits, according to a recent federal report.
The new Oregon data comes amid a political tug-of-war between insurers and PBMs that are trying to point fingers at pharmaceutical companies for rising medication costs, even as the drug industry and retail pharmacists blame PBMs. Many pharmacists and experts say the way PBMs work is helping drive local pharmacies out of business, hurting consumers and care.
The data is the result of legislation passed in 2023 as part of efforts to retool pharmacy benefit manager regulations following complaints from pharmacists and consumers.
However, the state’s data presents a limited view of PBM activities in Oregon. It does not include the overall amounts paid for the drugs. Not only that, but it leaves out the Medicaid-funded Oregon Health Plan, which covers one out of three Oregonians, as well as other publicly funded insurance plans, including those for state workers and Medicare.
The data drew mixed reactions from observers outside the state. One questioned its value while another who said it provided “a good gut check” on whether pharmacy benefit managers were benefiting from rebates.
Charlie Fisher, director of the Oregon State Public Interest Research Group, known as OSPIRG, told The Lund Report that the data raises additional questions and offers no easy answers to addressing rising drug prices. Passing rebate money along to consumers, instead of insurers, could unintentionally cause premiums to rise, he said.
The focus should instead be on the price set by manufacturers, Fisher added.
“It just highlights how prescription drug costs are just out of control,” he said.
Greg Lopes, vice president of public affairs for trade group Pharmaceutical Care Management Association, told The Lund Report in an email that the new data shows that the pharmacy benefit managers are serving their clients, who are in turn, serving consumers.
“Rebates are passed along to employers and typically used to lower premiums and out of pocket costs,” he wrote.
In an email, Reid Porter, spokesperson for the drug industry trade group PhRMA, called Oregon’s new data collection “a step in the right direction,” but said more needs to be done.
“PBMs get billions in rebates from manufacturers that lower what they pay for medicines, yet they often refuse to share those savings directly with patients,” Porter wrote. “That means patients can end up paying more for their medicines than their insurer and PBM did.”
Who benefits from rebates?
The Federal Trade Commission questioned rebates in a recent report that cited evidence that pharmacy benefit managers and drug manufacturers were entering into rebate contracts “designed to cut off access to generic and biosimilar competitors” in favor of more expensive drugs.
In September, the commission sued three of the largest pharmacy benefit managers, accusing them of creating “a perverse drug rebate system” that drove up the price of insulin for patients.
Pharmacy benefit managers and their trade association have denied the allegations, arguing that the commission is biased and overlooks the role the companies play in reducing drug costs.
The Federal Trade Commission’s report also noted growing consolidation among pharmacy benefit managers which are increasingly becoming “vertically integrated” as part of a larger conglomerate that includes a health insurance plan and a pharmacy.
“It’s just one entity within the same conglomerate giving money to another entity,” said Fisher.
The data lists 18 pharmacy benefit managers, including health care conglomerates such as Cigna Health and Life Insurance Company, OptumRx, Inc. and CaremarkPCS Health.
Even if a pharmacy benefit manager is part of a conglomerate with an insurer, it still passes the rebate to the employer, according to the Pharmaceutical Care Management Association.
Six of the largest 18 pharmacy benefit managers included in the state data received nearly all rebates from the drug manufacturers. The reporting does not identify which pharmacy benefit managers are the largest.
