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Special Communication
Health Care Policy and Law
August 2017

Association of Prescription Drug Price Rebates in Medicare Part D With Patient Out-of-Pocket and Federal Spending

Author Affiliations
  • 1Eshelman School of Pharmacy, Division of Pharmaceutical Outcomes and Policy, University of North Carolina at Chapel Hill
  • 2Gillings School of Global Public Health, Department of Health Policy and Management, University of North Carolina at Chapel Hill
  • 3UNC Lineberger Comprehensive Cancer Center, University of North Carolina at Chapel Hill
  • 4Cecil G. Sheps Center for Health Services Research, University of North Carolina at Chapel Hill
  • 5Department of Pediatrics, Section of Hematology/Oncology, University of Chicago, Chicago, Illinois
  • 6Department of Public Health Sciences, University of Chicago, Chicago, Illinois
  • 7Biological Collegiate Division, The College, University of Chicago, Chicago, Illinois
  • 8University of Chicago Medicine Comprehensive Cancer Center, Chicago, Illinois
  • 9The Center for Health Administration Studies, University of Chicago, Chicago, Illinois
  • 10Memorial Sloan Kettering Cancer Center, New York, New York
JAMA Intern Med. 2017;177(8):1185-1188. doi:10.1001/jamainternmed.2017.1885

The increasing cost of prescription drugs is a burden for patients and threatens the financial stability of the US health care system. Rebates are a form of price concession paid by a pharmaceutical manufacturer to the health plan sponsor or the pharmacy benefit manager working on the plan’s behalf. Proponents argue that rebates result from vigorous negotiations that help lower overall drug costs. Critics argue that rebates have perversely increased the costs patients pay out of pocket, as well as the costs for Medicare as a whole. This special communication discusses how the availability of rebates for drugs covered by the Medicare Part D program may raise costs for patients and Medicare while increasing the profits of Part D plan sponsors and pharmaceutical manufacturers. Two policy alternatives are herein proposed that would reconfigure cost sharing to lower patient out-of-pocket costs and reduce cost shifting to Medicare.