April 11, 2024

The US pharmaceutical supply chain is complex. It involves numerous participants and intricate contracts that ultimately determine the cost of prescription drugs for plan sponsors. In recent years, a new entity has emerged, known as Rebate Aggregators. Let’s dive into what you need to know about how rebate aggregators fit into the supply chain.

PBMs and Rebate Aggregators

At the heart of this intricate system are Pharmacy Benefit Managers (PBMs), which play a vital role in facilitating access to medications for plan sponsors and their members. Among their many functions, PBMs are tasked with negotiating discounts and rebates with drug manufacturers on behalf of plan sponsors, effectively acting as intermediaries in the process.

Rebate aggregators further complicate the supply chain by serving as intermediaries between drug manufacturers and PBMs, which is visualized in the chart below:

Defining Rebate Aggregators

The primary role of rebate aggregators is to consolidate market share to negotiate better discount terms with manufacturers. In the pharmaceutical realm, rebate aggregators achieve this by pooling the drug volumes of various PBMs. They also leverage their collective market influence to secure improved rebate terms with manufacturers — a task that was previously handled individually by PBMs.

An Evolving Marketplace

Now, one might wonder why the need for rebate aggregators arose if PBMs historically managed rebate negotiations with drug makers. It all stems from the evolution of the PBM market. In recent years, the three largest PBMs in the US have established their own Group Purchasing Organizations (GPOs). These function similarly to rebate aggregators and aim to maximize rebates through consolidated purchasing power.

This development posed challenges for smaller PBMs, as rebate contracting heavily relies on membership size. It became increasingly difficult for smaller players to remain competitive. Consequently, the majority of PBMs now directly engage with rebate aggregators.

How Rebate Aggregators Impact Plan Sponsors

Rebate aggregators consolidate the purchasing power of multiple smaller PBMs to negotiate better rebates from drug manufacturers. This, in turn, reduces drug costs for downstream clients —plan sponsors.

However, the impact of rebate aggregators on plan sponsors depends on the contracts between PBMs and plan sponsors as well as the agreements between the PBM and their rebate aggregators. While plan sponsors with 100% pass-through rebate contracts should receive all rebates obtained by the PBM from manufacturers, the rise of rebate aggregators has altered this dynamic.

PBMs no longer directly contract rebates with manufacturers; instead, this is handled by rebate aggregators. As a result, the rebates received by PBMs are subject to the terms of their agreements with rebate aggregators. It is common for rebate aggregators to retain a portion of the rebate amount as fees. Across our practice, this fee is typically around 15% of the rebates received. The bottom line — rarely do 100% pass-through rebate contracts truly pass through all rebates.

 

An already complex pharmaceutical supply chain is becoming more complicated. Plan sponsors need clear vision into the dynamics between their PBM contracts and their PBMs agreements with other players in the chain, like rebate aggregators.

Innovative Rx Strategies partners with you to provide clarity and hold PBMs, rebate aggregators and every other member of the supply chain accountable. Contact us to ensure you receive the greatest possible value from your pharmacy benefit plan.

Reach out to our team