Pass-Through Rebate Models Must Lower Costs to Catch On

With the Trump administration’s rebate rule delayed and possibly slated for repeal by Democrats in Congress, major changes in how the PBM industry distributes rebate revenue will have to come from the private sector. While a notable minority of PBMs has adopted alternative rebate models, experts say that plan sponsors’ demand for such models is muted, as they still must demonstrate that they generate more value than traditional models.

The Biden administration will suspend implementation until 2023 of the so-called “rebate rule,” a Trump administration regulation that would have revamped the Medicare prescription drug rebate system. Some D.C. insiders expect Congress to eliminate the rule before then for budgetary reasons. Meanwhile, a growing number of PBMs that deal in the commercial market have pitched plan sponsors on a 100% pass-through rebate structure, in which the PBM collects its compensation through a fee or surcharges rather than diverting a share of rebate revenue.

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