In June, Alex Azar, Secretary of the U.S. Department of Health & Human Services (HHS), summarized his long-range vision for a new drug channel system:
“[W]e may need to move toward a system without rebates, where PBMs and drug companies just negotiate fixed-price contracts. Such a system’s incentives, detached from artificial list prices, would likely serve patients far better.” (emphasis added)No one has yet explained what a system without rebates would look like.
To facilitate the discussion, I have sketched out a possible new drug channel system that would:
- Respond to the HHS vision for a “system without rebates”
- Remove/decrease the reliance on list price as a component of intermediary compensation
- Use negotiated discounts as an alternative to the current system of retrospective rebates
- Require manufacturers to negotiate for desirable market access
Please note that I am not advocating for this approach. I am merely exploring one way that a system without rebates could be implemented. I hope you find it helpful for your strategic planning.
As always, I welcome feedback on how to improve and refine this model. Either leave comments below or email me. Enjoy!
A System Without Rebates: The Drug Channels Negotiated Discounts Model
For background and analysis of the current drug channel system, see Drug Channels Institute’s 2018 Economic Report on U.S. Pharmacies and Pharmacy Benefit Managers.
