Rebates: Do They Affect Generic Sales?

By Magill-Lewis, Jillene | Drug Topics, November 2002 | Go to article overview

Rebates: Do They Affect Generic Sales?


Magill-Lewis, Jillene, Drug Topics


Rebates have been in the news lately, most notably associated with pharmacy benefit managers. The U.S. Attorney's office in Philadelphia is concerned rebates may actually be kickbacks and is investigating the issue. Overall, said Perry Cohen, Pharm.D., who provides consulting services to managed care organizations through his company, The Pharmacy Group, LLC, PBMs have done a good job managing costs, but the rebates are coming under question.

How rebates work

While advertising and detailing are aimed at prescribers and consumers to drive prescription volume, "rebates are offered to purchasers," said Debi Reissman, Pharm.D., president of Rxperts in Irvine, Calif. Just like the rebates consumers get for buying certain brands of batteries, blood glucose monitors, and other items, purchasers of prescription medications can receive rebates for buying specific brands of drugs.

Most health insurance comes with some sort of prescription benefit, and the manufacturers have developed the rebate strategy to target this set of purchasers. Different programs have been designed for different organizations, such as nonprofit versus for-profit, said Reissman. Managed care organizations include PBMs and health plans. Programs for these are worked out in order to offer lower costs to their customers.

Here's how it works: The PBM will put the drug in a preferred category. The manufacturer can then say to prescribers, "Our product is in a preferential position." The idea is that physicians will prescribe the preferred brand for their patients in that plan. These physicians may then get into the habit of prescribing it for their other patients. The health plan involved in the rebate program will also promote the product to its members.

What does this nwm for ees

The rebate strategy works best when there are several brand-name drugs in a therapeutic category. Eventually, of course, the patents on these drugs will expire, and generics will enter

"Once there are generic products on the market, the manufacturer of the branded product typically cannot offer discounts [sufficient] to get it to the price of the generic," said Reissman.

Often, health plans switch their preferred product to the generic. Also, once a drug is off patent, the manufacturer does not put as much effort into advertising and detailing, so prescription volume goes down. This is all good news for the generic manufacturers.

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