Newspaper article THE JOURNAL RECORD

Commentary: Office Visit: Rebates vs. Value

Newspaper article THE JOURNAL RECORD

Commentary: Office Visit: Rebates vs. Value

Article excerpt

As a consumer, I generally love rebates. How else can you go to your local electronics store and grab a cordless keyboard and mouse for $2.99?

But have you ever wondered how the manufacturer and store are able to offer $40 in rebates on an item that costs $42.99? At the end of the day, rebates have to make financial sense for the manufacturers and sellers, or the rebates wouldn't be offered.

While rebates from prescription drug manufacturers work differently than those for consumer electronics, the basic principle remains the same; the rebates wouldn't exist if they were a money- loser for those issuing the rebates.

The "high rebate/high cost strategy" is one of two very different approaches that companies may take when designing their prescription drug benefits. This approach seeks to maximize rebates received from brand-name prescription drug manufacturers. Employees typically like this strategy, as pre-authorizations for prescriptions are rarely required and there are few restrictions on utilization. Employers like high-rebate plans because they're easy to administer.

But by design, these plans do little to control prescription drug costs. In fact, costs are driven upward, as the plan design pushes employees toward higher-cost brand-name drugs with higher rebates.

While many large (and typically self-funded) companies employ and even prefer the high rebate/high cost strategy, it's difficult for such a health plan to benefit a company's bottom line; the dollars received back in the form of rebates never catch up to the extra dollars paid out for choosing higher cost drugs. And as an unfortunate side effect, this strategy also contributes to the global problem of escalating health care costs.

Conversely companies that employ a "net-net/low cost strategy" seek the lowest net cost for their prescription drug plans. These plans typically require prior authorization for most high cost drugs; employ step-therapy programs for specific drug classes; and encourage employees to seek generic drugs first and look to preferred brand-name drug manufacturers next. …

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