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Passing Rebates Back to Customers to Lower Drug Costs

By Estay Greene | December 18, 2018 | Industry Perspectives

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Over the past five years, drug costs as a percent of total health care dollars have increased 30 percent.

These increases have caused prescription drugs to become more costly for many individuals and families. To help, starting January 1, 2019, Blue Cross NC will be passing back drug rebates directly to customers when they buy rebated drugs.

This change applies to all of our fully insured customers and is an option for large employers whose claims we manage but are paid by their employer.

Even with Rebates, Drug Costs Still Soar

Blue Cross NC negotiates prescription rebates with drug manufacturers to help offset the high costs of their products.

We have always passed back these rebates to our customers, and we will continue to do so.

In the past, we have spread the rebates across our entire customer base to offset premium increases. Now, as costs at the pharmacy counter continue to soar, we are going to target this benefit specifically to our members taking high cost, rebated prescription drugs.

Here is how it will work for a member who hasn’t yet met their deductible: if you are taking a prescription drug that costs $300, and there is a $100 rebate on the drug, you will now pay $200.

While this will help with the cost of some expensive prescriptions, a lot more needs to be done.

At Blue Cross NC, our customers spend about $1.6 billion a year on drugs, and that’s after all pharmaceutical industry rebates are applied.

There is no sign that increases are coming to an end – that’s because price increases work for the industry’s bottom line. What other industry can say their product costs 10 percent more and see their stock prices go up? For most publicly traded companies, the cost of their products needs to decrease for a stock price to go up.

In fact, in just the last three years, drug manufacturers have increased costs for our customers by $360 million, but only increased rebates by $130 million – pocketing $230 million of their cost increases.

The bottom line is that the dollar amount drug companies pass back in rebates is not close to the amount they charge our customers for their prescription drugs. It is only a fraction of the amount that they’ve raised drug prices in recent years.  

And while our policy change to apply rebates directly at the point of sale will help, much more must be done.

To significantly address high costs, we have to address the main driver: expensive prescription drugs.