Rebates

Prescription drug rebates are discounts negotiated between drug manufacturers, pharmacy benefit managers (PBMs), and/or health insurance plans. Pharmaceutical manufacturers offer rebates to incentivize formulary placement and retain or increase market share of their drugs over potential substitutes in the class. Generally, rebates are not tied to a specific patient or prescription but are based on the overall utilization and spending of an employer or health plan’s members on a drug during the year. At the end of the year or contract period, drug manufacturers return a share of the amount spent on rebated drugs to PBMs. The rebate is then shared with the insurance plan and employer, who eventually pass along the rebate to patients in the form of lower premiums. Rebates differ by plan, formulary, contract period, and drug. Frequently used and high-priced brand name prescription drugs are more likely to have rebates, and their rebate amounts tend to be larger.