The Future of Rebates: The Black Swan Scenario


Specialty pharmacy has reached an “inflection point” with the power to change the entire industry model.

Black Swan

What lies ahead for the specialty pharmacy industry?

That is the question that Adam J. Fein, PhD, CEO of the Drug Channels Institute, attempted to answer during a panel entitled, “Specialty Pharmacy Industry Outlook: What’s Next?” at the 2019 Asembia Specialty Pharmacy Summit in Las Vegas in April.

Fein is often called on to discuss the future of specialty pharmacy and opened the panel by stating the industry was at an important “turning point.” referring to the HHS proposed rule to eliminate safe harbor protections for the rebates paid by drug manufacturers to pharmacy benefit managers (PBMs), Medicare Part D plans, and Medicaid managed care plans.

“We are at an inflection point that will potentially change the entire commercial model of the pharmaceutical industry for the first time in a generation,” he said. “We are potentially on the verge of moving to a world without PBM rebates-which will lead to a total change in the way we do business.”

But in order to offer his thoughts on what this brave new world might bring, Fein said it was important to consider the various factors that led to this point. He noted that, back in 2014, drug list prices were increasing in double-digit rates.

“Can you think of any other thing you buy where the same thing goes up 13.5% over one year and then another 11.9% the next?” he asked the audience. When industry executives like Mylan’s chief executive officer Heather Bresch were called to account by the U.S. government to explain the skyrocketing costs, they explained that they only received 45 cents on the dollar-the other 55 cents were going to other players.

Trending: 17th Annual Drug Take Back Day Sets New Records

That’s shined a light on how rebates and kickbacks were influencing drug pricing-and hurting patients.

In his talk, Fein also addressed what he called the “gross-to-net bubble.” In the past few years, there has been a significant difference between list and net prices, or the cost of drugs after discounts and rebates. Such a bubble is simply unsustainable, he said .

“In 2013, $83 billion in rebates and other discounts were provided by manufacturers off the list price-by last year, that number was $166 billion,” he shared. “These things have essentially created a crisis for patients, who are paying out-of-pocket costs, their copay,s or deductibles, based on the list price.”

Given these issues, it’s not surprising that HHS proposed the antirebate rule-which many believe will be finalized in the next few months. Fein said, if it is finalized, it will “blow up the entire system” and require everyone in the specialty pharmacy industry to rethink how they do business. But, even if the rule does not go through, he said, the issues that brought us here still need to be addressed. Too much has been revealed about the inner workings of the industry, where the model is now that the sick subsidizing the healthy, he said.

“If approved, the entire way that plans and premiums manage specialty pharmacy would change,” he said. “We need to start focusing on the true net cost of drugs. You may see many brand name drugs vanish from formularies. And you will probably seem benefit design being to change. There will be a world of greater competition.”

He believes this kind of previously unfathomable “black swan” scenario will require physicians and patients to make direct cost and value trade-offs differently than they do at present.

“There will be an extensive amount of usage management. There will be a lot of formulary management,” he said. “You’ll see specialty pharmacies navigating a whole new world with their patients-and the rationale for the gross-net-bubble will disappear.”

Read More: CVS Health Buys Premier; Gets 367 Specialty Pharmacies in Health Systems

On the precipice of such radical change, the industry will have to rethink the way it has traditionally done business, he said. But, as with any other time of great uncertainty, there is the potential for remarkable opportunity.

“This is an exciting time. It’s a dynamic time. It’s a time of greater change than I’ve ever seen in this industry,” Fein concluded. “With all this change, with all this trouble, with all this complexity, try to stay positive.”

Related Videos
© 2024 MJH Life Sciences

All rights reserved.