A System Without Rebates: The Drug Channels Negotiated Discounts Model

Are you ready for a world without rebates?

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

You can download The Drug Channels Negotiated Discounts Model below.

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

[Click to Download]

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.