Two years ago on Drug Channels, I wrote about a shift from rebates to discounts as a black swan event—a massively important yet unexpected break from current practice.
Given recent developments, I believe that we are moving ever closer to a world without rebates. Yet there are many unanswered questions were such a radical shift to occur.
As I see it, a world without rebates would force manufacturers to use net price as a competitive weapon. If PBMs and payers behave logically, then drug prices would drop as manufacturers are forced to compete more aggressively for prescriptions.
These conclusions are based on the predictions about market changes that I describe below. Other key implications include:
- Winner-take-all auctions and narrow formularies for categories with therapeutically comparable products
- Broader formularies to encourage indication-based price competition for other therapeutic categories
- Faster patient access to new drugs with superior efficacy for certain subgroups of patients
- Fewer pharmacy benefit benefit tiers and a greater ability for physicians and patients to make cost/value tradeoffs
- The popping of the gross-to-net bubble and declines in brand-name list prices
- Slower growth in drug prices
This is a longer-than-average post, but I still only scratch the surface in speculating how our world could change. If the black swan continues to spread its wings, I’ll expand in future posts on implications for drug makers, pharmacy benefit managers (PBMs), wholesalers, pharmacies, health plans, and patients. As always, I encourage you to leave your comments and ideas below.
SAVE THE DATE: Drug Channels Institute will hold a special live, interactive webinar titled Competing in a World Without Rebates on April 12, 2019, at 12 PM ET. Details and registration information will be announced in the first week of April.
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