The Rundown on Rebates

In a video interview with Pharma Commerce, Ed Schoonveld, value & access advisor for Schoonveld Advisory and author of The Price of Global Health, points out that the latest 15 drugs chosen for price negotiations under Medicare Part Dare not "negotiations" but rather government-mandated price reductions, based on a percentage discount determined by how far a drug is beyond its patent expiration. While the government has shown restraint in previous rounds, it’s expected that as more drugs are added to the list, Medicare pricing will experience a significant impact.

In this round, weight loss drugs like Ozempic, which have proven effective in managing diabetes, controlling HbA1c, and providing cardiovascular benefits, are included. However, these drugs are not yet approved for weight loss in Medicare patients, so their future role remains uncertain. While this could significantly affect Medicare pricing, Schoonveld notes that the private market is unlikely to be directly impacted by these changes in the short term. The government, however, influences physician fees for Medicare patients, which tend to be lower than those charged for privately-insured patients. This dynamic has led to the private sector subsidizing Medicare patients through premiums.

This trend may extend to drug pricing, where companies might raise prices in the private market to compensate for the government-mandated discounts in Medicare. Such changes could further strain the private sector, especially as employers and insurers are already expressing concerns about rising premiums and drug costs. Additionally, there is ongoing debate around potential restrictions on drug rebates, further complicating the financial landscape for both private insurers and consumers.

Schoonveld also offers a teaser on what to expect in his upcoming February “Value and Access” column.

A transcript of his conversation with PC can be found below.

PC: What can readers expect from you February column?

Schoonveld: So my next column is going to talk about rebates. It's going to talk a little bit about, why are rebates bad? Why else would drug price controlling by the government be better? What are some of the drawbacks? What have we learned from some of the systems around the world? What are some of the drawbacks of that, and what are the points that we need to keep an eye on? What should be the focus of those programs, to make sure that we are keeping the patient in mind?